Download Direct foreign investment and inter-regional economic disparity in

International
Journal of Social
Economics
25,2/3/4
424
Direct foreign investment and
inter-regional economic
disparity in China
Haishun Sun
Deakin University, Australia, and
Joseph Chai
The University of Queensland, Australia
International Journal of Social
Economics, Vol. 25 No. 2/3/4, 1998,
pp. 424-447, © MCB University
Press, 0306-8293
1. Introduction
During the reform era since 1979, the Chinese economy has been characterised
by rapid growth and increasing inter-regional disparity. The economic growth
in the eastern (coastal) region has been faster than that in the western region[1].
During the period from 1980 to 1994, the real GDP of the eastern region grew at
an annual rate of 11.5 percent on average, compared to 9.4 percent in the
western region (SSB: SYOC, 1981-1995), resulting in a widening inter-regional
economic gap between the two regions. This disparity can be attributed to
many factors such as economic reforms and open-door policy in favour of the
eastern region, the different economic structure and resource conditions, coastoriented regional policy and direct foreign investment.
Several studies have examined the influence of economic reforms and regional
policy on regional economic development in China. These include Cannon (1990),
Chai (1994), Chai and Leung (1985), Falkentheim (1985), Jia and Tisdell (1993),
Kueh (1992), Lo (1989, 1990), Pannell (1987), Rothenberg (1987), Tisdell (1993),
Tsui (1991) and Yang (1990). Fan (1992) examined the regional impact of foreign
trade in China for the period 1984 to 1989 using the expansion approach (see
Casetti, 1972). He found that the effect of foreign trade on economic growth in the
eastern region was stronger than in the western region.
Sun (1995) investigated the impact of direct foreign investment (DFI) on
regional economic development in China, with a special focus on the differential
influences of DFI on economic growth in the eastern and western regions of
China. It was found that DFI played a distinguishing role in the two Regions.
DFI contributed significantly to the eastern region’s economic growth whereas
its impact in the western region was negligible.
This paper is an expansion of Sun’s previous study. It presents an
investigation of the impact of DFI on inter-regional economic disparity at both
the macro-regional and intra-provincial levels. It is hypothesised that the impact
of DFI on economic growth varies from one region to another – more
specifically that it is stronger in the eastern region (the coastal region) and
weaker in the western region. By promoting capital formation, technology
upgrading and exports, DFI contributed significantly to the economic growth
of the eastern region, while it had little influence on the western region. As a
result, the economic disparity between the two regions has been reinforced by
coast-oriented DFI. At the same time, DFI played an important role in
exacerbating intra-provincial economic inequality. This has been demonstrated
by the experience of Guangdong Province. An empirical investigation of this
issue using the case study of Guangdong Province is presented in this paper.
This paper is organised as follows. Section 2 discusses the pattern of the
regional distribution of DFI in the context of the open-door policy and regional
difference in investment environment. Section 3 presents a regression analysis
on the effects of DFI on the economic growth in the eastern and western regions,
using pooled time-series and cross-section data for 16 provinces over a sevenyear period (1986-1992). Section 4 discusses other important factors influencing
regional economic development including rural industry development,
differential growth of fixed capital investment and exports and domestic capital
flow from the western region to the eastern region. In Section 5, a case study of
the effect of DFI on the intra-provincial economic inequality in Guangdong
Province is presented. This study is complementary to the investigation of
macro-regional economic disparity. Finally, some conclusions and policy
implications will be drawn in Section 6.
2. The regional pattern of DFI distribution in China 1979-1993
The regional distribution of DFI in China is primarily determined by the investment environment and return on capital in the different regions. The investment
environment in a region is affected by a number of social and economic factors,
which in the theory of international investment are termed location-specific
factors. These include infrastructure, transportation, economic structure and
development level, economic policy, legal system and resource endowment.
In the case of China, the location-specific factors differ considerably between
the eastern and western regions. In general, the eastern region is more
developed economically and culturally. The eastern region has a better
infrastructure, especially in transportation and communication systems, as
well as a more developed economic structure and financial system.
Traditionally, all economic centres of China as well as major seaports and
airports are concentrated in the eastern coastal region. In addition, the better
service facilities and human resources make the investment environment in the
eastern region superior to that of the western. In terms of economic structure,
the share of manufacturing industry in GDP of the eastern region is
significantly higher with 52.5 percent in the ten eastern provinces in 1985,
compared to 40.7 percent in nine western provinces[2].
These traditional advantages of the eastern region over the western region in
economic development and investment environment were reinforced by the
coast-oriented economic reforms and open door policy since the early 1980s. The
Chinese government committed a large amount of capital to the eastern region to
improve infrastructure such as transportation, communication, public utilities
and service facilities. Furthermore, the government granted a package of
preferential policies to the eastern region, including favourable policies on
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taxation, foreign trade and investment and more autonomy in economic decision
making, all of which resulted in a better investment environment.
In particular, the open-door policy has been pursued with a remarkable
spatial dimension. In 1979, the Chinese government initiated the open-door
policy by establishing four special economic zones (SEZs) in the south-east
coastal region. These SEZs were initially designed as laboratories for use of
foreign investment, where special economic policies were adopted. The spatial
proximity to Hong Kong where about 80 percent of total DFI in China comes
from was important. In the initial stage, DFI was highly concentrated in the
four SEZs (Shenzhen, Zhuhai, Shantou and Xiamen) and during the period from
1979 to 1983, about 80 percent of total DFI projects was located in the four SEZs.
However, as the government used administrative regulations to isolate the SEZs
economically from the rest of the country, the SEZs in essence became foreign
enclaves with little economic linkages with other regions.
In 1984, 14 coastal cities were opened to foreign investment. As in the SEZs,
a series of special economic policies were practised in these open coastal cities
(OCCs). This helped DFI to diffuse spatially from the SEZs to the 14 OCCs
across ten coastal provinces. Consequently, the contracted DFI in the 14 OCCs
exceeded that in the SEZs. Since 1986 DFI has gradually spread to the other
regions including the other coastal areas and the vast inland regions. In 1990,
the new emphasis of open policy shifted to Shanghai Pudong New Area,
Changjiang (Yangtse River) Delta and Minnan Delta. This was followed by a
rapid expansion of DFI to the inland regions after Deng Xiaoping’s “south tour”
in early 1992. As a result, DFI diffused quickly to the inland regions and
scattered widely across the country.
However, as the investment environment in the eastern region is more
favourable for foreign investors, DFI has been concentrated in the eastern
region since the beginning of the open-door policy. As Table I shows, during the
period of 1983-1993, 89.7 percent of the realised DFI in China was located in the
coastal region, with 6.9 percent and 3.4 percent in the central inland and the
western inland regions respectively. Although DFI has spread to the inland
regions since the mid-1980s, the eastern region is still the primary location of
foreign investment. For example, Guangdong Province is the single largest
recipient of DFI, amounting to US$19.6 billion, which accounted for 34.6 percent
of the national total for the period from 1983 to 1993. In the initial stage (19831985), 61 percent of total DFI flowed into Guangdong. Since the mid-1980s
Guangdong has maintained the most important location for DFI although its
share in the national total has declined.
Fujian Province is second only to Guangdong, with DFI amounting to US$5.8
billion during the period from 1983 to 1993, accounting for 10 percent of the
national total. At the other end, however, both the central and western regions
got a very small share of DFI. The sum of the DFI in these two inland regions
was less than 30 percent of the DFI in Guangdong for the period 1983 to 1993.
