Foreign Direct Investment and Unequal Regional Economic Growth in China



Comparing the figures in the three economic area, we find that the regional income
inequality in the coastal area has been declining in the whole period, while both the
central and western areas have frustrated in the same period. An increase in the
dissimilarity in the central area during 1990-1992 is caused by flood catastrophes
happened in Jilin province in 1989 and Anhui province in 1991. This natural disaster
has brought these two province drop in relative per capita income to a quite low level,
specially for Anhui province, it did not totally recover until 1994. However, the total
inequality in the western area has been continued in the period, because a few
province, such as Xingjiang, are rich in petroleum or other natural resources, therefore
they could benefit from the economic boom of the coastal area. For some provinces in
the western area, such as Guizhou, have not superior geographical condition and
suffered from stagnation and are left behind. Therefore the gap between these
province and others both within the region and the country has been enlarged.

8.CONCLUSION

This article is based on a data bank covering 29 regions over 9 years of which two
years were ”unusual” due to political instability. The data material must therefore be
considered as weak, with only limited possibilities to extract effects. Some main
features can, however, be derived.

The direct foreign investments is highly unequal distributed on the Chinese regions.
The unequal distribution of DFI does not, however, influens the economic growth
towards a more unequal income distribution among the Chinese regions over the
period 1988-1996 for several reasons:

The growth rate is not decided by the investment level but by the change in the
investment level.

The investment multiplier declines at increasing income making the benefit of a given
investment grater in poor regions than in rich regions.

The Special Economic Zones who attract the greatest DFI are middle income regions
and the effect on the income distribution is thus close to neutral.

The effect of the DFI is spread to the neighboring regions, and the poorest regions
also here gets the highest growth rate for a given investment in the neighbor region.

The adaption to new investment level seems to happen (according to our tiny data set)
within the year which gives the impression that the Chinese economy is frictionless.

Keynesian economic modelbuilding seems still to be appropriate in a short run model
like this.

16



More intriguing information

1. The name is absent
2. Subduing High Inflation in Romania. How to Better Monetary and Exchange Rate Mechanisms?
3. The Role of Immigration in Sustaining the Social Security System: A Political Economy Approach
4. Industrial districts, innovation and I-district effect: territory or industrial specialization?
5. THE INTERNATIONAL OUTLOOK FOR U.S. TOBACCO
6. Sector Switching: An Unexplored Dimension of Firm Dynamics in Developing Countries
7. Fiscal Insurance and Debt Management in OECD Economies
8. Konjunkturprognostiker unter Panik: Kommentar
9. Une nouvelle vision de l'économie (The knowledge society: a new approach of the economy)
10. 5th and 8th grade pupils’ and teachers’ perceptions of the relationships between teaching methods, classroom ethos, and positive affective attitudes towards learning mathematics in Japan
11. Making International Human Rights Protection More Effective: A Rational-Choice Approach to the Effectiveness of Ius Standi Provisions
12. Computational Experiments with the Fuzzy Love and Romance
13. The Global Dimension to Fiscal Sustainability
14. The name is absent
15. The name is absent
16. Fiscal Policy Rules in Practice
17. The name is absent
18. Secondary school teachers’ attitudes towards and beliefs about ability grouping
19. A Classical Probabilistic Computer Model of Consciousness
20. Globalization and the benefits of trade