1. Chapter 9 Bianzhong – a percussion instrument in ancient China 1

2. 9. A Multiregional Economic Comparison 9.1 China’s statistical systems 9.2 Macroeconomic performance 9.3 Real living standards 9.4 Regional economic disparity 2

3. Keywords: System of National Accounts (SNA), material product system (MPS), purchasing power parity (PPP), living standard, Engel's Law, rural-urban divide, regional disparity 3

4. 9.1 China’s statistical systems 9.1.1 Material Product System (MPS) 9.1.2 System of National Account (SNA) 9.1.3 Credibility of Chinese statistics 4

5. Figure 9.1 Which countries match the GDP per capita of Chinese provinces? 5

6. Notes: to Figure 9.1 (1)The equivalents include: Albania=Hebei, Algeria=Jilin, Angola=Hubei, Armenia=Sichuan, Azerbaijan=Zhejiang, Belarus=Jiangsu, Belarus=Jiangsu, Congo (Brazzaville) =Tibet, Costa Rica=Liaoning, Cuba=Fujian, Egypt= Xinjiang, El Salvador=Henan, El Salvador=Hunan, Guatemala=Ningxia, Guyana=Jiangxi, Hungary=Tianjin, India=Guizhou, Iraq=Gansu, Jordan=Anhui, Kazakhstan =Guangdong, Mauritius=Chongqing, Mauritius=Shaanxi, Namibia=Shanxi, Qatar=Macau, Saudi Arabia=Shanghai, Singapore=Hong Kong, Slovakia=Beijing, South Africa =Shandong, Swaziland=Guangxi, Turkmenistan=Hainan, Turkmenistan=Qinghai, Ukraine=Heilongjiang, Vanuatu =Yunnan. (2)Figures are in purchasing power parity (PPP) dollars and as of 2010. 6

7. 9.2 Macroeconomic performance 9.2.1 Estimating China’s time- series data 9.2.2 China’s interprovincial differences 7

8. YearNBS (2005)Equation (9.2)WPT c Other sources d RMB (yuan) a US$ a RMB (yuan) b PPP ($) 19794172684557241000 198695627797412932440 19881355364140614892472 19901634342166816781031; 2140 19911879353189517981680 19922287415228819831600 19932939510275321312120 1994392345524532510 ( a ): All are measured at current prices (the exchanges rates of RMB yuan to US dollar are shown in Figure 12.1). ( b ): Estimated by author at current prices. ( c ): Penn World Table (PWT) v6.2 (Heston et al., 2006) at constant prices. ( d ): World Bank (1996, p. 21) and Zheng (1996, p. 1). Table 9.1 Various estimates of China’s GDP per capita, selected years 8

9. Province1952 a 1980199020002010 Anhui222724 25 Beijing32222 ChongqingNP 1918 Fujian14201279 Gansu16 2730 Guangdong18 556 Guangxi272829 26 Guizhou29 3031 HainanNP 15 22 Hebei97171112 Heilongjiang4581014 Henan2321281815 Hubei201713 Hunan2122201720 Inner Mongolia 71418167 Jiangsu1310765 Jiangxi1124232527 Jilin86101411 Liaoning54a4a 489 Ningxia1019 2219 Qinghai159142023 Table 9.2 Provincial ranks by per capita GDP, selected years 9

10. Province1952 a 1980199020002010 Shaanxi2412212717 Shandong19131198 Shanghai11111 Shanxi1715162116 Sichuan2826 2324 Tianjin23333 Tibet25 b 23 b 222628 Xinjiang61191221 Yunnan2625 2829 Zhejiang128644 Table 9.2 (cont’d) 10 Notes: (1)Per capita GDP data are measured at current prices; (2)“NP” denotes “not a province for the year”. ( a ) Per capita GDP is estimated based on the data of national income (SSB, 1990) and Equation 9.2 of Section 9.2. ( b ) Per capita GDP is estimated by the author based on the Tibet/Yunnan ratio of national incomes (1.127) and Yunnan’s GDP data. Sources: SSB (1986, 1991) and NBS (2001; 2011) except for ( a ) and ( b ).

11. (1) 1952–1980 (29 provinces): 15 provinces (Beijing, Hebei, Shanxi, Liaoning, Jilin, Jiangsu, Zhejiang, Shandong, Henan, Hubei, Sichuan, Yunnan, Tibet, Shaanxi, and Qinghai) ranked higher than before; ten provinces (Tianjin, Inner Mongolia, Heilongjiang, Anhui, Fujian, Jiangxi, Hunan, Guangxi, Ningxia, and Xinjiang) ranked lower than before; and four provinces (Shanghai, Guangdong, Guizhou, and Gansu) remained unchanged. 11

12. (2) 1980–1990 (29 provinces, with the exclusion of Hainan): ten provinces (Jiangsu, Zhejiang, Anhui, Fujian, Shandong, Hubei, Guangdong, Yunnan, Tibet, and Xinjiang) ranked higher than before; 11 provinces (Hebei, Shanxi, Inner Mongolia, Jilin, Heilongjiang, Guangxi, Sichuan, Guizhou, Shaanxi, Gansu, and Qinghai) ranked lower than before; and eight provinces (Beijing, Tianjin, Liaoning, Shanghai, Jiangxi, Henan, Yunnan, and Ningxia) remained unchanged. 12

