The Beijing News recently published a commentary calling for closer attention to disparities of per capita income between different areas. The commentary came in a response to the recent release of statistics which show a city's GDP being 10 times that of a western Chinese province.
Gaps between regions and economic scales are very common; it is the disparities of per capita income between different areas that demand our close attention, according to Dr. Wei Zhiming from Nankai University in his article published in the Beijing News on January 3.
The GDP of Guangzhou, capital city of Guangdong Province, is ten times more than that of the entire region of Qinghai, a province in northwest China. Dongguan, a city in Guangdong and Suzhou, a city in southeast China's Jiangsu Province, also boast greater economic strength than some of the western provinces, according to the latest statistics which have captured public concern.
If a city is as wealthy as a province, Wei believes that this phenomenon is in accordance with economic laws. Commercial activities in a city are often concentrated inside a few areas. Even a small town has a "commercial district".
Wei cited South Korea as an example: one third of the country's business activities take place in Seoul, which houses more than 30 percent of the country's total population. "We cannot hinder the growth of big cites in order to realize balanced regional development. We also should not simply equate economic disparity with a gap in wealth among different regions," he says in the article.
It is therefore normal to see economic disparities between different administrative regions. It's also not rational attempting to achieve a balanced distribution of economic activities in various geographic regions of an economic entity, he says.
"But we should attach great importance to the gap in wealth between regions, because this causes polarization in per capita income. "
"It is true that disparities in average labor productivity exist among different areas in China, which leads to different living standards. If production factors: including capital, natural resources and labor, flow freely among these areas, then income polarization will be narrowed. Hence liberalizing the economy is the most effective way to stimulate income growth and bridge the wealth gap."
Wei says that people should have the freedom to choose their place of residence as well as their workplace. The Chinese government must strive to establish a unified and open labor market, allowing people to freely distribute their human capital and also give the people many opportunities to maximize their wealth. The government must take the initiative conducting reforms in population management instead of permitting passive movement.
Governments at all levels should carry out effective measures to abolish barriers to the free flow of capital. Capital allocation must be optimized to obtain maximum returns, but this process requires a unified institutional framework. Compared to preferential policies, savvy investors prefer a transparent and efficient government administration that freely permits various economic activities.
If people could choose where they wish to live and where they wish to work, many areas in China would become sparsely populated, so it is not necessary to develop the economy in these regions. Small economic scales do not necessarily imply low incomes and poor living standards. People engaged in industries with regional advantages can also obtain substantial incomes and high standards of living. All of these things promote wealth accumulation and act in accordance with economic laws.
(China.org.cn by Yang Xi, January 8, 2008)