Understanding China's Economic Growth from a Regional Policy Perspective

• Published date: 01 May 2023
• Author: Jiashun Huang,Jim Huangnan Shen,Zhiyan Sun
• Date: 01 May 2023
• DOI: http://doi.org/10.1111/cwe.12468

©2023 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 1–26, Vol. 31, No. 3, 2023 1

Understanding China’s Economic Growth

from a Regional Policy Perspective

Jiashun Huang, Jim Huangnan Shen, Zhiyan Sun*

Abstract

There has been ongoing interest in China’s economic growth. What were the drivers of

China’s economic growth in past years? What policies were used to promote China’s

economic growth? Although different lenses may be used to understand and explain

China’s economic growth, this paper draws on historical, theoretical, and empirical

perspectives to discuss the nexus between China’s regional policies and economic

growth. First, we review the evolution of China’s regional policy and the policy’s

changing emphasis in different development stages, from balanced, unbalanced, and

coordinated development to synergistic development. Then we construct a theoretical

model to illustrate the impact of regional policy on the local economy and conduct an

empirical examination with a case study of regional policy using regression discontinuity

design. This paper analyzes the concept of regional policy and the underpinning logic

of economic growth and presents practical approaches to formulate a better regional

policy framework.

Keywords: economic growth, spatial distribution, regional governance, regional policy

JEL codes: O10, O21, R10, R58

I. Introduction

China has experienced remarkable economic growth in the past 70 years, and there are

numerous explanations for this. It has transformed from an impoverished country to

the second-largest economy and has maintained rapid economic growth for decades.

*Jiashun Huang, Professor, School of Public Affairs and Institute of Intellectual Property, University of

Science and Technology of China, China. Email: jh993@ustc.edu.cn; Jim Huangnan Shen, Assistant Professor,

Department of Applied Economics, School of Management, Fudan University, China. Email: hnshen@fudan.

edu.cn; Zhiyan Sun (corresponding author), Senior Research Fellow, Department of Development Strategy

and Regional Economy, Development Research Center of the State Council, China. Email: sunzhiyan-

drc@139.com. The authors are listed in alphabetical order, and they contributed equally to this paper. They

would like to thank the editors, reviewers, Martin Williams, Yongzhi Hou, Joe Walsh, and Xi Hu for their

helpful comments. This study is supported by the Fundamental Research Funds for the Central Universities,

the Center for International Knowledge on Development, and the Department for International Development.

Jiashun Huang et al. / 1–26, Vol. 31, No. 3, 2023

©2023 Institute of World Economics and Politics, Chinese Academy of Social Sciences

2

China has risen out of poverty from 1981 to 2020, contributing to more than 70 percent

of world poverty reduction (Liu et al., 2020). One of the prevailing views to explain

its economic growth among academics and policymakers is that market economy

reform and a policy of opening up in eastern China boosted its rapid growth, and the

regional policy of Open up the West program in western China reduced the regional

disequilibrium (Lin and Wang, 2020; Cheong et al., 2022). However, some are critical

of regional policies and claim that the market would allocate resources more effi ciently;

regional development should be driven by the market rather than constrained by specifi c

place-based policies resulting from government intervention (Acemoglu et al., 2008).

Some evidence of little contribution (Driffi eld, 2004) or even negative eff ect (Mancha

and Yserte, 2008; Bernini and Pellegrini, 2011) of regional policies on growth raised

concerns regarding government interventions. There are increasing debates regarding

regional policy in the literature, while it remains underinvestigated in terms of how

policy intervention infl uences economic growth and whether place-based policies could

be applied to facilitate rapid economic growth (Martins, 2021; Mogila et al., 2022).

Regional policy could play a critical role in economic growth; however, topics

such as the kinds of regional policy that should be enacted and how to implement

regional policy have long been controversial (Armstrong, 1983; Martin and Sunley,

1998; Qin and Fang, 2022; Wang, 2022). To help understand the role of regional

policy in stimulating economic growth, this study enriches the literature from several

perspectives.

First, this study reviews the development of China’s regional policies at diff erent

stages. Then, it presents a theoretical model of the relocation of public spending

across regions and its impact on economic growth. It presents an empirical analysis of

regression discontinuity by adopting the Open up the West Program as a case study to

illustrate the impact of regional policy on the western regions.

This paper explores the relationship between regional policy and economic growth

with a two-region model, and draws on empirical research from China to discuss the

issues around regional development policy and economic growth. The primary aim of

the paper is to illustrate the theoretical foundations of regional policy and the economy,

verify the linkage between regional policy and growth, explain the logic behind China’s

regional economic growth, and refl ect upon how other developing countries can achieve

economic growth through their own approaches to regional policy. From a historical

perspective, this study comprehensively summarizes the regional policy of China in

diff erent stages since the establishment of the People’s Republic of China.

Unlike other studies, after reviewing the evolution of China’s regional policy, this

study aims to contribute to the literature by identifying China’s regional policy design,