The DFI which flowed into the western region (nine provinces) was only equal
to 10 percent of the DFI in Guangdong Province over the same period.
Therefore, the regional distribution of DFI in China was highly unbalanced.
0.5
1.4
1.5
3.1
3.4
14.4
39.2
41.1
86.2
95.7
455.6
390.7
250.9
339.7
57.9
216.6
1,056.5
261.2
123.3
141.3
571.9
3,440.0
7,651.7
1986-89
5.4
4.6
3.0
4.0
0.7
2.5
12.4
2.6
12.0
3.1
1.5
1.7
6.7
40.5
90.0
100.0
Percent
1,361.3
3,421.9
1,438.5
2,371.7
593.4
815.9
1,538.6
3,176.9
3,973.1
4,643.4
1,411.6
1,108.0
5,047.4
14,482.0
40,575.2
45,387.0
Value
1990-93
3.0
7.5
3.2
5.2
1.3
1.8
3.4
7.0
8.8
10.2
3.1
2.4
11.1
31.9
89.4
100.0
Percent
4.9
3.1
6.9
3.4
2,750.6
1,730.5
3,898.8
1,912.6
9.1
5,150.3
1.2
8.8
4,967.3
665.7
2.8
1,571.9
1.9
2.3
1,308.9
1,103.1
10.2
5,840.8
6.1
34.6
19,623.4
4.9
89.7
50,800.4
3,437.3
100.0
56,664.7
2,795.0
Percent
1983-93
Value
Source: Almanac of China’s Foreign Economic Relations and Trade, 1984-1994; Statistical Yearbook of China 1991-1994; and China Foreign
Economic Statistics 1979-1992
Notes: The figures for 1983-85 include direct foreign investment and other forms of investment such as compensation trade, processing assembly
and international leasing. The figures for 1986 and after refer only direct foreign investment.
Western inland
Central inland
Hainan
Laioning
Hebei
Tianjin
Beijing
Shandong
2.5
5.8
160.6
Shanghai
70.6
217.6
2.3
62.7
Jiangsu
1.5
1.3
37.0
7.2
2.1
59.6
Zhejiang
Guangxi
42.8
6.7
185.5
Fujian
199.9
1,016.7
61.2
1,701.4
Guangdong
92.6
Coastal (east) region
8,497.7
100.0
2,779.8
2,573.7
All regions
Value
Percent
1983-85
Value
Region/province
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Table I.
Regional distribution
of direct foreign
investment (utilised)
in China 1983-93
(million US$)
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3. DFI and regional economic development: regression analysis
3.1. The approach, study period, spatial scope and data
Because of the imbalance of the spatial distribution of DFI in China between the
eastern region and the western region, the impacts of DFI on economic
development of China should differ between the two regions. In order to
investigate this difference, a regression analysis is performed.
Prior to the mid-1980s, DFI was highly concentred in the coastal open areas,
with little extension to the inland regions. For most of western provinces DFI
started after 1986 when China began to spread the open-door policy to the inland
regions. In order to make comparative analysis of the effect of DFI on economic
growth between the eastern and western regions, the period covered in this study
is from 1986 to 1992. The spatial scope of this study includes nine of the 11 eastern
provinces and seven of the nine western provinces. In order to make the regions
more comparable, Shanghai and Tianjin are excluded from the regression analysis. They are the two largest cities and commercial centres in the eastern region
and are much different from other provinces in the economic structure and condition. Two western provinces, Qinghai and Tibet, are also excluded in this study
because almost no DFI in these two provinces existed prior to 1992. The source of
data are mainly provincial statistical yearbooks for each province and The
Statistical Yearbook of China from 1986 to 1993. As this study covers 16 provinces
over a seven-year period, the sample size is 112 observations for each variable.
The regression model is based on the classical production function, which
expresses output as a function of capital and labour. Capital includes domestic
and foreign capital. Thus, the production function is: GDP = f(DK, DFI, L). In
logarithmic form it is as follows:
ln(GDP) = β0 + β1Ln(DK) + β2Ln(DFI) + β3ln(L) + u
(1)
where
GDP = Gross domestic product;
DK = Domestically financed fixed capital investment;
DFI = Direct foreign investment;
L = Labour force (the number of labour employed); and
u = Stochastic error term.
In this study, pooled time-series and cross-section data are employed. Because of
this, some conventional methods and diagnoses tests that applied to time-series
analysis lose efficiency. Instead of using conventional methods, a special approach
(Pool), designed particularly for pooled time-series and cross-section data in the
latest version of the Shazam econometrics computer program, is used. As this
method applies the generalised least square (GLS) technique to pooled data,
taking time-wise autocorrelation and cross sectional heteroskedasticity into
account, it will produce a higher efficient regression estimation than that obtained
by other methods like OLS (ordinary least square) and ILS (indirect least square).
In order to remove the influence of inflation on the variables and their
relations, GDP, DK and DFI are expressed in constant prices (1986 = 100). The
current values of GDP and DK are converted into real values using 1986 constant
prices for each province. The values of DFI, originally expressed in current US
dollar, are deflated using the US. GDP implicit price deflators published in
Survey of Current Business (September 1994, p. 44). In addition, to eliminate the
influence of annual fluctuations in DFI, which is highly subject to political events
and policy change in China, the three-year moving average values are used.
To measure the variation in the effect of DFI on the economy between the
eastern and western regions, a dummy variable (D) is used. It takes the value 1
for the eastern region and 0 for the western region. Thus the regression formula
is expressed as follows:
ln GDP = β0 + β1D + β2ln DK + β3ln DK(D) + β4ln DFI + β5lnDFI(D)
(2)
+ β6ln L + β7ln L(D) + u
where β0 is the intercept for the western region; β1 is the differential intercept for
the eastern region; β2, β4 and β6 are the estimated coefficients of DK, DFI and L
for the western region, i.e. the elasticity of GDP with regard to DK, DFI and L
respectively. β3, β5 and β7 are the differential coefficients of DK, DFI and L, for the
eastern region, i.e. the elasticity of GDP with regard to DK, DFI and L
respectively. If β3, β5 and β7 are significantly different from zero, the effects of DK,
DFI and L on GDP are significantly different between the eastern and western
regions. The extent to which the effects differentiate between the two regions
depends on the level of the estimated coefficients, the relevant t-ratios and real
growth rates of these three inputs. The regression can also be run separately for
each region without a dummy variable; the results in this case should be the same
as that obtained for the two regions using regional dummy variable.
4. Regression results and explanation
The two sets of results are presented in Table II.
The results indicate:
(1) The effect of DFI on GDP is significantly different between the eastern
region and the western region. It is stronger in the eastern region than in
the western region. This supports the hypothesis raised at the beginning
of this chapter.
(2) There is no significant difference in the elasticities of GDP with regard to
DK and L between the two regions. This indicates that the responsiveness
of GDP to a unit change in the domestically financed fixed investment (DK)
and labour force (L) is not significantly different between the two regions.
