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China in the Global Economy

Edited by P. J. Lloyd and Xiao-guang Zhang

China in the Global Economy focuses on the theme of twin transitions occurring in the Chinese economy: the transition from a centrally planned economic system to a market oriented one, and from an agrarian to a modern industrialised society. China’s exporters face unprecedented competition in the world market and the flow of foreign direct investment has fallen restraining the growth of the domestic economy. These new challenges have fuelled debate on the perspective of the Chinese economy and its role in the global economy.
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Chapter 15: Income disparity and convergence in China's regional economies

Yanrui Wu


15. Income disparity and convergence in China’s regional economies Yanrui Wu With two decades of reforms and the subsequent economic growth, the Chinese economy in general and the well-being of the world’s largest populace in particular have improved significantly. However, has the improvement been equal across regions? More importantly, has rapid economic growth led to regional convergence as argued in the so-called endogenous growth theory? These issues have become the focus of recent debate on regional disparities in China. Understanding these issues has important implications not only for regional development policy but also for the continuation of the reforms in China. This chapter attempts to review the existing literature and to present new evidence of income disparity and convergence in China. It thus contributes to the current debate and adds to the literature. The chapter begins with a critical review of the existing literature. Then new evidence on regional disparities is presented. This is followed by analyses of regional convergence. The final section summarizes the main findings and indicates the direction of further research. PREVIOUS STUDIES: A REVIEW Economists’ views on the impact of disparity on growth are inconclusive.1 Galor and Zeira (1993) presented empirical evidence to show that more equal income distribution does not always imply better economic performance. Perotti (1996) also provided evidence that inequality through its negative impact on fertility affects growth positively. However, it is also argued that greater equality implies higher human capital accumulation and hence better economic performance (Chiu 1998; Clarke 1995; Alesina...

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