The Unexpected Convergence of Regional Productivity in Chinese Industry, 1978--2005

It is widely believed that the acceleration of growth since reforms began in 1978 has increased regional disparities in China. This paper examines whether this is the case for GDP per capita, labour productivity and technical efficiency in industry in 30 regions from 1978 to 2005. The unexpected conclusion is that over the whole period, there has been convergence rather than divergence: more backward regions have caught up with leading regions. The process of regional convergence was especially strong from 1978 to 1990. In the 1990s, there was divergence, but convergence resumed after 2000, leaving regional inequalities in 2005 much smaller than in 1978. Possible theoretical and policy explanations for the observed pattern are considered.