Using the estimated elasticity coefficients of GDP with regard to DK, DFI and L,
the relative contributions of these inputs (DK, DFI and L) to the output (GDP) in
the two regions can be identified. During the period of 1986-1993, the average
annual growth rate of GDP was 11.2 percent in the eastern region and the
growth rates of DK, DFI and L are 17.02 percent, 47.13 percent and 2.26 percent
respectively. During the same period, the GDP of the western region grew at 8.5
percent on the average. DK, DFI and L grew at annual rates of 12.0 percent, 40.82
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Variables
Estimated
coefficient
Standard
error
T-ratio
Partial
correlation
ln DK
ln DK(D)
ln DFI
ln DFI(D)
ln L
ln L(D)
Constant
Constant(D)
0.4618
–0.0492
0.0180
0.0543
0.5446
–0.0203
–0.5138
0.4152
0.0430
0.0633
0.0137
0.0178
0.0326
–0.0667
0.1677
0.3831
10.73**
–0.777
1.315*
3.049*
16.70**
–0.304
–3.065*
1.084
0.725
–0.076
0.128
0.286
0.853
–0.030
–0.288
0.106
Buse (1973) R2 = 0.9823, Buse (1979) R2 = 0.7517; dof = 104; F-statistics = 889.84 > F0.01 = 2.66
(for one-tailed test)
The eastern region:
ln DK
0.4126
ln DFI
0.0723
ln L
0.5243
Constant
–0.0986
0.0476
0.0117
0.0597
0.3531
8.661**
6.176**
8.787**
–0.279
0.748
0.627
0.753
–0.036
Buse (1973) R2 = 0.9325, Buse (1979) R2 = 0.7517; dof = 59; F-statistics = 271.83 > F0.01 = 3.65
Table II.
Production function
estimates for the
eastern and western
regions
The western region:
ln DK
0.4618
ln DFI
0.0180
ln L
0.5446
Constant
–0.5138
0.0435
0.0138
0.0329
0.1694
10.63**
1.302*
16.53**
–3.033**
0.846
0.191
0.927
–0.412
Buse (1973) R2 = 0.978, Buse (1979) R2 = 0.7035; dof = 48; F-statistics = 715.304 > F0.01 = 3.72
**t-ratio is statistically significant at 1 percent level, *t-ratio is statistically significant at 10
percent level (for one-tailed test)
percent and 2.58 percent respectively (SSB, 1986-1993). Thus, the estimated GDP
growth functions for the eastern and western regions can be expressed as:
(1) For the eastern region:
GDP*
= 0.4126DK + 0.0723DFI + 0.52431L
= (0.4126 × 17.12) + (0.0723 × 47.13) + (0.5243 × 2.26)
= 7.022 + 3.407 + 1.185
= 11.6
GDPr/GDP* = 11.2/11.6 = 0.97
where GDPr is the real GDP growth rate and GDP* is the estimated
growth rate. Therefore, the relative contributions of the three inputs (DK,
DFI and L) to output (GDP) for the eastern region are respectively:
DK*/GDP* = 7.02/11.6 = 0.605, or 60.5 percent
DFI*/GDP* = 3.41/11.6 = 0.294, or 29.4 percent
L*/GDP*
= 1.19/11.6 = 0.102, or 10.2 percent
(2) For the western region:
GDP*
= 0.4618DK + 0.018DFI +0.5446L
= (0.4618 × 12.0) + (0.018 × 40.82) + (0.5446 × 2.58)
= 5.554 + 0.735 + 1.405
= 7.7
r
*
GDP /GDP = 8.5/7.7 = 1.104
Thus, the relative contributions of the three inputs to the output are:
DK*/GDP* = 5.55/7.7 = 0.721 or 72.1 percent
DFI*/GDP* = 0.74/7.7 = 0.96 or 9.6 percent
L*/GDP*
= 1.41/7.7 = 0.183 or 18.3 percent
These results suggest that:
• Domestically financed investment (DK) is the largest contributor to the
economic growth in both the eastern and western regions. In the eastern
region, 60.5 percent of GDP growth was accounted for by the increase in
DK during the period from 1986 to 1993. In the western region, DK’s
relative contribution to GDP growth was even larger (72.1 percent). This
implies that the economic growth in the western region is more
dependent on domestic investment than in the eastern region.
• Direct foreign investment (DFI) has become the second largest
contributor to the economic growth of the eastern region. About 30
percent of GDP growth in this region was generated by the increase in
DFI during the period from 1986 to 1993. In comparison, the contribution
of DFI to the economic growth of the western region is less significant.
About 10 percent of the GDP growth in this region was brought by the
increase of DFI during the same period.
• Labour (L) increase contributes to economic growth in both regions at
different levels of significance. In the eastern region, about 10 percent of
GDP growth was generated by an increase in the labour force compared
to 18.3 percent in the western region. This suggests that labour-intensive
industries account for a larger share in the economic structure of the
western region compared to that in eastern region.
The above findings suggest that DFI has become an important dynamic force
propelling economic growth in the eastern region. At the same time, however,
DFI only contributed slightly to economic growth in the western region where
DFI’s share is very small and its effect is insignificant. This is one of the
primary reasons for the different rates of economic growth in the eastern and
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western regions. During the period from 1980 to 1993, the economy of the
eastern region grew at 11.2 percent per year on the average, two percentage
points higher than that of the western region (9.2 percent) (see Appendix 1). As
a result, inter-regional economic disparity between the two regions has
widened. This indicates that the coast-dominated DFI has played an appreciable
role in reinforcing the existing inter-regional economic disparity.
5. Other relevant factors
In practice, many factors contributed to the widened inter-regional disparity.
DFI worked jointly with a number of other factors in accelerating the economic
growth in the eastern region and enlarging the economic disparity with the
western region. These other factors include the coast-oriented economic
reforms and open policy, regional development strategy giving first priority to
the coast, the decentralisation of fiscal power and decline in the central
government’s ability to redistribute fiscal revenue between regions, the
advantages of the East over the West in transportation facilities, well-developed
industrial structure and more autonomy in decision making. These factors have
been carefully discussed by other studies mentioned at the beginning of this
Chapter. These factors together with DFI determined the disparity between the
eastern and western regions in economic development.
Owing to the divergence in the economic conditions and policy treatment, the
two regions have experienced distinct economic achievements. Among the
direct factors contributing to the inter-regional difference in economic
performance, the rural industry development is one of importance. It has an
explicit bearing on the widened inter-regional economic disparity, especially on
the income per capita gap. This is because the rural industry provides one
primary source of income for the rural population, which accounts for 80
percent of the total population of China. One principal indicator for the rural
industry development is the growth of the sales of enterprises run by townships
and villages. During the period from 1981 to 1992 the total sales of township
and village enterprises (TVEs) in the eastern region grew at 23.1 percent per
year on average, with the value increasing from 44.9 billion yuan to 750.1 billion
yuan. The TVEs’ sales per capita in the eastern region increased from 121 yuan
in 1981 to 1,750 yuan in 1992 (SSB, 1981-1993).
In comparison, the TVEs’ development in the western region was relatively
slow. During the same period, the total sales of TVEs of this region grew by 19.7
percent per year on average. The TVEs’ sales per capita increased from 25 yuan
in 1981 to 273 yuan in 1992. The ratio of TVEs’ sales per capita of the eastern
region to that of the western region increased from 4.84 in 1981 to 6.41 in 1992
(SSB, 1981-1993). This indicates that income per capita generated by the rural
industry became more divergent between the two regions.
Two other factors exacerbating the inter-regional economic disparity are the
different investment rates and openness of the regional economies. During the
period from 1982 to 1993, the fixed capital investment in the eastern region
maintained a higher growth rate than that of the western region. The
investment/GDP ratio of the eastern region was 28.8 percent on average over
this period, compared to 26.5 per cent in the western region. In addition, the
economy of the eastern region is more open to the outside world. For instance,
the export/GDP ratio of the eastern region was 23.1 percent in 1993, which was
significantly higher than that of the western region (6.2 percent). In terms of
exports per capita, the eastern region is far ahead of the western region, with
the exports per capita in 1980 at US$44.8, compared to US$1.2 in the western
region. By 1993 the exports per capita in the eastern region reached US$157.6,
which was US$140 more than that of the western region (SSB, 1981-1993).
