The Cyclical Behaviour of Regional Growth Rates in China

Chinese economic growth has been rapid and sustained over the pasttwo decades but has varied significantly across regions. We analyse economic growthdisparities at the provincial level using combined time-series and cross-section data withina framework first used by Thirlwall in 1966 for the analysis of unemployment ratedisparities in the UK. We find considerable differences in the sensitivity of provincialgrowth rates to fluctuations in the national growth rate, with the most sensitive provincesgenerally having the highest average growth rates. Thus continued increases in thenational rate will exacerbate disparities. We find that industrial structure has littleexplanatory power for sensitivities and experiment with various measures of geographyand policy. We find that a simple coastal dummy variable has the greatest explanatorypower, eclipsing the policy variable. We use our analysis to predict that an increase in thenational growth rate to double-digit levels will considerably worsen the dispersion ofgrowth rates across the provinces.