Table of contents
2. Conditions and Indicator
2.1. National Parameters
2.1.1. Under Mao
2.1.2. After Mao
2.2. Distribution of investments
3. Regional inequality
3.1. Theoretical Models of Convergence
3.2. Development of inequality in China
3.3. Reasons of growth
4. Geographic Influence
4.1. Geographic factors
4.2. Geographical model
5. Future Trends
The economic growth of China impresses the world; and some country fear about this, because firms displace there production from these countries to china. But China is only the last step in an array of development countries from East / Southeast Asian region. After the fast development of Japan after World War II, the so called tiger countries, South Korea, Hong Kong, Singapore, Taiwan, highlight from the 60s on with high rates of economic growth and later the second generation of tiger countries also (e.g. Malaysia, Indonesian and Thailand). And now China!
A country of 9.5 Million square mile can’t growth on whole with the same rate. The effect is an increase in the disparity of regional incomes and still increase with the boost at the rates of economic growth. But what are the reasons for the regional differences in economic growth and the regional disparity. One reason could be the preferential policies in the eastern regions. These policies are specially prepared to attract foreign companies. A second reason, that is current discuss in the scientific world, could the geographical characteristics. The differences in the distance to the coast or navigable river, the climate or the slope could explain variable development.
This paper wants to illuminate especially the second reason as a possible answer for unequal regional development and regional disparity, but policy and geography are often the same. So it is important to show the link between these possible reasons and the policies with regional impacts. There are different publications about the geographical implication on economic growth in china in the last years, based on different models. The intention is to compare these papers and highlight the differences.
The first chapter handles the historical economic development of the last years in china and wants to show the actual situation. The development especially in policy terms, the change to a market-orientated economy, could already explain many disparities. The third chapter illuminate the regional inequality in China, there development, the theories of convergence and want to give a first answer for the different growth rates. Then we will look to the geography and their effects to Chinese growth rates and at least we make an outlook on future development base on polarization theory.
2. Conditions and Indicator
In the orthodox Marxist view all people and regions in a nation should have equal shares of resources and development. Regional imbalance is considered as a problem to be corrected by policies toward a more balanced pattern of development. So it should expect that policies are geared to decline the inequality between regions and people. Research on socialist countries shows that they most of the time didn’t follow the socialist ideology (WEI 2000) and instead made their own interpretation based on their perception of international and domestic conditions.
The ambition of this chapter is to show the development of the China’s economic especially their regional development and the mutations of the disparity in context with the policies.
2.1. National Parameters
Already before the establishment of People’s Republic of China (PRC) in 1949, the regional economy was spatially uneven, effect of the last 300 years. The coastal region was more developed than the interior regions. The different languages people spoke and their different identities divided China into two parts: the northwest, largely occupied by minorities, and the developed southeast, controlled by the Han Chinese. With the end of the Opium War (1839 – 1842) a new era began, because china had open for colonial. The ports and later the coastal regions were cession to the European states. This time of occupation and penetration brought China in the east fast development. During the occupation of the northeastern regions Japan established their heavy industrial bases. During the World War II and the following civil war the Chinese Economic was severe damage; high inflation, big depression and high income and regional inequalities were in China. Over 70 percent of industrial products were produced in the coastal region and only a few cities in the interior had modern industries. Shanghai, Tianjin, Guangdong, consolidated by the colonial preference, and Manchuria, ‘cause of Japanese buildup, were best developed. Railway and port development concentrated at the coastal regions (WEI 2000).