13. (3) 1990–2000 (30 provinces, with the exclusion of Chongqing): nine provinces (Fujian, Hebei, Henan, Hunan, Inner Mongolia, Jiangsu, Shandong, Sichuan, and Zhejiang) ranked higher than before; 13 provinces (Gansu, Guizhou, Heilongjiang, Jiangxi, Jilin, Liaoning, Ningxia, Qinghai, Shanxi, Shaanxi, Tibet, Yunnan, and Xinjiang) ranked lower than before; and eight provinces (Anhui, Beijing, Guangdong, Guangxi, Hianan, Hubei, Shanghai, and Tianjin) remained unchanged. 13

14. (4) 2000–2010 (31 provinces): ten provinces (Chongqing, Jiangsu, Shandong, Guangxi, Henan, Jilin, Ningxia, Shanxi, Inner Mongolia, and Shaanxi) ranked higher than before; 14 provinces (Xinjiang, Hainan, Heilongjiang, Hunan, Qinghai, Fujian, Jiangxi, Tibet, Anhui, Guangdong, Hebei, Liaoning, Sichuan, and Yunnan;) ranked lower than before; and seven provinces (Beijing, Gansu, Guizhou, Hubei, Shanghai, Tianjin, and Zhejiang) remained unchanged. 14

15. 9.3 Real living standard 9.3.1 General situation 9.3.2 Rural-urban disparity 9.3.3 Spatial differences of purchasing power 15

16. Source: IMF. Figure 9.2 China’s purchasing power parity (PPP) conversion rates, 1980- 2010 16

17. Source: NBS, various years. Figure 9.3 China’s rural-urban income gaps 17

18. Source: NBS, various years. Figure 9.4 The Engle coefficients of China’s urban and rural households, 1978-2010 18

19. Spatial differences of purchasing power: 1 kg of chicken costs ¥12.06 in Jiangxi but ¥32.00 in Shanghai; 1 kg of fish costs ¥10.04 in Jiangxi but ¥20.10 in Tibet; 1 kg of pork costs ¥21.76 in Xinjiang but ¥32.00 in Beijing; 1 kg of eggs costs ¥6.8 in Shanghai but ¥10.96 in Hainan; 1 kg of milk costs only ¥3.78 in Xinjiang but ¥17.4 in Shanghai; 1 kg of apples costs only ¥4.12 in Henan but ¥13.16 in Chongqing; 1 kg of oranges costs only ¥3.04 in Henan but ¥7.00 in Qinghai and Tibet; 1 kg of bananas costs only ¥2.98 in Jiangxi but ¥7.00 in Chongqing. 19

20. CountryLife expectancy (years) Infant mortality rate (‰) 1980200719802007 China6872.884221.16 Australia7480.62114.51 Hong Kong7481.68112.93 Japan7682.2082.80 South Korea6779.10265.94 Malaysia6772.763016.39 New Zealand7378.96134.99 Singapore7181.80122.30 Sri Lanka6874.803419.01 World average6165.826742.65 Sources: Wang (2003, p. 55) and CIA (2008). Table 9.3 Life expectancy and infant mortality rates, selected economies 20

21. 9.4 Regional economic disparity 9.4.1 Literature review 9.4.2 Regional inequality index 21

22. GDP per capita19521980199020002010 Panel A: All provinces Top five (yuan)397176638332012961956 Bottom five (yuan)81176979399115548 Absolute gap (yuan)315159028541613846407 Ratio of top five to bottom five4.8710.043.925.043.98 Panel B: Excluding Beijing, Shanghai and Tianjin Top five (yuan)22650221361198149126 Bottom five (yuan)81176979399115548 Absolute gap (yuan)1443261157799033577 Ratio of top five to bottom five2.772.852.183.003.16 Source: As for Table 9.2; calculated by author. Table 9.4 Gaps between the top five and bottom five provinces (in per capita GDP, yuan) 22

23. Figure 9.5 The coefficients of variation (CV) of per capita GDP among provinces 23

24. China had a per capita GDP ratio of more than 12 for the richest (Shanghai) to the poorest (Guizhou) at the end of 1990s. This figure is only lower than Indonesia (20.8 in 1983), but much higher than many other countries, such as:  the former Yugoslavia (7.8 in 1988),  India (3.26 in 1980),  Netherlands (2.69 in 1988),  Italy (2.34 in 1988),  Canada (2.30 in 1988),  Spain (2.23 in 1988),  France (2.15 in 1988),  West Germany (1.93 in 1988),  Greece (1.63 in 1988),  UK (1.63 in 1988),  South Korea (1.53 in 1985),  Japan (1.47 in 1981),  USA (1.43 in 1983; 2.31 in 2009) and  Australia (1.13 in 1978). 24

