Mt. Huangshan, Anhui (Copyright © by Arne Hückelheim, September 23, 2009)

Chapter 10

10. Regional Diseconomies and Development Strategy

10.1 Spatial comparative advantages

10.2 Spatial economic separation

10.3 Spatial diseconomies and China

10.4 Regional development strategies

Keywords:

• comparative advantage,

• spatial diseconomies,

• regional economics,

• interregional separation,

• spatial economic integration,

• transprovincial border economic zone,

• development strategy,

• location quotient

10.1 Spatial comparative advantages

10.1.1 General overview

10.1.2 Location quotient

10.1.3 Empirical evidence

Note: Bohai Sea rim=Beijing, Tianjin, coastal Hebei and Shandong and Liaodong peninsulas; Pearl river delta=Guangdong and northern Hainan (Hong Kong and Macau are excluded); Yangtze river delta=Shanghai, Zhejiang and southern Jiangsu.

Table 10.1 Comparative advantages of China’s three economic engines

output national Totalindustry in output National

output regional Totalindustry in output s'Region

i

ij

The location quotient (LQ) of region j in industry i can be calculated as:

Interpreting the Location Quotient (LQ)

• LQ <1, suggesting that local economy is less than was expected for a given industry. Therefore, that industry is not even meeting local demand for a given good or service.

• LQ=1, suggesting that the local economy is exactly sufficient to meet the local demand for a given good or service. Therefore, that industry is meeting local demand for the given good or service.

• LQ>1, suggesting that local economy is greater than expected and it is therefore assumed that there is an "extra" part of goods and services. This extra economy then must export their goods and services to other areas.

Province Coal Petro-leum

Metal Non-metal

Timber Food

Anhui 1.42 0.00 0.93 1.61 0.18 1.34Beijing 0.63 0.00 0.44 0.62 0.00 1.90Fujian 0.43 0.00 0.33 1.55 6.23 1.45Gansu 0.75 2.22 1.01 0.92 0.83 0.46Guangdong 0.21 0.16 0.82 1.58 0.14 1.78Guangxi 0.32 0.00 2.58 1.16 0.34 1.59Guizhou 2.63 0.00 1.30 0.97 1.94 0.76Hainan 0.04 0.00 3.58 0.83 0.54 1.59Hebei 1.51 1.30 2.05 0.75 0.00 0.57Heilongjiang 0.58 2.79 0.12 0.16 3.12 0.32Henan 1.57 0.94 1.24 0.37 0.00 0.91Hubei 0.23 0.71 0.66 2.45 0.17 1.37Hunan 1.21 0.00 2.53 1.44 0.43 1.19Inner Mongolia

1.48 0.38 1.33 0.95 5.60 0.78

Jiangsu 0.79 0.14 0.16 1.62 0.00 1.66Jiangxi 1.08 0.00 3.43 1.36 1.38 1.05

Table 10.2 Interprovincial comparative advantage indexes

Province Coal Petroleum Metal Non-metal Timber FoodJilin 0.79 0.95 0.56 0.54 6.50 0.88Liaoning 1.03 1.51 1.18 0.99 0.00 0.75Ningxia 3.70 0.42 0.05 0.25 0.00 0.52Qinghai 0.26 2.70 1.13 1.37 0.09 0.37Shaanxi 1.22 0.58 3.47 0.64 0.67 0.82Shandong 0.90 1.13 0.97 1.22 0.00 1.01Shanghai 0.00 0.00 0.01 0.07 0.04 2.31Shanxi 4.70 0.00 0.89 0.25 0.03 0.20Sichuan 1.10 0.61 0.43 1.35 1.74 1.16Tianjin 0.01 2.05 0.02 0.56 0.00 1.12Tibet 0.03 0.00 5.05 1.88 10.7 0.53Xinjiang 0.35 3.11 0.44 0.26 0.21 0.37Yunnan 0.71 0.40 3.24 0.66 1.83 1.09Zhejiang 0.21 0.00 0.62 2.21 0.01 1.82

Table 10.2 (Cont’d)

10.2 Spatial economic separation

10.2.1 Geographical barriers

10.2.2 Administrative barriers

10.2.3 Ethno-cultural barriers

Topographical type

Core counties

Peripheral counties

2-d border 3-d border

Plain area 623.46 733.50 411.03

Mountain area 774.24 532.95 623.01

All 746.10 607.44 501.88

Note: An i-d border county is one which is bordered by i provinces.Source: Guo (1996, 73-4).

