ABSTRACT
This chapter analyzes the issue of regional inequality in terms of per capita income by provinces, and discusses the policy responses of the central government to these regional variations. As one of the salient outcomes of the changing relationship between the central and local governments, regional inequality is generally believed to have been greatly exacerbated due to reformist policies that favored the relatively advanced coastal regions of China. Even though the Third Plenum of the Chinese Communist Party at the end of 1978 provided the basic outline for economic structural reform, the debate over a market-oriented versus planning-oriented economy has never ended. As a matter of fact, the debate became much more intense and controversial in 1980 when the problem of regional inequality emerged as a serious issue. Decentralization has actually allowed local economic initiatives that have eased the economic burden of the central government.