25. Case study 7 Similar initial conditions, varied results 25

26. Chapter conclusion: Since the late 1970s, the Chinese economy has demonstrated an increasing asymmetry between different regions and resulted in a series of regional economic problems. Due to the application of different statistical systems in the pre- and post-reform periods as well as the unavailability of statistical data in some provinces, a complete multiregional comparison of the Chinese economy is extremely difficult and, to some extent, meaningless. Using the best data and the regression approach, we try to estimate a set of time-series data on GDP for all provinces, on which the multiregional comparison of the Chinese economy is based. Finally, regional economic disparity indexes are computed for the past decades. Not surprisingly, China’s interregional economic differences have been posing considerable challenges to its societal harmony… 26

27. Suggested reading Brandt, Loren and Dwayne Benjamin (1999). “Markets and Inequality in Rural China: Parallels with the Past,” American Economic Review, Volume 89, Issue 2. Cao, Huhua (2010). “Urban–Rural Income Disparity and Urbanization: What Is the Role of Spatial Distribution of Ethnic Groups? A Case Study of Xinjiang Uyghur Autonomous Region in Western China,” Regional Studies, Volume 44, Issue 8, October, pp. 965-982. Chen, Anping, Nicolaas Groenewold (2010). “Reducing regional disparities in China: An evaluation of alternative policies,” Journal of Comparative Economics, Volume 38, Issue 2, pp. 189-198. Dong, Xiao-Yuan (2005). “Wage inequality and between-firm wage dispersion in the 1990s: A comparison of rural and urban enterprises in China,” Journal of Comparative Economics, Volume 33, Issue 4 pp. 664-687. Dong, Xiao-yuan, Louis Putterman, Bulent Unel (2006). “Privatization and firm performance: A comparison between rural and urban enterprises in China,” Journal of Comparative Economics, Volume 34, Issue 3, pp. 608-633. 27

28. Suggested reading Gao, Qin (2010) “Redistributive Nature of the Chinese Social Benefit System: Progressive or Regressive?” The China Quarterly, Volume 202, pp. 1 - 19. Giles, John, Albert Park and Fang Cai (2006). “How has Economic Restructuring Affected China's Urban Workers?” The China Quarterly, Volume 185, pp. 61 - 95. Hao, Rui (2008). “Opening up, Market Reform, and Convergence Clubs in China,” Asian Economic Journal, Volume 22, Issue 2, pp. 133–160. Jian, T., J.D. Sachs, and A.M. Warner (1996). “Trends in Regional Inequality in China,” China Economic Review, Volume 7, Issue 1, pp. 1–22. Jiang, Minghua, Lixin Colin Xu (2005). “Medals in transition: explaining medal performance and inequality of Chinese provinces,” Journal of Comparative Economics, Volume 33, Issue 1, pp. 158- 172. Jiang, Yanqing (2011). “Understanding openness and productivity growth in China: An empirical study of the Chinese provinces,” China Economic Review, Volume 22, Issue 3, September 2011, pp. 290-298. 28

29. Suggested reading Mehrotra, Aaron, Jenni Pääkkönen (2011). “Comparing China’s GDP statistics with coincident indicators,” Journal of Comparative Economics, Volume 39, Issue 3, pp. 406-411. Ravallion, M., Chen, S. (2007). “China's (uneven) progress against poverty,” Journal of Development Economics, Volume 82, Issue 1, pp. 1-42. Rawski, T. G. (2001). “What is happening to China’s GDP statistics?” China Economic Review, Volume 12, pp. 347-54. Tsui, Kai-yuen (1991). “China’s Regional Inequality, 1952–1985,” Journal of Comparative Economics, Volume 15, pp. 1–21. Tsui, Kai-yuen (2005). “Local tax system, intergovernmental transfers and China's local fiscal disparities,” Journal of Comparative Economics, Volume 33, Issue 1, pp. 173-196. Wan, G., M. Lu, and C. Zhao (2004). “Globalization and Regional Income Inequality Evidence from within China,” Discussion Paper No. 2004/10, UNU World Institute for Development Economics Research (UNU-WIDER), Helsinki, Finland, November. 29

30. World Bank (2011). Bulletin Board of Statistical Capacity, Washington, DC: The World Bank. Williamson, J. (1965). “Regional Inequality and the Process of National Development: A Description of the Patterns,” Economic Development and Cultural Change, Volume 13, Issue 4, pp. 165–204. Yang, Dennis, Tao (1999).”Urban-Biased Policies and Rising Income Inequality in China,” American Economic Review, Volume 89, Issue 2. Yao, S. and Z. Zhang (2001). “On Regional Inequality and Divergence Clubs: A Case Study of Contemporary China,” Journal of Comparative Economics, Volume 29, pp. 466–84. Yusuf, Shahid (1994). “China's Macroeconomic Performance and Management during Transition,” Journal of Economic Perspectives, Volume 8, Issue 2. Zhang, Z., A. Liu and S. Yao (2001). “Convergence of China’s Regional Incomes, 1952–1997,” China Economic Review, Volume 12 Issues 2/3, pp. 243–58. Zheng, J. (2001). “China’s official statistics: Growing with full vitality,” China Economic Review, Volume 12, pp. 333-7. Suggested reading 30