TY - JOUR AU - Demurger,Sylvie AU - Sachs,Jeffrey D. AU - Woo,Wing Thye AU - Bao,Shuming, Gene Chang AU - Mellinger,Andrew TI - Geography, Economic Policy, and Regional Development in China JF - National Bureau of Economic Research Working Paper Series VL - No. 8897 PY - 2002 Y2 - April 2002 UR - http://www.nber.org/papers/w8897 L1 - http://www.nber.org/papers/w8897.pdf N1 - Author contact info: Jeffrey D. Sachs The Earth Institute at Columbia University 314 Low Library 535 West 116th Street, MC 4327 New York, NY 10027 Tel: 212/854-8704 Fax: 212/854-8702 E-Mail: sachs@columbia.edu Wing T.. Woo Department of Economics University of California Davis, CA 95616 E-Mail: wtwoo@ucdavis.edu AB - Many studies of regional disparity in China have focused on the preferential policies received by the coastal provinces. We decomposed the location dummies in provincial growth regressions to obtain estimates of the effects of geography and policy on provincial growth rates in 1996-99. Their respective contributions in percentage points were 2.5 and 3.5 for the province-level metropolises, 0.6 and 2.3 for the northeastern provinces, 2.8 and 2.8 for the coastal provinces, 2.0 and 1.6 for the central provinces, 0 and 1.6 for the northwestern provinces, and 0.1 and 1.8 for the southwestern provinces. Because the so-called preferential policies are largely deregulation policies that have allowed coastal Chinese provinces to integrate into the international economy, it is far superior to reduce regional disparity by extending these deregulation policies to the interior provinces than by re-regulating the coastal provinces. Two additional inhibitions to income convergence are the household registration system, which makes the movement of the rural poor to prosperous areas illegal, and the monopoly state bank system that, because of its bureaucratic nature, disburses most of its funds to its large traditional customers, few of whom are located in the western provinces. Improving infrastructure to overcome geographic barriers is fundamental to increasing western growth, but increasing human capital formation (education and medical care) is also crucial because only it can come up with new better ideas to solve centuries-old problems like unbalanced growth. ER -