DFI is an important contributor to both domestic investment and exports in
the eastern region. In 1992 and 1993, the share of DFI in the total fixed capital
investment was 13 percent and 17.5 percent respectively in this region, compared
with 1.1 percent and 4 percent in the western region (SSB, 1981-1994). In the
South-east coastal provinces, the contribution of DFI to the capital formation is
more significant. For example, DFI accounted for 21.2 percent and 26.4 percent
of the total fixed capital investment of Guangdong Province in 1992 and 1993
respectively (Guangdong Statistical Bureau, 1992, 1993, GSB, hereafter). In
Fujian Province, DFI’s contribution was even larger. The ratio of DFI to the total
fixed capital investment reached 39.6 percent and 44.5 percent in 1992 and 1993
respectively (Fujian Statistical Bureau, 1992, 1993. FSB, hereafter). Another
important contribution of DFI to the economic growth is promoting exports. In
1992 and 1993 foreign-invested enterprises (FIEs) provided 20.4 percent and 27.5
percent respectively of the total exports of China (SSB, 1992, 1993). Since DFI
was highly concentrated in the eastern region, most of the exports by FIEs
occurred in this region. For instance, FIEs provided 41.6 percent of Guangdong’s
total exports in 1991 and 44.3 percent in 1992 (GSB, 1992, 1993).
Finally, the flow of economic resources from the western region to The
eastern region is an influential factor for the inter-regional economic disparity.
Since the mid-1980s, a large number of technicians, engineers, managers and
other professional people have shifted from the inland regions to the coastal
region, although they contributed significantly to the economic development of
the eastern region. However, the economy of the western region has suffered
from the lack of technical and management professionals, thereby from lower
productivity and efficiency.
Similarly, capital flow from the western region to the eastern region became
noticeable in recent years. For example, the net capital outflow of Shaanxi
Province amounted to 1,881 million yuan in 1990 and 3,019 million yuan in 1992.
These two figures were equal to 18.1 percent and 22.6 percent of the total
provincial fixed capital investment respectively in these two years (Shaanxi
Province Statistical Bureau, 1994). Another example is Guizhou, the poorest
province in the western region. Exports of capital from Guizhou in 1984 were
estimated at over 700 million yuan, virtually equal to the fiscal subsidies from
the central government (Yang, 1990, p. 255). Capital outflow also occurred in
other inland provinces in various degrees. This phenomenon can be attributed
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to the better investment environment, favourable policy treatment and an
attractive return to capital in the eastern region.
The influence of the inter-regional capital outflow on the two regions is different.
It further augmented capital supply, hence promoting investment and economic
growth in the eastern region. At the same time, it impaired capital formation and
hindered economic growth in the western region. In the case of Shaanxi Province,
when a large amount of capital outflow occurred in 1990 and 1992, the GDP
growth rate was only 2.9 percent and 6.3 percent respectively, remarkably lower
than the national average (3.9 percent and 13.6 percent). As a result, the income per
capita gap between Shaanxi and the national average increased from 301 yuan in
1988 to 524 yuan in 1992 (SSB, 1994 and Shaanxi Statistical Bureau, 1994).
These factors collectively contributed to the widening inter-regional
economic disparity and resulted in an enlarged income per capita gap between
the two regions. Theoretically, the per capita income is determined by economic
growth and population change. During the period from 1981 to 1992, the
population in the western region grew by 1.28 percent per annum, slightly
lower than the population growth rate (1.3 percent) of the eastern region (SSB,
1981-1993). This suggests that the relative change in population is not a factor
leading to the increased income per capita gap. Therefore, the factors
contributing to the differential economic growth of the two regions are the
causes of the increased income per capita gap. This is demonstrated in Table III.
As Table III shows, the east/west income per capita ratio displays a clear
increasing trend. It is positively correlated with the east/west ratios in domestic
investment per capita, DFI per capita, township and village enterprises’ sales
income per capita and the divergence between the two regions in exports per
capita. This suggests that the increased disparity between the eastern region
and the western region in fixed capital investment, foreign investment, exports
and in rural industry development are primary reasons for the growing income
inequality.
The increased inter-regional economic disparity reveals that the economic
boom of the eastern region has not diffused efficiently to the western region.
The diffusion of growth (or “trickle down effect”) from the eastern region to the
western region has not happened or has not been empirically evidenced, as Chai
(1994) and Rothenberg (1987) maintain. The major reason for the deficiency of
the diffusion of growth is the lack of effective inter-regional industrial linkages
and economic cooperation based on these linkages.
Under the open-door policy, the eastern region has been encouraged to be
more involved in the international markets for both exports and imported
materials. This development strategy was formally confirmed at the 13th
Congress of Chinese Communist Party in 1987. As a result, the economy of the
eastern region has become more foreign market-oriented. This is particularly
the case in Guangdong and Fujian provinces. The economic integration
between the Guangdong, Fujian, Hong Kong and Taiwan has rapidly
developed. It is the most important characteristic and cause of economic
development of the south-east region of China. However, as the coastal region
Year
(I)
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
Correlation
East/West
income
ratio
(II)
1.595
1.595
1.625
1.729
1.789
1.820
1.990
1.933
1.884
1.933
2.098
1.000
East/West
DFI ratio
(III)
East/West
investment
ratio
(IV)
East/West
TVE sales
ratio
(V)
East/West
export
divergence
(VI)
N/A
7.857
8.095
8.398
9.671
6.292
9.267
14.669
22.127
35.321
30.951
0.666
1.701
1.689
1.709
1.784
2.094
2.253
2.372
2.205
2.158
2.163
2.410
0.736
4.895
4.896
5.012
5.073
5.345
5.734
6.277
6.146
6.074
6.194
6.415
0.968
42.6
57.8
45.1
47.3
43.8
54.5
61.9
66.3
77.5
88.3
109.5
0.790
Notes: Column II is the East/West per-capita income ratio. Column III is the East/West percapita DFI ratio. the figures for 1983-1985 refer to total foreign investment (utilised) including
DFI and other foreign investment. they refer to DFI only after 1986. Column IV is the East/West
ratio of the fixed capital investment per capita. Column V is East/West ratio of township and
village enterprises (TVEs’) sales income per capita. Column VI is the difference of exports per
capita between the East and the West. the unit is US$. The correlation coefficients listed on the
bottom line are the correlations coefficients between column I and each of other columns
Sources: The figures for 1982-1991 in column II are cited from Chai (1994. Table I). The figures
for 1992 in column II are calculated based on Statistical Yearbook of China 1994. The figures in
other columns are calculated from Statistical Yearbook of China 1982-1993 and China Foreign
Economic Statistics 1979-1991 and also provincial statistic yearbooks for nine eastern and
eight western provinces over 1988-1993
has increasingly shifted to overseas markets, the economic linkages between
the coastal region with inland regions including the western region have
weakened.
In addition, the less-developed domestic market is an important reason for
the lack of effective regional economic linkages. Since the early 1980s, the
Chinese economy has been undergoing a transformation from the traditional
centrally-planned system to a market economy. The market-oriented reforms
are more progressive and far-reaching in the eastern region than in the western
region. The regionally unbalanced reform progress impedes the formation and
development of the integrated domestic market and restrains the economic
linkage and cooperation between the two regions. As a result, economic growth
in the eastern region can not effectively diffuse to the western region, as the
“dualism” theory expects. Consequently, the inter-regional economic disparity
increased.
