Index > Briefing
Monday, March 08, 2021
China's Eastern-Western Regions Will Develop Further in Equility

In a recent annual government work report delivered by Chinese Premier Li Keqiang, it has been pointed out that the regional economic layout should be optimized, and the coordinated regional development should be promoted. It clearly stated that China shall implement strategies that encompass the country's major regions, coordinated regional development, and the functional zones. This is done with the objective to build a regional economic layout and territorial spatial support system for high-quality development. It also stated that China shall promote the large-scale development of its western region, make breakthroughs in the revitalization of the northeast region, accelerate the rise of the central region, and encourage the eastern region to accelerate its modernization.

This actually highlights the fact that "eastern-western regional disparities" in China are still the main subject of the analysis of the country's regional development differences. In recent years, as the economic gap between the northern region and the southern region continues to widen, the "northern-southern regional disparities" have left a deep subjective impression on the people. Since about 2010, the view that "northern-southern regional disparities" overwhelm "eastern-western regional disparities" has gradually taken hold, and it has been argued that China's future regional development should focus on solving the problem of the backward development of the northern region. However, from an objective point of view, when explaining China's regional development gap, without focusing on the change in economic growth figures between regions, we will find that the "northern-southern regional disparities" may only be the manifestation of fast and slow development over a period of time, while there is a "qualitative" development difference between the eastern region and the western region. Historically, the development of Northeast China had been ahead of the southern region for a long time, while the western region has almost never been ahead of the eastern region.

Population differences are the dominant factor when dividing the eastern and western regions. In terms of population size and density, the eastern region has an overwhelming advantage over the western region. The "Hu Line" proposed by geographer Hu Huanyong in 1935, which delineates China's population density, is still in effect today. Since the reform and opening-up, the main direction of population migration in China is still from the central and western regions to the Pearl River Delta, Yangtze River Delta, Beijing, and Tianjin. From 1978 to 2019, the share of the population in the eastern region increased from 34.0% to 38.6%, indicating an obvious trend of population migration in the central and western regions. In contrast, the population shares of the northern and the southern regions changed slightly. From 1978 to 2019, the population share of the southern region and the northern region changed from 42.2% and 57.8% to 41.6% and 58.4%, respectively, with a change of only 0.6 percentage points. In terms of changes in population distribution, after years of development, the imbalance between the eastern region and the western region is intensifying.

In terms of the degree of county economic development, there are still serious differences in the development of the county industrial economy among different regions in China. According to the newly released statistics of China's top 100 counties in 2020, more than 30 counties in the northern region were selected, while only 7 counties in the western region were selected (based on the division of eastern region and western region), which further demonstrates the huge gap between China's eastern region and western region, and the gap is more obvious than that between the northern region and southern region.

In addition, compared with economic indicators such as GDP, per capita disposable income can directly reflect households' living standard and quality of life, and it is more intuitive to measure the level of development. In 2020, nine eastern provinces, including Shanghai, Beijing, and Zhejiang, ranked top in the list, exceeded the national level, while none of the central and western provinces were included in the list. Of the top ten provinces in per capita consumption expenditure, eight were eastern provinces. In terms of per capita disposable income, Ningxia, Shanxi, Heilongjiang, Henan, Guangxi, Qinghai, Xinjiang, Yunnan, Guizhou, Tibet, and Gansu ranked 21st to 31st accordingly, with the western provinces taking the majority. By comparing the situation between northeast and northwest, southwest and southeast, it is obvious that compared with the "collective mediocrity" in the northern region, the internal contrast in the southern region is starker. The existence of relatively poor provinces such as Guizhou, Guangxi, and Yunnan is actually a deeper reflection of the "eastern-western regional disparities".

There is no denying that the economic development in the western region is catching up in recent years. The economies of inland provinces in the central and western regions, such as Yunnan and Guizhou, have been growing faster than the rest of the country, thanks to some inwardly relocated industries, especially the massive investment in railway infrastructure. However, it should also be noted that this investment-led model, on the one hand, faces the ceiling of infrastructure, on the other hand, it leads to significant debt risk. In the past two years, the growth rate of western provinces as a whole has slowed down. With the gradual completion of industrial upgrading in the eastern region, the development gap between the eastern and the western regions is likely to widen again.

The "eastern-western regional disparities" are even more profound than the "northern-southern regional disparities". What policies should China adopt to narrow the gap? Some pessimistically claimed that it is the "fate" of the western region as the "Hu Line" is still in effect after more than 20 years of the implementation of the western region development strategy. Researchers at ANBOUND believe that the western region is not without development opportunities, and that at least some parts of it are facing development opportunities amid the current emphasis on a "great internal circulation". The idea of making use of the "golden waterway", i.e., the Yangtze River to develop the Yangtze River Economic Belt, advocated by ANBOUND, can narrow the difference between the eastern and the western regions.

Figure: Yangtze River helps narrow the difference between the eastern region and the western region

Source: Internet

Due to factors such as resource endowment, geographical location, historical background, etc., the western region is relatively backward, forming an obvious economic gap with the eastern region. Against the backdrop of China's suppressed external economic space, this economic gap shows the potential domestic market, and it is the domestic demand space to be developed. The Yangtze Riverbasin spans the three regions of China's economic development from west to east. The transportation cost advantage of the Golden Waterway is conducive to the westward migration of industries in the eastern region. With this as a link, it is completely possible for the advanced eastern region to drive the relatively backward western region, thus forming linkage development among regions. Promoting the development of western region such as Sichuan and Chongqing needs to rely on the Golden Waterway and take the construction of the Yangtze River Economic Belt as the starting point. The country should give full play to the function of the golden waterway, promote the gradient transfer of economic factors, and explore and release new space in the domestic market. The development pattern of the Yangtze River Economic Belt is in line with the "great internal circulation". In terms of the regional development practice, the construction of the Yangtze River Economic Belt is also conducive to the continuous opening up of the western region and its participation in the great external circulation by fully drawing on the experience of the rapid development of Southeast China that took advantage of the shipping capacity along the Yangtze River and along the coast.

Final analysis conclusion:

Although the "northern-southern regional disparities" in China are intensifying, the "eastern-western regional disparities" are still the core issue of China's coordinated regional development. It is both a challenge and an opportunity in facing the "eastern-western regional disparities". Taking the construction of the Yangtze River Economic Belt as the starting point, a better utilization of Yangtze River will promote the gradient transfer of industries from the eastern region to the western region, thereby unleashing the potential market space and further accelerating the development of the western region.

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