Table 10.3 Average income level (yuan/person) by region

Province Main ethnic groups Main languages (dialects)Anhui Han, Hui, She MandarinBeijing Han, Hui, Manchu MandarinChongqing Han, Yi MandarinFujian Han, She, Hui Min, KejiaGansu Han, Hui, Tibetan Mandarin, MongolianGuangdong Han, Yao, Zhuang Cantonese (Yue), Kejia, Miao-YaoGuangxi Zhuang, Han, Yao Chinese dialects, DaiGuizhou Han, Miao, Buyi Chinese dialects, DaiHainan Han, Li, Miao Chinese dialects, Kejia, DaiHebei Han, Hui, Manchu MandarinHeilongjiang Han, Manchu, Korean MandarinHenan Han, Hui, Mongol MandarinHubei Han, Tujia, Hui Chinese dialectsHunan Han, Tujia, Miao Xiang (Chinese dialects), Miao-YaoInner Mongolia

Mongol, Han Mongolian, Mandarin

Table 10.4 China’s ethnic and linguistic differences, by province

Province Main ethnic groups Main languages (dialects)Jiangsu Han, Hui, Manchu Chinese dialects, Mandarin, WuJiangxi Han, Hui, Miao Gan (Chinese dialects)Jilin Han, Korean, Manchu MandarinLiaoning Han, Manchu, Mongol MandarinNingxia Hui, Han, Manchu MandarinQinghai Han, Tibetan, Hui Tibetan, MongolianShaanxi Han, Hui, Manchu MandarinShandong Han, Hui, Manchu MandarinShanghai Han WuShanxi Han, Hui, Mongol MandarinSichuan Han, Yi, Tibetan Mandarin, TibetanTianjin Han, Hui, Korean MandarinTibet Tibetan, Han, Menba TibetanXinjiang Uighur, Han, Kazak Turkish dialects, MongolianYunnan Han, Yi, Bai Mandarin, TibetanZhejiang Han, She, Hui Chinese dialects, Wu

Table 10.4 (Cont’d)

10.3 Spatial diseconomies and China

10.3.1 China’s quest for spatial integration

10.3.2 Multiregional economic cooperation

10.3.3 Trans-province border economic cooperation

Border economic cooperative zone (BECZ)

Participating provinces

Land area (000 sq. km)

Population (million)a

Natural resources

Zhongyuan Association for Economic and Technological Coordination

Shanxi, Hebei,Shandong, Henan

97.3 4.42 Coal, petroleum, agricultural resources

The Yellow River Delta Economic Zone

Shanxi, Shaanxi, Henan

36.6 10.00 Coal, bauxite; copper; hydraulic power

The Huaihai Economic Zone

Jiangsu, Shandong, Henan, Anhui

176.0 100.00 Coal, agricultural resources

The H-H-S-S Border Zone for Economic Cooperation

Hubei, Henan, Sichuan, Shaanxi

153.8 32.91 Petroleum; coal; phosphor; iron ore; natural alkali; crystal; mercury

The S-G-G Border Economic Zone

Shaanxi, Gansu, Sichuan

162.0 22.60 Lead; zinc; petroleum; natural gas; pottery

The F-G-J Border Zone for Economic and Technological Cooperation

Fujian, Guangdong, Jiangxi

74.6 11.39 Coal; manganese; hydraulic power; copper; gold; silver

The Joint Congress for Promotion of Economic Development in the Dabieshan Area

Anhui, Henen, Hubei

123.0 25.69 Biological and agricultural resources

(a): Data as of the 1990s.

Table 10.5 Selected transprovincial border economic cooperative zones in China

Area type2-d border counties 3-d border counties

(1) non-BECZ

(2) BECZ

(2)-(1) (1) non-BECZ

(2) BECZ

(2)-(1)

Plain area 489.79 942.40 452.61 391.61 467.69 76.08

Mountain area

460.07 566.96 106.89 NA 623.01 NA

All 473.79 686.42 212.63 391.61 584.18 192.57Notes: (1) An i-d border county is one which is bordered by i provinces. (2) BECZ= trans-provincial border economic cooperative zone.Source: Guo (1993).