Direct foreign
investment in
China
435
Table III.
East/West income per
capita ratios 1982-1992
International
Journal of Social
Economics
25,2/3/4
436
6. Intra-provincial economic disparity: case study of Guangdong
This section discusses the impact of DFI on intra-provincial economic disparity
using Guangdong Province’s data. Guangdong is the province that was opened to
foreign investment earlier than other provinces and well ahead of them in terms of
economic growth in the past 15 years. Rapid economic growth and foreign investment have brought about a far-reaching impact on Guangdong’s economic life.
Income per capita of Guangdong increased from 419 yuan in 1980 to 2,795 yuan in
1992. The share of Guangdong’s GDP in the national total nearly doubled, from 5.5
percent in 1980 to 10.3 percent in 1992 (GSB, 1993). The major driving forces for
Guangdong’s rapid growth are direct foreign investment and export expansion.
However, the benefit from fast economic development was not evenly shared
by all regions within Guangdong Province. The three SEZs and the Pearl River
Delta are the centre of economic growth and principal beneficiaries. Taking
advantage of the favourable policy granted by the Government and of the
proximity to Hong Kong and Macao, this region (SEZs and the Delta) has made
great strides in using foreign investment. As of 1992, there were 21,430 foreigninvested enterprises in this region, accounting for 81.3 percent of the total
number of FIEs in Guangdong (the same source as Table IV).
In terms of realised DFI, this region is even more impressive. As Table IV
shows, the three SEZs and the Pearl River Delta accounted for 90 percent of the
realised DFI of Guangdong Province from 1987 to 1991. Although the share of
the other regions in the realised DFI increased to 21 percent in 1992, the three
SEZs and the Delta still accounted for an overwhelming share. DFI contributed
significantly to the economic boom in the SEZs and the Pearl River Delta.
First, DFI led export growth in this region, as most of DFI in Guangdong,
especially those in the Pearl River Delta, are export-oriented using cheap labour.
During the period from 1984 to 1992, FIEs’ exports increased by 80.2 percent
SEZs
Shenzhen
Zhuhai
Shantou
Pearl River Delta
Other regions
Provincial total
Table IV.
Regional distribution of
realised DFI in
Guangdong Province
1987
1988
3.07
2.65
0.24
1.77
2.26
0.61
5.94
3.17
2.59
0.36
0.23
4.92
1.10
9.19
(US$ 100 million)
1989
1990
3.73
2.71
0.43
0.59
6.35
1.48
11.56
4.73
3.49
0.62
0.61
8.28
1.59
14.60
1991
1992
5.61
3.35
1.21
1.05
10.63
1.99
18.23
8.68
4.49
1.99
2.20
20.08
7.76
35.52
Notes: The Pearl River Delta includes Guangzhou (city area) and 28 cities and counties.
Geographically, Shenzhen SEZ and Zhuhai SEZ are also included in the Pearl River Delta which
covers 47,1512kms, but in statistics, the two SEZs are excluded from the Delta
Source: Statistical Materials on Foreign Economic Relations of Guangdong Province
(Guangdong Sheng Duiwai Jingji Tongji Ziliao), 1987-1992
per year in Guangdong while the provincial total exports increased by 29.9
percent per year. By 1992, FIEs’ share in the provincial total exports reached
42.0 percent. Since FIEs are concentrated in the SEZs and the Pearl River Delta,
this region has dominated in the provincial total exports and FIEs’ exports. For
example, in 1992 this region accounted for 86.9 percent of the provincial total
exports and 87.7 percent of FIEs’ exports (see Table V). Thus, the contribution
of DFI-led export expansion to Guangdong’s economic growth has materialised
mainly in the three SEZs and Pearl River Delta.
Second, DFI accelerated the industrial development in the SEZs and the Pearl
River Delta. Since DFI involves capital inflow, technology transfer and investment
goods importation, it can help upgrade technology and improve management
efficiency in FIEs. As DFI increased, FIEs’ contribution to the industrial
production became significant. During the period from 1989 to 1992, FIEs’
industrial output increased by 226.2 percent in the three SEZs. In 1992, the FIEs’
share in the total industrial output of the three SEZs reached 67 percent, compared
to 32 percent of the provincial average. Of the three SEZs, Shenzhen is more
remarkable, 72 percent of the total industrial output was produced by FIEs in 1992
(See Table V). Similarly, in the economic and technology development zones
(ETDZs) in Guangzhou and Zhanjiang, FIEs also headed industrial production.
They produced about 65 percent of the total industrial output in the past few years.
Third, DFI played an important role in fixed capital investment in the Pearl
River Delta, hence promoting significantly the economic growth. As Table V
shows, the ratio of DFI to the total fixed capital investment was between 22
percent and 50 percent in this region for the past four years. Along with capital
flowing into this region, the importation of advanced equipment and machinery
increased substantially. This further stimulated capital formation in this region.
Since DFI has been highly concentrated in the SEZs and the Pearl River Delta,
its impact on Guangdong’s economy has been realised principally in this region.
It speeded the economic development of this region, therefore, making this
region the leading growth area. However, DFI exerted very little influence on the
economy in the inland areas, especially in the mountain areas (covering 48
counties), which accounts for 64 percent in the area and 40 percent in the
population of Guangdong Province. These areas were traditionally closed to the
outside world and far behind the Pearl River Delta in economic development.
Although their connections to the outside world have increased in the reform era,
these inland counties (cities) are still disadvantaged compared to the Delta area
in transportation, industrial facilities and the distance from Hong Kong and
Macao. The difference in economic development conditions between the
mountain area and the Delta was reinforced by the unbalanced DFI distribution.
As a result, the economic disparity between the mountain area and the Delta
within Guangdong has persisted and even increased. This can be displayed by
a comparison of income per capita between the two regions. In 1980, the income
per capita in the Pearl River Delta was 625 yuan which was 1.84 times that of the
mountain area (340 yuan). In 1985 the income per capita in the Delta increased to
1,452 yuan, 2.5 times that in the mountain area (585 yuan). The income gap
Direct foreign
investment in
China
437
Table V.
