China regional GDP data shows growing economic divide, exacerbated by coronavirus

Orange Wang
·8-min read

Holding cups of hot milk tea or carrying shopping bags filled with sports shoes or smartphones, tens of thousands of residents and tourists packed Shanghai’s Nanjing Road pedestrian shopping street last weekend, most not wearing masks as they swarmed onto the Bund promenade to enjoy the night view of the city.

But on the same Sunday evening in late October, the atmosphere in the western border city of Kashgar in Xinjiang province more than 4,100km (2,500 miles) away was entirely different, with most stores closed and streets eerily quiet as the city was under a de facto lockdown after more than 100 asymptomatic coronavirus cases were detected.

These contrasting fortunes mirror the uneven nature of China’s economic recovery, headlined by a 4.9 per cent third quarter gross domestic product (GDP) growth rate as the world’s second-largest economy as a whole has recovered strongly after shrinking by 6.8 per cent in the first three months of the year.

Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.

But under the surface of the country’s overall strong rebound, regional economic divergences have widened in wake of the coronavirus pandemic, and not only the traditional gaps between the coastal provinces in the east and inland provinces in the west, but also between the north and south of the country.

At the same time Beijing’s political elite announced that the size of the country’s economy is expected to surpass 100 trillion yuan (US$14.9 trillion) this year, the government also announced that bridging the regional and urban-rural development disparities would be a major item on its agenda in the next 15 years.

All of China’s 31 provincial-level jurisdictions have released their local growth data for the first three quarters of 2020, with 25 posting positive growth compared to a year earlier. This figure is 10 higher than in the first six months of the year, helping push up national growth to 0.7 per cent in the first three quarters.

Economic growth in the autonomous region of Tibet stood at 6.3 per cent in the first nine months of the year, the highest rate among all regions, according to official data from provincial statistics bureaus.

However, its economy remained the smallest in the country at 130.8 billion yuan (US$19.9 billion), a figure which represents less than 2 per cent of the 7.84 trillion yuan of the southern province of Guangdong – China’s largest provincial economy.

Guangdong’s economy grew 0.7 per cent in the January-September period, reversing a contraction of 2.5 per cent in the first half of the year, while the eastern coastal province of Jiangsu saw its growth rate accelerate to 2.5 per cent from 0.9 per cent.

Our country’s problem of imbalance and insufficient development remains serious … the gaps between urban and rural areas in regional development and income distribution are still large

Chinese Communist Party communique

But in the landlocked northwestern Xinjiang Uygur autonomous region, growth slowed to 2.2 per cent in the first nine months of the year from 3.3 per cent in the first six, despite it being a core area within China’s Belt and Road Initiative.

In the landlocked Hubei province in central China, where the first coronavirus outbreak was detected, the economy continued to shrink, dropping by 10.4 per cent in January-September compared to the same period last year.

The northern provinces of Inner Mongolia, Heilongjiang and Liaoning also continued to contract in the first three quarters of the year, while the northern Chinese municipality of Tianjin only just returned to the same economic level of 12 months ago.

“Our country’s problem of imbalance and insufficient development remains serious … the gaps between urban and rural areas in regional development and income distribution are still large,” the Chinese Communist Party leadership concluded in its communique at the end of its fifth Plenum on Thursday, at which it set the parameters for the nation’s new five-year and 15-year development plans.

The key four-day closed-door meeting in Beijing also set the improvement in regional and urban-rural development coordination as a major target for the 2021-25 plan, calling for a “significant narrowing” of the gap in living standards between regions, as well as urban and rural areas, by 2035.

Five of the 10 largest provincial economies in China are located along the eastern coast, with only one – Sichuan province – in the west, while eight of the top 10 are southern provinces.

Other than Hubei and Shanghai, the other six provinces that had slower growth rates than the national average in the first nine months of the year were located in the north.

Shanghai’s GDP in the first three quarters of 2020 was ranked 12th at 2.73 trillion yuan (US$407 billion), down 0.3 per cent.

The competitiveness of the south has generally grown faster than the north, so the south-north gap will continue to widen in the future and become a more serious regional issue

Huang Hancheng

“The competitiveness of the south has generally grown faster than the north, so the south-north gap will continue to widen in the future and become a more serious regional issue than the gap [between east] and the Midwest, ” said Huang Hancheng, a partner at Chinese consultancy Trigger Trend.

Decades ago, northern Chinese provinces relied on natural resources and heavy industries as their economic growth engines, but these have endured significant declines.

The northern regions have also suffered a greater impact from recent coronavirus outbreaks, including Beijing in June, Dalian in July, Qingdao in early October as well as Kashgar.

Of the 31 provinces that have published local economic results, the southern provinces accounted for 64.6 per cent of the entire national economy at the end of September, a heavier weight than 58.8 per cent five years ago, showing a widening of the economic gap between northern and southern China.

What is China's GDP and why is it important?

Chinese President Xi Jinping has called on the country to adopt the so-called dual circulation economic strategy that relies more on domestic demand consumption for future growth, but at least in the near future, the strategy is expected to have to rely on southern provinces.

Seven of the 10 provinces that suffered the largest declines in per capita consumption expenditures during the first three quarters were in the north, including Beijing, Tianjin, Xinjiang and Inner Mongolia, as well as the three northeastern rust belt provinces of Heilongjiang, Jilin and Liaoning.

In terms of growth rates, southwestern provinces were major driving forces in the first three quarters. The mountainous Guizhou and Yunnan provinces grew by 3.2 per cent and 2.7 per cent respectively, the second and fourth highest readings among all provinces.

The economy of the southwestern municipality of Chongqing rose by 2.6 per cent to 1.77 trillion yuan (US$264 billion) in the first three quarters, exceeding Guangzhou, the capital of the manufacturing and trade hub of Guangdong province.

China’s top leadership is seeking to rely more on this inner region, designating the Chengdu-Chongqing area as the fifth national strategy for regional development after the first four targeted areas in southern China.

However, the sizes of the economies in southwestern provinces, and so their weight in the country as a whole, are still small, accounting for only 14 per cent of the national economy, while they also are still seen to have major structural problems.

“[The cities in the Chongqing-Chengdu economic area] have similar industrial structures, with serious internal competition, weak industrial chain complementarity, and development levels that lag behind the eastern coastal areas,” analysts at China Minsheng Bank said last week.

Provincial figures also show a widening gap between urban and rural regions in the world’s most populous country.

the country’s fiscal and monetary policies so far have some loopholes or flaws in this field, not only causing problems in terms of social fairness, but also holding back the economy from a more efficient and sustainable recovery

Gao Shanwen

The per capita urban disposable income in Shanghai in the first three quarters was the highest in the country, 52,632 yuan (US$7,800) more than in Xinjiang, the lowest, compared to 51,032 yuan of a year ago, according to a South China Morning Post calculation based on data from the National Bureau of Statistics.

Gao Shanwen, chief economist at Essence Securities, said that China’s economic policies and social safety net should provide stronger support for low-income groups and rural residents.

“But the country’s fiscal and monetary policies so far have some loopholes or flaws in this field, not only causing problems in terms of social fairness, but also holding back the economy from a more efficient and sustainable recovery,” he said.

More from South China Morning Post:

This article China regional GDP data shows growing economic divide, exacerbated by coronavirus first appeared on South China Morning Post

For the latest news from the South China Morning Post download our mobile app. Copyright 2020.