China’s regional inequality – is it real?

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11 April, 2013

China’s regional inequality – is it real?

During China’s 30-plus years of economic reform attention has often been drawn to claims of rising inequality between China’s fast-growing coastal provinces and the poorer interior. But economists from the University of Waikato say the way that China’s local populations have been counted caused the extent of disparity between the richer and poorer regions to be greatly overstated.

Professor John Gibson from the Department of Economics and the National Institute of Demographic and Economic Analysis (NIDEA) has published an article with PhD student Chao Li in the latest issue of the leading international development studies journal, World Development showing that much of the apparent trend in regional inequality is a statistical artefact.

“For most of the reform era, China’s per capita statistics did not use counts of where people lived, but rather where they were registered under the Chinese hukou law,” says Professor Gibson. “This place of hukou registration may have been hundreds or thousands of kilometres from where they lived. The statistics didn’t take into account that millions of people had moved from their place of registration to find work.”

This statistical anomaly meant that reported per capita income was overstated in coastal provinces and understated in the interior. The distortion grew bigger as the non-hukou migrants increased to over 100 million.

Since the mid-2000s, larger provinces began taking migrant workers into account when producing per capita statistics. Coincidentally, inter-provincial inequality appeared to be greatly reduced. But this may just reflect the changing way that local population counts were used rather than any actual change, says Professor Gibson.

“Since China spent hundreds of billions of dollars to speed up development in the interior regions, actually knowing whether there was a true increase in regional inequality is very important for both the Chinese economy and the world economy” said Professor Gibson.

“Moreover, a very large amount of research relies on figures that use the wrong population counts, and this research may have misinformed our understanding of China’s recent experience.”

Full details of the report at:

http://www.sciencedirect.com/science/article/pii/S0305750X13000545

ENDS

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