CHINESE REGIONAL INEQUALITIES IN INCOME AND WELL-BEING

Dividing China into seven regions reveals rural income and consumption divergence for both 1980–2005 and 2000–05. But while real rural consumption growth averaged 7.7 percent over 1985–2005 in the eastern coastal region, it averaged 6.5 percent uniformly in the interior. In evaluating well-being, such rapid improvement in all regions arguably overshadows negative connotations of divergence. Twenty years of household survey data reveal dramatic increases in rural household savings, as rural consumption improved more slowly than income in some periods. This raises questions about the suitability of consumption as a basis for measuring well-being and its distribution. Increased savings appear to be transient, as some households save while others dissave to purchase durables and afford lumpy services like education and healthcare—supplies of which became more plentiful in the 1990s. The paper argues that more meaningful measures of regional disparities come from differences in regional poverty headcounts. It also suggests that higher regional inequality and accompanying interregional migration indicate that inequality plays an important positive role in inducing economic actors voluntarily to move to more productive locations and activities as a mechanism for ensuring sustainable improvements in individual well-being.