Comparison of China’s major regions, detailed below, shows that in official GDP per
capita terms and for rural income and consumption, disparities appear large. Furthermore, both
over 20 years and over the 2000-05 five-year period, Chinese rural income and consumption
disparities have increased, as measured by the ratios of per-capita rural household statistics
representative for major regions. In other words, regional rural household income and
consumption levels in China are diverging (at least through 2005) and have been, whether
measured since 1985 or 2000.
Although disparities are growing, the extraordinarily rapid improvement in rural
household income and consumption levels in all regions over both longer-term (1985-2005) and
more recent (2000-2005) periods is notable. Average annual real growth in rural household
income was at least 6.0 percent for all seven regions over the period 1985-2005, and for
consumption the corresponding average growth rate was at least 6.5 percent over all regions.
Compared to the most obvious static measure of differences in regional well being,
average consumption levels, the sustained speed of improvement in income and consumption in
all regions and provinces is a dynamic indicator of well being that argues for less severe regional
disparities in well being and weaker divergence in well being from one region to another. In
other words, to the degree that well being is more than absolute consumption levels but is linked to satisfaction of citizen expectations, comparably rapid increases in static measures arguably
convey similar subjective benefits to different regions, despite their persistent gaps by static
measures. Giving significant weight to this dynamic indicator of well being must influence the
overall evaluation of both the causes and consequences of observed levels and trends in China’s
inter-regional inequality in recent decades.
In a third dimension, poverty incidence comparisons between coastal and interior
provinces reveal clear differences in well-being in this context, especially when poverty
incidence calculations use an appropriate poverty-line standard. Revisions to the World Bank’s
“dollar-a-day” poverty standard consistent with the December 2007 release of revised Chinese
purchasing power parity statistics (World Bank 2007b, 2007c) makes this traditional poverty
standard more useful for this purpose than its unrevised predecessor.
Finally, the analysis presented below concludes that the levels and trends in regional
inequality are healthy parts of China’s successful economic reform program. They furthermore
provide essential incentives for voluntary labor migration from low-productivity areas to highproductivity
and higher income work opportunities in other regions. The inequality trends also
indicate that China’s high internal migration period is not over and that equilibrating
convergence must be a long time away. In the meantime, China should continue to provide the
essential complementary investments and reforms needed to facilitate migration set in motion in
part by the very inequalities themselves.