The Economist 20161001 ed79b8

China
The Economist October 1st 2016 31
Regional development
Rich province, poor province
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34 Banyan: Dogged documentarians
BEIJING
The government is struggling to spread wealth more evenly
EARLY in the summer Xi Jinping, China’s
president, toured one of the country’s
poorest provinces, Ningxia in the west.
“No region or ethnic group can be left behind,”
he insisted, echoing an egalitarian
view to which the Communist Party
claims to be wedded. In the 1990s, as China’s
economy boomed, inland provinces
such as Ningxia fell far behind the prosperous
coast, but Mr Xi said there had since
been a “gradual reversal” of this trend. He
failed to mention that this is no longer happening.
As China’s economy slows, convergence
between rich and poor provinces
is stalling. One of the party’s much-vaunted
goals for the country’s development,
“common prosperity”, is looking far harder
to attain.
This matters to Mr Xi (pictured, in Ningxia).
In recent years the party’s leaders
have placed considerable emphasis on the
need to narrow regional income gaps.
They say China will be a “moderately
prosperous society” by the end of the decade.
It will only be partly so ifgrowth fails
to pick up again inland. Debate has started
to emerge in China about whether the
party has been using the right methods to
bring prosperity to backward provinces.
China is very unequal. Shanghai,
which is counted as a province, is five
times wealthier than the poorest one,
Gansu, which has a similar-sized population
(see map, next page). That is a wider
spread than in notoriously unequal Brazil,
where the richest state, São Paulo, is four
times richer than the poorest, Piauí (these
comparisons exclude the special cases of
Hong Kong and Brasília).
To iron out living standards, the government
has used numerous strategies. They
include a “Go West” plan involving the
building of roads, railways, pipelines and
other investment inland; Mr Xi’s signature
“Belt and Road” policy aimed partly at
boosting economic ties with Central Asia
and South-East Asia and thereby stimulating
the economies of provinces adjoining
those areas; a twinning arrangement
whereby provinces and cities in rich coastal
areas dole out aid and advice to inland
Faltering progress
China’s provincial income inequality*
MORE INEQUALITY
1975 80 85 90 95 2000 05 10 15
Source: Gavekal
Dragonomics
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
*Dispersion index, using the ratio of
the standard deviation of provincial
GDP per person relative to the mean
counterparts; and a project to beef up China’s
rustbelt provinces in the north-east
bordering Russia and North Korea. The
central governmentalso givesextra money
to poorer provinces. Ten out of China’s 33
provinces get more than half their budgets
from the centre’s coffers. Prosperous
Guangdong on the coast gets only10%.
The number, range and cost of these
policies suggest the party sees its legitimacyrooted
notonlyin the creation of wealth
but the ability to spread it around. Deng
Xiaoping’s economic reforms, launched in
the late 1970s, helped seaboard provinces,
which were then poorer than inland ones,
to catch up by making things and shipping
them abroad. (Mao had discouraged investment
in coastal areas, fearing they
were vulnerable to attack.) In the 1990s the
coast pulled ahead. Then, after 2000, the
gap began to narrow again as the worldwide
commodity boom—a product of China’s
rapid growth—increased demand for
raw materials produced in the interior (see
chart). That was a blessing for Mr Xi’s predecessor
Hu Jintao, who made “rebalancing”
a priority after he became party chief
in 2002. It also boosted many economists’
optimism about China’s ability to sustain
rapid growth. Even if richer provinces
were to slow down, they reckoned, the
high growth potential of inland regions
would compensate for that.
But convergence is ending. GDP growth 1