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Finance & Economy

Uneven economic growth in China’s regions


china-GDP-map-2012-EIUWhen looking at Chinese growth, it’s easy to think of the country as one entity, and one figure. Will GDP expand by 8 per cent this year, or “just” 7?

However, China is a bit bigger than just one number. With a fifth of the world’s population in the fourth biggest country by area, distributed over many provinces, growth has been very uneven as a closer look at China’s growth by region unveils.

Of course, when talking about any country’s GDP, growth rates tend to vary – affluent, dynamic cities usually expand faster and give more to economic growth than poorer, more rural areas.

This was true for China during much of its transformation since the 1970s with the coastal provinces leading the way.

However, as the map of 2012 real GDP growth estimates from the Economist Intelligence Unit (EIU) shows, things have changed completely in the last few years.

China’s two major financial centres, Beijing and Shanghai, are the two provinces with the lowest growth in 2012 – with 7.7 per cent and 7.5 per cent .

At the other end of the spectrum, with growth of over 13 per cent are Tianjin, Chongqing, Guizhou, Yunnan – three of those four are away from the developed eastern seaboard, in the more impoverished interior.

A look at the map below shows how China’s fastest growing regions are mainly in the western interior, and away from the factories and developed regions of the east.

As the EIU explains, this is the result of deliberate action by Beijing.

“The ‘Go West’ policy was put in place more than a decade ago to push economic development into the country’s interior, in trying to discuss the widening inequality between the rich coast and the poor hinterland. In the past several years, these efforts have borne fruit for Sichuan, Chongqing and Shaanxi in particular.”

The poorer regions have been able to unveil big investment plans of their own. Sichuan announced a huge $582 billion investment plan in September 2012, following Changsha, a gritty industrial city in central China, which unveiled a $130 billion investment plan back in July 2012. These are country-sized sums for provinces and cities, underlining China’s scale and ambition.

Back in the more developed east, the appetite for stimulus and investment has worn off – as has credit too. As the EIU points out:

“In the east, by contrast, concerns about the overheated property market spurred the national government to keep house purchasing restrictions in place, reining in a main driver of investment in the region.”

In effect, China is undertaking a rebalancing between regions to cut the disparity in incomes, wages and development – but only by a huge shift in investment which may complicate progress on a national level towards a consumption-led economy.

Plus, turning the regional investment tap on and off might work to help poorer regions catch up with richer ones, but as eastern regions have shown in their property markets, there can be tricky consequences.

Source: FT.com – Chart of the week: uneven economic growth in China’s regions 
 
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About Political Atheist

Living in South East Asia (Vietnam & Cambodia). At the ending/starting point of the more than 1000 year old SIlk Road.

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  1. Pingback: Easing Chinese inflation helps to mask monetary problems. | China Daily Mail - May 3, 2013

  2. Pingback: Why Beijing’s big economic announcement will not amount to much | China Daily Mail - May 9, 2013

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