FIE’s role in industrial
production and exports
in SEZs and Pearl
River Delta
101.5
84.9
10.7
5.9
163.2
20.3
43.5
157.9
116.1
32.9
8.9
1,320.6
61.6
347.3
0.33
0.13
0.64
0.73
0.33
0.66
0.12
0.47
0.48
0.46
0.41
0.30
0.28
F/T
73.3
372.6
221.7
161.3
45.4
15.1
1,491.0
3,552.2
2,784.2
348.6
419.5
3,494.2
10,560.2
Total
34.9
69.8
133.6
106.9
17.3
9.4
348.2
1,956.9
1,646.1
136.9
173.9
1,513.6
3,723.8
1990
FIEs
0.48
0.19
0.60
0.66
0.38
0.63
0.23
0.55
0.59
0.39
0.42
0.43
0.35
F/T
160.8
478.2
426.0
255.2
92.6
78.2
2,071.8
4,420.0
3,179.6
655.7
584.7
5,291.0
13,687.9
Total
49.8
97.0
250.3
174.0
44.0
32.3
559.4
2,435.4
1,847.9
326.5
261.0
2,559.6
5,327.5
1991
FIEs
0.31
0.20
0.59
0.68
0.48
0.41
0.27
0.55
0.58
0.50
0.45
0.48
0.39
F/T
654.1
921.8
497.8
357.0
140.8
N/A
2,769.1
7,126.7
4,787.3
894.9
1,444.0
16,898.8
19,439.5
Total
144.9
195.7
331.1
256.2
74.9
N/A
882.1
3,825.3
2,988.9
487.2
349.2
7,155.7
8,159.1
1992
FIEs
0.22
0.21
0.67
0.72
0.53
N/A
0.32
0.54
0.62
0.54
0.24
0.42
0.42
F/T
Sources: The export data is from the Statistical Materials on the Foreign Economic Relations of Guangdong Province (Guangdong Duiwai Jingji
Tongji Ziliao) 1989-1992. The three SEZs’ industrial output data is from the Statistical Yearbook of China’s SEZs and Coastal Economic and
Technology Development Zones, 1990-1992, pp. 653-5 and 1993, p. 363-5; Guangdong’s industrial output data is from Statistical Yearbook of
Guangdong Province, 1993, p. 185. The data on fixed capital investment in Pearl River Delta is from the Statistical Materials on the Foreign
Economic Relations of Guangdong, 1989-1992; the provincial data is from Guangdong Statistical Yearbook 1991-1993
Notes:
1. The statistics for Pearl River Delta in 1991 and before included 28 counties and cities, but in 1992 the statistics included these 28 counties (or
cities) and Shenzhen, Zhuhai and Guangzhou
2. The administrative boundary of Shantou SEZ was changed in 1992 from 52.6 sq. kms. to 234 sq. kms
3. FIE’s exports do not include compensation trade and processing exports of imported materials
1,227.9
985.1
120.1
122.7
683.2
2,276.7
2,631.2
2,069.2
262.6
299.4
2,277.3
8,167.7
1989
FIEs
438
Exports (million US$)
SEZs
Shenzhen
Zhuhai
Shantou
Pearl River Delta
Guangdong Province
Industrial output
(100 million yuan)
SEZs
Shenzhen
Zhuhai
Shantou
Guangdong Province
Fixed capital investment
(100 million vuan)
Pearl River Delta
Guangdong Province
Total
International
Journal of Social
Economics
25,2/3/4
became larger in 1992. The income per capita in the Delta reached 4,673 yuan
compared to 1,566 yuan in the mountain area, the former being nearly three times
that of the latter. The difference between the SEZs and the mountain area is even
larger. In 1992, income per capita in Shenzhen was 8,122 yuan, 4.2 times higher
than that in the mountain area. This is compared to the income ratio of
2.1:1between them in 1980. Therefore, the income gap became much larger in the
last decade (see Table VI).
In the context of individual city (or county), the income gap also shows a
growing trend. For example, Meizhou, a typical mountain region, is unfavourably
compared with some cities in the Pearl River Delta. During the period from 1984
to 1992, the per capita income in Meizhou increased from 312 yuan to 1,182 yuan,
whereas the increase in per capita income of the following three cities in the Delta
was much more than that: Jiangmen – from 652 yuan to 3,423 yuan; Zhongshan –
from 1,110 yuan to 5,306 yuan; Feshan – from 1,222 yuan to 7495 yuan (Sawada,
1992, p. 10 and Guangdong Statistical Yearbook 1993, p. 93).
These facts indicate that the intra-provincial economic disparity in
Guangdong has been enlarged since the early 1980s. Although the geo-economic
factors are one basic reason for the persistent difference in economic development
between the Pearl River Delta and the mountain area, the unbalanced distribution
of DFI and DFI-led export expansion played an important role in causing a larger
economic disparity between the two regions in the last 15 years.
Income per capita
1980
1985
1989
1990
1991
1992
SEZs
Shenzhen
Zhuhai
Shantou
Pearl River Delta
Mountain area
Provincial average
650
698
–
–
625
340
419
2,100
2,111
2,069
–
1,452
585
830
4,957
5,059
3,607
4,103
2,610
1,068
1,718
6,157
6,905
3,848
4,357
2,729
1,141
1,842
7,211
7,886
5,396
5,202
3,321
1,291
2,188
7,225
8,122
5,800
4,298
4,673
1,566
2,795
Direct foreign
investment in
China
439
Notes:
1. Data for Shantou in 1980 and 1985 is not available
2. Since Shantou changed its administrative boundary in 1992, the data is not comparable with
other years
3. The income per capita is calculated by dividing the total national income by total
population. It includes registered permanent residents and external population, the ratio
between them in Shenzhen was 1:2.8 in 1989; 1:2.56 in 1990 and 1:2.25 in 1992
4. The mountain area in this table includes Meizhou, Heyuan, Shaoguan and Qingyuan only
Source: The data for 1989-1992 is prepared from Statistical Yearbook of Guangdong (SYG)
1990, 1991, 1992 and 1993; and Statistical Materials on Foreign Economic Relations of
Guangdong Province, 1989, 1990, 1991 and 1992. The data for 1980 and 1985 is from SYG 1987,
Table VI.
and Statistical Yearbook of China’s SEZs and Economic and Technology Development Zones,
Intra-provincial income
1990-1992
inequality in Guangdong
International
Journal of Social
Economics
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7. Conclusion and policy implications
Throughout the reform era of 1979 to 1995, the Chinese economy has experienced
rapid growth and a widened inter-regional disparity, with many factors contributing to this. Economic structure and resource conditions, economic reforms and
open-door policy with emphasis on the eastern region increased the divergence
between the eastern and western regions in the economic growth conditions. As a
result of the divergent economic environments, both DFI and domestic investment
witnessed a different growth in the two regions, leading to economic disparity.
This chapter investigated the impact of DFI on the regional economic development
and inter-regional disparity using regression analysis and the case study. The
regression analysis indicates that the effect of DFI on the economic growth was
stronger in the eastern region, significantly promoting exports and capital
formation and very weak in the western region. Consequently, the inter-regional
economic inequality has been reinforced. Other factors like the rural industry
development and domestic capital flow from the western provinces to the eastern
provinces also accounted for the enlarged inter-regional economic differences.
The increased disparity is also closely related to the regional policy of the
Chinese government. Basically, the regional policy throughout the reform era
was based on regional comparative advantages. Under this policy, the coastal
region, owing to its superior geographic location and factor endowment, has
been given a pivotal role as “growth pole” or “engine of growth”. To promote the
growth of this growth, the central government pursued a special economic
policy and committed a large amount of capital to improve infrastructure in this
region. As a result, the investment environment in the coastal region was much
better than in the inland. Domestic and foreign capital therefore flowed into the
coastal region, accelerating its regional economic growth. Owing to the lack of
effective inter-regional industrial linkages and a well-functioning domestic
market, the economic boom in the coastal region has not noticeably diffused to
the inland, resulting in a widening inter-regional economic disparity.
Some implications can be drawn from the Chinese experience with rapid
growth and inter-regional disparity. First, inter-regional disparity is
unavoidable in the process of economic development, especially for a
developing country, since the conditions for development in each region are
different and the regional policy based on comparative advantages tends to
reinforce the existing regional difference. Thus, regional “equality” and
“efficiency” of development are two primary issues faced by a government. In
the initial stage of development, a government may place priority on coastal
(well established) regions which can result in overall national economic growth.
Second, a government should pay particular attention to the growing interregional disparity. In order to facilitate the diffusion of growth from the growth
region to a relatively stagnant region, inter-regional economic linkages should be
promoted through a series of policy tools and encouragement of inter-regional
economic cooperation. All the artificial barriers to inter-regional economic
linkage and integration should be removed. In the Chinese context, some
regulations which isolate the SEZs or other coastal areas from the inland regions
should be eliminated. At the same time, the bilateral trade, investment and other
linkages between the coastal and the inland regions should be promoted, rather
than the coastal region being encouraged to rely more on foreign markets.
