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.
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