China's widening economic disparities and its ‘Go West Program’

This paper analyzes the serious widening of economic disparities in China during the last two decades. The economic disparities indicate that there is a substantially lower standard of living, and lower economic activity in the western region of China as compared with the eastern region. The causes of these disparities include a wide range of factors: geographical differences; government policies that address market distortions; preferential treatment that favors the eastern coastal areas; and an imbalance in China's industrial structure. To avoid further deterioration and a further widening of the disparities, Chinese leaders have embarked on the so‐called ‘Go West Program’. By adopting the node–axle theory, this study recommends that selected areas in the western region be considered as pilot nodes for this development, with each node networked to other axles for further development. The government's policy declaration on the ‘Go West Program’ should not lead one to be overly optimistic about this program. Evaluations of investment prospects in western China should take into consideration the constraints inherited by the western regions: a weak legal system, local government inefficiency, and inferior infrastructure and labor quality.