Another important point for a less-developed market economy or one
undergoing the transformation from a central planning system to a market
economy, is the enhancement of the market mechanism. As a well-developed
market can allocate resources efficiently, the overall efficiency of an economy can
be significantly improved. However, since market forces could result in regional
inequality in the first stage of economic development, a suitable regional policy
which can foster market efficiency and domestic market integration and
facilitate economic linkages and cooperation between regions is critical.
Third, at present, it is important that the Chinese government standardises
the open policy in all regions and eliminates the prevailing policy differences
which discriminate against the western region. The coast-oriented open policy
is one of the most important causes of the widened economic gap between the
western and the eastern regions. When the eastern region is efficiently involved
in the world economy, the open policy should be extended as much as possible
to the vast inland regions where a huge potential for development exists. The
differences in policy treatment between the western and the eastern regions
would then be eliminated, enabling the western region to greatly improve
development potential.
Fourth, improvement in transportation links between the eastern region and
the western region is essential for enhancing the inter-regional linkages. The
central government should allocate fiscal funds to finance some important transportation projects and should also encourage local capital to invest in infrastructure so as to improve the local investment environment. To this end, some
special programs stimulating investment in the western region are necessary.
Notes
1. China consists of three macro-regions. The eastern (coastal) region includes 11 provinces
and cities: Guangdong, Fujian, Jiangsu, Zhejiang, Shanghai, Shandong, Hebei, Beijing,
Tianjin, Liaoning and Hainan. The Central (inland) Region contains nine provinces:
Heilongjiang, Jilin, Inner Mongolia, Shanxi, Henan, Hubei, Hunan, Jiangxi and Anhui. The
western (far inland) region includes nine provinces: Shaanxi, Sichuan, Gansu, Qinghai,
Xinjiang, Ningxia, Guizhou, Yunnan and Tibet. Although this study included brief
references to the Central Region, it focuses on the eastern and western regions.
2. Calculated from provincial statistical yearbooks of 19 provinces (and cities), including ten
coastal provinces (Hainan and Guangxi are excluded) and nine western inland provinces
(Tibet is excluded).
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Tisdell, C. (1993), Economic Development in the Context of China: Policy Issues and Analysis, The
Macmillan Press, London.
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Vol. 15, pp. 1-21.
Walker, K.R. (1989), “40 years on: provincial contrasts in China’s rural economic development”,
The China Quarterly, Vol. 119, pp. 448-80.
Yang, D. (1990), “Patterns of China’s regional development strategy”, The China Quarterly, June,
No. 22, pp. 231-57.
Direct foreign
investment in
China
443
Appendix 1. Real GDP and growth rates in different regions of China (in 1980
constant price)
Regions
The East
Guangdong
Fujian
Jiangsu
Zhejiang
Shanghai
Shandong
Hebei
Beijing
Tianjin
Liaoning
Hainan
The West
Shaanxi
Sichuan
Qinghai
Yunnan
Guizhou
Ningxia
Gansu
Xinjiang
1980
2,187.5
245.7
85.9
319.8
179.7
311.9
301.2
219.2
139.1
103.5
281.5
N/A
725.1
95.2
322.0
18.3
84.3
60.3
15.1
73.9
53.0
Real GDP (100 million yuan)
1985
1992
1993
3,708.0
436.1
147.9
568.3
357.5
466.8
509.3
355.4
230.4
161.5
432.5
42.3
1,179.5
159.8
507.8
28.1
147.2
107.8
25.7
106.2
96.9
7,177.4
1,125.4
310.2
1,177.8
707.1
780.9
1,035.9
655.7
421.2
246.8
702.4
92.5
2,039.6
272.9
830.7
40.8
272.1
178.8
41.9
210.7
191.7
8,666.8
1,376.4
390.0
1,414.5
888.8
897.2
1,266.9
763.3
472.2
276.7
805.6
115.2
2,287.8
309.2
945.3
44.7
300.9
196.5
46.2
235.1
209.9
GDP growth rate percent
1981-1985 1986-1993 1981-1993
11.1
12.2
11.5
12.2
14.7
8.4
11.1
10.1
10.6
9.3
9.0
N/A
10.2
10.9
9.5
8.9
11.8
12.3
11.2
7.5
12.8
11.2
15.5
12.9
12.1
12.1
8.5
12.1
10.0
9.3
7.0
8.1
13.3
8.6
8.6
8.1
6.0
9.3
7.8
7.6
10.4
10.1
11.2
14.2
12.3
12.1
13.1
8.5
11.7
10.1
9.8
7.9
8.4
N/A
9.2
9.5
8.6
7.1
8.6
9.5
9.0
9.3
11.1
Notes:
1. Since the data for Guangxi and Tibet are incomplete, they are excluded in the East and West
s respectively
2. With the exception of Beijing, the deflators used in calculating the real GDP of all other
provinces are their provincial deflators for each year. The national deflators are used in
calculating the real GDP of Beijing since its local deflators are not available in its statistical
yearbook or other materials
Source: The statistical yearbooks of all the province listed above for period from 1986-1993 and
Statistical Yearbook of China 1994
Table AI.
International
Journal of Social
Economics
25,2/3/4
Appendix 2. Original data for regression analysis
GDP = Gross domestic product;
DK = Domestically financed fixed capital investment;
DFI = Direct foreign investment;
DFIA= Three-year moving average of DFI;
444
L
= Number of labour force.
GDP, DK are in constant price (1986 = 100) for each province. DFI is in constant US dollar (1986
= 100). The deflator for US dollar are: 1987 = 103.2, 1988 = 106.4, 1989 = 112.0, 1990 = 116.8, 1991
= 121.4, 1992 = 124.8, 1993 = 127.5 (see Survey of Current Business, September, 1994, p. 44)
The unit of GDP and DK is 100 million RMB yuan, DFI is in million US dollars.
The regression analysis covers the period from 1986 to 1992, including nine eastern provinces
and seven western provinces. Shanghai and Tianjin are included in this regression analysis.
DFIA are calculated from DFI data from 1985 to 1993.
Year
Guangdong
1986
1987
1988
1989
1990
1991
1992
1993
Fujian
1986
1987
1988
1989
1990
1991
1992
1993
Jiangsu
1986
1987
1988
1989
1990
1991
1992
1993
Table AII.
