China’s WTO Accession and Regional Economies

Along with the rapid economic growth since China undertook economic reform in 1978, theincome gap among Chinese regions has widened. Using CERD, a computable general equilibriummodel of the Chinese economy with regional details, this paper investigates the impactof China’s accession to the World Trade Organisation on regional development and finds that,although all regions will gain from the accession, the trend of a widening gap among regionswill be reinforced rather than eased. Specifically, the eastern coastal region gains more than theinland regions. The result is robust no matter whether the change in trade balance is left freeor fixed, although the scenario with zero change in the trade balance generates a lower overallwelfare gain and an even worse regional disparity. A retreat from WTO commitments in tariffcuts in agriculture reduces welfare gains, but could to some degree ameliorate the worseninginequality between rural and urban households and between coastal and inland regions. However,this analysis incorporates only WTO commitments on tariff cuts and does not includecommitments on non-tariff barriers. Moreover, it does not model other domestic reforms thatmay be adopted to offset the adjustment costs of the WTO commitments.