2.1.1. Under Mao
In the first period (1949 – 1957) the Chinese copied the Soviet-model of industrialization, they concentrated for rapid industrial growth on heavy industries (iron, steel, oil, and heavy chemical industries) and launched the socialist transformation of private enterprises and implemented the collectivization of agriculture. They established, helped by Soviet experts, a highly centralized mode of planning and administration and took control of the economy. Already in this time regional development was part of the Chinese policies. Mao attempted to develop backward inland areas and to reduce regional imbalance by rapid industrialization through the development of heavy industries. They believed these industries were best allocated close to energy, located coastal, and raw materials, located interior. So they endeavored to build industry in the interior. A second point was the fear of attack from Taiwan, Korea and other regions near the coast. For defense considerations they also established industry in the interior. The last point was that they considered inequality a colonial legacy that should be eradicated with the establishment of socialism. Of the 156 industrial projects, most of them imported from the Soviet Union, during the first Five Year Plan (FYP), were half of them allocated in central China. During this first period China experienced rapid industrial growth and stead agricultural growth (WEI 2000).
The living standards were still low in the time of first socialist transition, so Mao called the Great Leap Forward (1958 – 1960) for faster economic growth and radical social change. Be based on unrealistic targets Massive investments to a campaign of industrial production were used and the rural people were ordered to work in industrial production. The result was the collapse of the Chinese economy. Intensified by inclement weather and the end of friendship to Soviet, they withdrew all there technicians and aids, China falls in recession, social chaos and a big famine (1959 – 1961). In 1965 the per capita food consumption was still less than in 1957.
Chinese threats of foreign attacks begin with the Korean War in the early 1950s and growth with the American military involvement in Vietnam (1964). The leadership declared that China should prepare for wars and strengthen the construction of the Third Front. This tied up much state investments and resulted in the construction of many defense-orientated industries in the interior provinces (DEMURGER et al. (2002)).
In 1966 the Cultural Revolution starts. Mao was frightened for internal, political enemies and for losing his power, so he mopping up the establishment. Class struggle and mass mobilization should destroy the last capitalism elements and his enemies. All private form of commerce and markets were prohibited; numerous government organizations, factories, and educational institutions were disbanded during this disruptive and violent movement. Consequently the industrial production dropped sharply.
In the early 1970s some policy changed and marked the emergence of a more pragmatic leadership. Before this time china was isolated from the West, but with his entrance into the United Nations in 1971 a new era began. In this also the leadership in Soviet changed, so the national defense lost its priority. China developed his petroleum resources in coastal provinces started with investments for the improvement of port facilities (DEMURGER et al. 2002).
The time of Mao leadership was embossed by many economic and development problems (WEI 2000):
- overly centralized planning system, poor planning, and economic mismanagement;
- overemphasis on national defense and the lack of efficiency;
- overemphasis of self-reliance
- excessive emphasis on grain production and the low productivity of commune systems
- excessive accumulation of national income at the expense of consumption
- overemphasis on heavy industry while ignoring light industry and services
2.1.2. After Mao
After the death of Mao in 1976 a new policies under Den Xiaoping followed. 1978 China launched his economic reforms. Socialism with Chinese characteristics was established; mean a way flexible between socialism and capitalism. Economic growth and raising the living standards of the people was getting a higher priority then the idea of class struggle. This changed dramatically the Chinese development policy and regional economies. The rural communes were decollectivized and the farmers got power on their economic activities. In 1984 urban reforms allowed market forces to adjust the distribution of commodities and materials and in the beginning of the 1990s deeper economic reforms brought China to a socialist market economy (DEMURGER et al. 2002).
The change of policy wasn’t limited to domestic; it also included an opening of its domestic economy to the outside world. A new Joint Venture Law from 1979 allowed foreign investments in China, followed by the establishment if four special economic zones, which received various policy incentives. In 1984 the open areas were extended to 14 open coastal cities and also three delta areas (1985 and 1986) and Hainan Island (1988) were opened. In 1997 about a half of Chinese cities and counties were opened for foreign investments (WEI 2000). This kind of policies brings China dramatic growth and stability. The average annual growth rates were in the 80s next to 8 percent and in the 90s even beyond 10 percent.