GDP
DK
DFI
DFIA
L
685.4
806.7
932.3
997.4
1,110.1
1,302.1
1,588.6
1,942.9
191.0
210.0
271.3
236.3
247.0
317.6
600.6
976.7
643.9
575.6
863.8
1,032.5
1,249.8
1,501.6
2,845.8
5,880.8
578.3
694.4
823.9
1,048.7
1,261.3
1,865.7
3,409.4
2,813
2,911
2,995
3,041
3,118
3,259
3,367
3,480
210.7
236.2
268.3
285.7
305.7
350.6
423.5
532.3
58.4
69.3
65.0
55.0
66.0
78.6
109.7
187.2
61.3
49.8
122.4
293.6
248.3
530.9
1,134.9
2,249.0
76.3
77.8
155.3
221.4
357.6
637.9
1,304.9
1,190
1,239
1,281
1,302
1,348
1,437
1,490
1,521
774.9
866.3
979.8
1,001.0
1,045.0
1,117.1
1,409.8
1,693.2
228.5
293.0
296.1
236.9
263.0
311.3
473.5
680.1
18.1
48.1
96.8
84.5
120.8
192.1
1,124.1
2,230.4
26.0
54.3
76.5
100.7
132.5
479.0
1,182.2
3,350
3,430
3,503
3,520
3,569
3,600
3,614
3,743
(Continued )
Year
DK
DFI
DFIA
L
479.8
536.4
597.0
593.4
616.5
711.4
845.9
1,063.3
126.2
143.3
152.2
128.8
131.9
164.7
240.6
495.8
18.5
22.7
27.8
46.8
41.4
75.5
235.6
809.3
19.2
23.0
32.4
38.7
54.6
117.5
373.5
2,386
2,445
2,503
2,523
2,554
2,579
2,600
2,659
Shanghai
1986
1987
1988
1989
1990
1991
1992
1993
490.8
527.6
580.9
598.3
619.2
662.5
761.2
874.6
126.6
142.4
180.3
152.8
160.0
171.3
228.1
372.1
147.6
205.4
342.3
376.9
151.7
144.4
633.0
2,478.7
153.5
231.8
308.2
290.3
224.3
309.7
1,085.4
766
771
772
764
767
774
776
740
Shandong
1986
1987
1988
1989
1990
1991
1992
1993
695.1
791.0
892.2
927.7
977.8
1,113.7
1,330.9
1,627.7
214.1
273.9
301.2
247.3
222.6
286.8
366.5
512.4
19.4
23.1
36.7
117.2
129.1
147.9
780.0
1,445.6
16.0
26.4
59.0
94.3
131.4
352.3
791.2
3,651
3,766
3,887
3,940
4,043
4,219
4,303
4,473
Hebei
1986
1987
1988
1989
1990
1991
1992
1993
436.7
487.4
546.9
570.4
597.2
650.9
741.4
863.0
129.9
139.1
170.7
133.9
116.6
155.5
207.9
240.5
6.9
7.2
15.7
24.0
33.7
36.6
143.8
311.0
6.0
9.9
15.6
24.5
31.4
71.4
163.8
2,626
2,726
2,808
2,858
2,955
3,040
3,106
3,241
Beijing
1986
1987
1988
1989
1990
1991
1992
1993
284.9
310.5
348.8
364.1
383.7
412.5
460.4
516.1
90.0
107.5
97.0
99.8
123.8
119.5
160.4
237.0
139.9
92.3
472.6
284.4
237.2
201.6
280.3
523.1
107.0
234.9
283.1
331.4
241.1
239.7
335.0
Zhejiang
1986
1987
1988
1989
1990
1991
1992
1993
GDP
573
580
603
594
627
634
649
659
(Continued )
Direct foreign
investment in
China
445
Table AII.
International
Journal of Social
Economics
25,2/3/4
446
Table AII.
Year
GDP
DK
DFI
DFIA
L
Tianjin
1986
1987
1988
1989
1990
1991
1992
1993
194.1
208.9
221.0
224.6
236.7
250.9
280.3
314.2
59.4
58.2
48.5
40.8
43.9
46.5
53.6
88.3
42.9
53.2
22.6
72.6
71.2
77.3
185.4
424.3
46.7
39.6
49.5
55.5
73.7
111.3
229.0
467
471
465
469
470
480
486
478
Liaoning
1986
1987
1988
1989
1990
1991
1992
1993
578.9
642.0
714.5
730.9
733.1
773.4
863.9
990.9
168.0
193.9
212.7
181.9
184.3
209.2
280.7
384.0
33.0
62.4
85.1
97.2
212.6
258.3
351.9
990.4
37.0
60.2
81.6
131.6
189.4
274.3
533.5
1,799
1,835
1,859
1,875
1,897
1,938
1,958
1,952
Hainan
1986
1987
1988
1989
1990
1991
1992
1993
46.7
52.5
57.8
61.0
66.8
75.0
92.5
115.2
15.1
14.2
14.6
17.8
21.3
29.2
46.9
77.8
30.7
8.6
107.3
95.7
86.1
145.1
361.9
554.6
25.8
48.9
70.5
96.4
108.9
197.7
353.9
273
280
291
298
304
316
321
322
Shaanxi
1986
1987
1988
1989
1990
1991
1992
1993
206.8
225.6
259.9
262.8
274.1
304.0
330.4
374.3
60.1
71.3
73.6
69.9
85.9
103.3
107.9
153.6
37.2
70.1
105.0
86.8
35.9
26.0
36.7
183.8
41.2
70.8
87.3
75.9
49.6
32.9
82.2
1,409
1,449
1,494
1,529
1,576
1,640
1,672
1,718
Sichuan
1986
1987
1988
1989
1990
1991
1992
1993
654.6
718.8
781.3
802.4
832.1
896.2
1006.4
1,145.3
152.0
177.4
170.1
160.1
151.0
182.9
263.7
332.0
15.2
20.5
22.2
10.1
13.3
20.1
81.7
439.1
21.5
19.3
17.6
15.2
14.5
38.4
180.3
5,311
5,422
5,586
5,764
5,872
6,075
6,203
6,221
(Continued )
Year
GDP
DK
DFI
Yunnan
1986
1987
1988
1989
1990
1991
1992
1993
178.5
200.5
232.6
246.1
267.5
283.6
314.5
347.8
48.4
49.9
56.8
50.5
48.1
60.3
83.6
139.7
3.5
4.7
2.9
6.6
2.2
2.5
18.5
76.1
3.3
3.7
4.7
3.9
3.9
7.7
32.4
1,732
1,778
1,827
1,881
1,923
1,989
2,032
2,106
Guizhou
1986
1987
1988
1989
1990
1991
1992
1993
139.6
154.7
168.0
175.6
183.2
201.0
219.3
241.0
31.0
31.8
40.4
32.2
35.7
39.4
50.8
60.6
2.2
0.2
4.1
6.7
4.0
6.0
15.9
33.6
4.1
2.2
3.7
4.9
5.6
8.8
18.5
1,383
1,436
1,501
1,517
1,652
1,701
1,720
1,770
Gansu
1986
1987
1988
1989
1990
1991
1992
1993
140.7
151.7
162.5
176.8
186.7
198.8
218.1
243.4
39.8
45.0
50.0
40.9
46.2
52.4
60.4
64.9
5.9
5.2
8.2
0.2
4.0
0.5
0.3
9.4
4.8
6.4
4.5
4.1
1.6
1.6
3.4
1,099
1,140
1,179
1,214
1,292
1,303
1,313
1,331
Ningxia
1986
1987
1988
1989
1990
1991
1992
1993
33.6
36.0
40.4
43.8
45.5
47.4
51.0
56.3
16.2
17.8
15.2
13.0
14.7
17.7
24.0
24.5
0.1
0.03
0.3
1.1
0.9
0.9
2.8
9.3
0.10
0.13
0.48
0.77
0.97
1.53
4.33
Xinjiang
1986
1987
1988
1989
1990
1991
1992
1993
126.0
138.1
152.2
161.2
176.0
200.5
226.8
248.3
48.4
47.0
49.7
49.1
57.9
73.8
84.9
97.0
12.8
17.0
8.3
0.3
6.1
3.4
8.2
41.6
DFIA
13.6
12.7
8.5
4.9
3.3
5.9
17.7
L
Direct foreign
investment in
China
447
183
191
197
204
211
219
226
230
575
585
594
600
620
638
647
646
Table AII.