Table 10.6 Average income level (yuan/person) by type of border-region

10.4 Regional development strategies

10.4.1 Historical review

10.4.2 Coastal area development strategy

10.4.3 Western region development strategy

10.4.4 Resurgence of the old industrial base

Period Coastal (%) Inland (%) Coastal/inland

1953–57 (1st FYP) 36.9 46.8 0.788

1958–62 (2nd FYP) 38.4 56.0 0.686

1963–65 34.9 58.3 0.599

1966–70 (3rd FYP) 26.9 64.7 0.416

1971–75 (4th FYP) 35.5 54.4 0.653

1976–80 (5th FYP) 42.2 50.0 0.844

1981–85 (6th FYP) 47.7 46.5 1.026

1986–90 (7th FYP) 51.7 39.9 1.296

1953–78 (pre-reform) 35.7 55.2 0.647

1979–90 (post-reform) 49.9 43.2 1.155

1953–90 45.0 46.8 0.962

Notes: The total investment of coastal and inland areas are less than 100.00% due to the exclusion of the spatially ‘unidentified’ investment which includes (1) the trans-provincial investment in railway, post and telecommunication, electric power, etc.; (2) the unified purchase of airplanes, ships, vehicles, etc.; and (3) the investment in national defense.Sources: (1) SSB (1991, 1992) and (2) Li and Fan (1994, p. 65).

Table 10.7 Spatial distribution of investment, 1953--90

Case study 8

Fighting for rainfalls?

Chapter conclusion:

Despite the mutually complementary conditions between many of its different regions, the Chinese economy has been internally affected by various geographical, administrative and cultural barriers that exist between provincial administrations. Following an empirical analysis of the spatial efficiency of the Chinese economy, this chapter studies the possibilities and conditions under which the Chinese economy can (or cannot) be optimized spatially. We will analyze the negative economic impacts of China’s interprovincial barriers. The result shows that the multiregional complementarities have not been utilized fully and that due to this existing cross-border separation the Chinese economy cannot be spatially optimized. During recent decades, China’s economic reform and open-door policies have developed its provincial and local economies disproportionally. The particular focus of the final part of this chapter will examine China’s various efforts on the search for spatial economic integration.

Suggested readingAlesina, A., E. Spolaore, and R. Wacziarg (2000). “Economic

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Bai, Chong-En, Y. Du, Z. Tao, and S. Y. Tong (2004). “Local protectionism and regional specialization: evidence from China’s industries,” Journal of International Economics, Volume 63, Issue 2, pp. 397–417.

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Suggested reading

Du, Julan, Qing He, Oliver M. Rui (2011). “Channels of interprovincial risk sharing in China,” Journal of Comparative Economics, Volume 39, Issue 3, pp. 383-405.

Goyal, S. and K. Staal (2003). “The political economy of regionalism,” European Economic Review, Volume 48, pp. 563-93.

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Suggested reading

Li, Z. (1993). “In-Depth Exploration of the Question of Regional Blockades,” Chinese Economic Studies, Volume 26, Issue 5, 23–36.

Magee, Darrin (2008). “Spatial Structure and Regional Development in China: An Interregional Input–Output Approach,” Regional Studies, Volume 42, Issue 10, December, pp. 1401-1403.

Sonobe, Tetsushi, Dinghuan Hu, Keijiro Otsuka (2006). “Industrial development in the inland region of China: A case study of the motorcycle industry,” Journal of Comparative Economics, Volume 34, Issue 4, pp. 818-838.

Tong, Yanqi (2007). “Bureaucracy Meets the Environment: Elite Perceptions in Six Chinese Cities,” The China Quarterly, Volume 189, pp. 100 - 121.

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Suggested reading

Yao, S. and Z. Zhang (2001). “Regional Growth in China under Economic Reforms,” Journal of Development Economics, Volume 38, pp. 16-46.

Yeung, Godfrey (2002). “WTO Accession, the Changing Competitiveness of Foreign-financed Firms and Regional Development in Guangdong of Southern China,” Regional Studies, Volume 36, Issue 6, August, pp. 627-642.

Zhang, Jingxiang and Fulong Wu (2006). “China's changing economic governance: Administrative annexation and the reorganization of local governments in the Yangtze River Delta,” Regional Studies, Volume 40, Issue 1, February, pp. 3-21.

Yuan, Juanwen and Anke Niehof (2011). “Agricultural Technology Extension and Adoption in China: A Case from Kaizuo Township, Guizhou Province,” The China Quarterly, Volume 206, pp. 412 - 425.