Tag Archives: Market integration

One Country, Two Centuries

If India is said to be one country spanning three centuries then China may be one country spanning two. This passage in a new World Bank policy research working paper* caught this Bystander’s eye:

The PRC’s GDP per capita today is roughly equivalent to that of Britain in 1911. London at that time had a GDP per capita around 1.7 times the national average, whereas East Anglia had a GDP per capita two thirds of that average. In the PRC today, the comparable figures are 3.3 for Shanghai and one third for the lagging area of Guizhou. Shanghai has a GDP per capita ($16,044), roughly equivalent to the British average in 1988, while Guizhou has a level ($1,653) close to the British average in 1830.

The paper, by Qingqing Chen and colleagues, is a survey of surveys of China’s development from low- to middle-income economy over the past three decades. As such some of the data is a bit whiskery. The paper provides a succinct overview rather than breaks new ground, although it does suggest that barriers to inter-provincial trade (i.e. local protectionism) are falling more than some of the literature has held. Another passage that caught our eye:

Government efficiency and effectiveness are highest in the Southeastern cities (Fujian, Guangdong, Jiangsu, Shanghai, and Zhejiang), and are lowest in the lagging Southwest and Northwest. The firms in the coastal areas pay lower taxes and fees; have a much shorter customs clearance delay; spend less time dealing with bureaucracy; and spend less on entertainment and travel, which are good proxies of local corruption. The survey finds that foreign firms operating in the Southeast face considerably lower taxes and fees than elsewhere  while combined average export/import clearance in the Southeast stood at 7.3 days in contrast to the Northwest at 16.8. In the coastal areas, firms reportedly have better access to finance, more reliable protection of property rights, and more effective contract enforcement.

The substantive point of the paper is that China’s economy remains under-concentrated and under-urbanized so its rapid development phase has yet to run its full cycle with is consequent geographical disparities continuing. The corollary of that is that economic geography is not the same as the geography of social welfare. Dare we suggest the two need to be harmonized, or has that already been proposed?

* Market Integration in China, by Qingqing Chen, Chor-Ching Goh, Bo Sun and Lixin Colin Xu. World Bank Policy Research Working Paper 5630.

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