ABSTRACT
As the most populous country in the world, with the second largest total output level 2 and the third largest land area in the world, the economic reforms of Mainland China and the incurred development in spatial inequality among its provinces and municipalities have caught the interest of economists worldwide. Following the availability of more reliable statistics in the 1980s, a group of studies have been conducted to address the issue of income disparities in Mainland China. The hypothesis of converging income level among Mainland Chinese provinces in the pre- and post-reform period has been thoughtfully examined in Chen and Fleisher (1996), Jian, Sachs and Warner (1996), Gundlach (1997), Raiser (1998) and Zhang and Yao (2001), amongst others. It is generally believed that income distribution among Mainland Chinese provinces was rather unequal in the pre-reform period with little tendency toward convergence at the provincial level. Since the start of economic reforms in 1978, the spatial income disparity among provinces has started to decline and the initially poorer provinces have been able to grow faster than the initially richer ones, achieving the so-called β-convergence. Growth determinants such as capital investment, human capital and openness level were found to have contributed to the convergence process. Nevertheless, a tendency toward deterioration in income equality has been found after the 1990s. Researchers have attributed this to the divergence in trade exposure, endowments and attractiveness to incoming foreign direct investment, amongst other factors. The hypothesis of ‘club divergence’ has also been proposed, which suggested that Mainland Chinese provinces have formed different ‘growth clubs,’ consisting of the coastal, central and inner regions. While income convergence was found within each club, an enlarged income gap was observed across different clubs.