With the shifting of China’s development policies they preferred with favorable policies the coastal area. The “ladder-step theory”, a Chinese version of the growth pole and inverted-U theories, was proposed. China wanted to concentrate its resources in the more developed coastal region and bring them to a higher step. This development will be shifted to the central and western regions, because the diffusion of coastal development will stimulate the development of the interior. So the regions with comparative advantages in factor endowments, most of the in the coastal region, were preferred. Cities and core regions were selected as growth poles and are emphasized by government policy. The coastal region was expected to develop high-tech industries and to participate in the international market, while the central and western regions were earmarked for energy, agriculture, and mineral development. Many policies in investment, finance, and trade were implemented to help the special, economic zones, coastal open cities, and numerous development districts, and to decentralize (WEI 2000).
The decentralization is a special point. Decentralization has allowed local governments to actively initiate policies to stimulate local economic growth, and makes a great difference to reform policies that differ from region to region. Local governments are acting very much as entrepreneurs whose motives derive from desire maximize income and power. The interdependence between local governments and enterprises stimulates the bargaining effort of local governments. The regions differed greatly in their experience in managing local economies and in their abilities to adapt to changing macro conditions. So decentralization often resulted in economic chaos and mismanagement.
In 1988 the coastal development strategy was decreed to facilitate China’s open door policy and to enable China to compete in the global market. The Coastal region should participate more in international markets and develop export-oriented economies. This increased the foreign investments and trade rapidly. Special policies were not limited to the coastal region, were also existed some policies for development of the interior like fiscal subsidies and the establishment of border-region open areas. In summary major policies of the 1980s favored coastal development by (WEI 2000):
- more state investment was allocated to the coast
- the coast enjoyed more tax breaks for export, higher foreign exchange retention rates and lower tariff in import
- decentralization gave the coastal region more autonomy
- policies favoring the coast also attracted labor and raw materials from the interior
After the Tiananmen incident in 1989, the 1990s were embossed by a faster implementation of reforms towards socialist market economy. Deng Xiaoping pressed for further reforms and he advertised for deeper reforms and rapid development of market economies (DEMURGER et al. 2002). Several categories of development zones were developed, so that also small towns in the coastal regions getting their own developments districts. This brought brings China dramatic growth; on the other hand it is threatening the social stability. Millions of rural workers migrated to coastal cities and generated regional “resource wars” (WEI 2000), because the localities use illegal administrative measures to protect their local markets. The raising of inequalities was getting political. The interior provinces wanted a fair treatment by the central government, and demanded more resources for interior development. The problems of regional gap were intensified by inflation and corruption. The government reduced policy emphasis on the coastal region and encouraged interregional development and the development of the Yangtze River Valley, they committed more resources for development of the interior and special policies have been attended to develop the interior. In 1994 the central control of fiscal resources were improved to strengthen the state capacity for funding. More key-point investments were made in the interior and policies were developed to channel more foreign investments and transfer labor-intensive industries to interior. Chongqing was designed as a new growth pole in the western area (WEI 2000).
 Also known as “new industrial economics (NIC’s)”
 But it also destroyed the former organisation of rural economic.
 Mao (1956) „in the past our industry was concentrated in the coastal regions …. This irrational situation is product of history. The coastal industrial base must be put to full use, but to even out the distribution of industry as it develops we must strive to promote industry in the interior …. Without doubt, the greater part of the new industry should be located in the interior so that industry may gradually become evenly distributed; moreover, this will help our preparations against war …“
 For the time of Culture Revolution CHANG & HALLIDAY (2005).
 The farmers had still to fulfil the contracted quotas of production required by the government.
 The inverted-U theory holds that regional inequality tends to rise during the early stages of development and to fall as the economy matures.
 The strategy also include more endeavours against poverty (RAVALLION & CHEN 2004)
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- Alexander Wijgers (Autor), 2005, Geography and regional development in China, München, GRIN Verlag, https://www.grin.com/document/89506