The Economist has an article showing a dramatic difference in economic growth between northern and southern China:
There has been some migration to southern China, but nowhere near enough to fully explain this divergence. The southern provinces really have done better, even in per capita terms.
The Economist provides a number of explanations for this gap, but barely even alludes to the most important; southern China is considerably more capitalist than northern China. That oversight would not have occurred in the Economist I read when I was young. Someone should revive the Far Eastern Economic Review.
PS. Of course there are more than two Chinas. Taiwan is even more capitalist than the southern mainland, and is even richer. Hong Kong is even more capitalist than Taiwan, and is even richer. Funny how that works.
PPS. I said, “barely even alludes to” as this is the only reference to free market policies in the article:
In 2013, the peak of China’s building frenzy, investment in assets such as roads and factories reached an eye-watering 66% of gdp in the north versus 51% in the south. Southern officials have been more hands-off.
PPPS. I see a lot of talk about China’s “industrial policy”. FWIW, there’s more industrial policy in northern China than in the south.
READER COMMENTS
Jon Murphy
Feb 27 2021 at 1:14pm
Your analysis is interesting. Generally speaking, I tend to think of China as a monolith with regions that are largely under the control of Beijing. But, if I understand you correctly, China has something more of a federalist system?
Scott Sumner
Feb 27 2021 at 2:42pm
That’s right.
BJH
Feb 27 2021 at 1:26pm
I had no idea. When you say, “Southern China is considerably more capitalist than northern China” — you mean it has BECOME more capitalist? Because of course we can’t explain a change with a level (unless the north has persistently experienced zero or negative growth, which would be even more surprising).
Also: in what ways is the south more capitalist?
Scott Sumner
Feb 27 2021 at 2:44pm
Yes, neither region allowed any capitalism prior to 1978, so the south has changed more. The governments in the south were more willing to allow entrepreneurship, whereas the northern provinces were more statist in policy. The difference is fairly large.
Kevin Dick
Feb 27 2021 at 1:38pm
You should do a long post where you provide citations to back this all up. Or contract with Scott Alexander to write, “China and capitalism: much more than you wanted to know”.
Because if you had a fully sourced piece that demonstrated this, I would reference it all the time when people argue for less capitalism.
Scott Sumner
Feb 27 2021 at 3:26pm
There’s a good book on China’s economy by Coase and Wang.
Henri Hein
Feb 28 2021 at 11:55pm
This one?
Pedro Silva
Feb 27 2021 at 1:58pm
I seem to recall that Manchuria used to be the considrablymore industrialized than most China. It would therefore be no wonder that, as the rrst od the country left poverty behind, the relative weight of the North would decrease (just like the decrease of 1st world countries GDP as % of world GDP simply means that poor countries have become richer and that it is easier to grow from technology /wealth level 20 to technology /wealth level 100 when top technology/wealth level stands at 120 than from level 120 to level 200 in the same conditions.
Scott Sumner
Feb 27 2021 at 3:25pm
That success contributed to their current failures. The north had more heavy industry owned by the state, and this is the least productive part of the modern Chinese economy. The state continues to play a bigger role in the north, with relatively more state investment and a less friendly attitude toward private business.
Pedro Silva
Feb 28 2021 at 7:51am
My point is that, even if tge northern industry had been completely capitalist, the higher starting point of the Northern regions would inevitably mean that the Nothern share of the GDP would have to decrease as the Southern regions caught up
Jon Murphy
Feb 28 2021 at 8:54am
Sure, but that would mean the GDP % would be converging. But they’re not; they diverging and have been for some 70 years
Scott Sumner
Feb 28 2021 at 1:05pm
Exactly. The south is now richer than the north.
Shyam Vasudevan
Feb 27 2021 at 2:26pm
Hasn’t southern China historically always been richer?
Scott Sumner
Feb 27 2021 at 2:45pm
Manchuria was once richer than southern China.
Andrew_FL
Feb 27 2021 at 2:40pm
Jon Murphy, I believe what Scott has in mind is the fact that Southern China is where the Special Economic Zones are located-mostly
Scott Sumner
Feb 27 2021 at 2:45pm
Yes, but it’s much more than the SEZs.
RicardianEquivalence
Feb 27 2021 at 4:23pm
Scott,
Why do you think the private sector in Qing China failed to adopt modern technology to any great extent? I think it is interesting to compare the success of China under “communism” with its failure under the relatively free market Qing (or even Hong Kong’s failure to grow under free market British policies before 1950).
Scott Sumner
Feb 28 2021 at 1:08pm
I don’t believe China had a capitalist system under the Qing, and I’m not sure that Hong Kong failed to grow under the British. But perhaps someone with more expertise on China can speak to these questions.
Henri Hein
Mar 1 2021 at 12:05am
We had a discussion about the Hong Kong question in the fall.
Scott Sumner
Mar 1 2021 at 12:10pm
Thanks, I wonder if globalization also played a role after 1950. China was a mess, and HK was sort of isolated from the richer parts of the world.
I’d also like to see GDP growth numbers for HK. Because of the flow of poor migrants from the mainland, you might not expect per capita growth to be all that high. But what about total GDP?
Brandon
Feb 27 2021 at 10:29pm
Nice post.
I wish our foreign policy elites would think about China this way, too. Consider:
China’s Communist government routinely violates human rights
The U.S. is too hawkish on China
To undermine socialist Beijing, why not put more effort into highlighting the differences between north and south in China?
This would put the hawks in Washington and the Communists in Beijing on the defensive
And give a platform of sorts to the hundreds of millions of people in southern China who otherwise don’t have one
Brandon
Mar 2 2021 at 9:47pm
No takers?
The best road map for weakening the CCP via non-violence is the one featured in this post…
Thomas Hutcheson
Feb 28 2021 at 7:01am
The article does not say anything about it, but from the industrial structure, my guess is that there are grater import restrictions on products produced in the North than the South. And China does not get a lot of immigration for its size, but again, I’ll bet the South gets a lot more than the North. That the North(west) is where the Uighurs are oppressed is probably orthogonal to current policy however.
Melissa Dell or someone like this should look at the deep history of the regions (greater exposure of the North to step nomad invasion?) to develop an explanation.
Scott Sumner
Feb 28 2021 at 1:11pm
The Uighur region is too small in population to play a major role in this divergence.
Again, the biggest problem in the north is that their governments are too statist.
David Henderson
Feb 28 2021 at 4:39pm
Scott, I know this is a little off topic, but I’ve been impressed with your knowledge of China and so here’s a question I’ve been wondering about.
A friend who follows foreign policy closely and is an extreme skeptic of the U.S. government’s claims and motives tells me that when he tried to trace the claims about the Uighurs back to the source(s), he found only one source: an Australian government study.
Question 1: Is he right?
Question 2: Is the number of Uighurs who are imprisoned about 1 million or is it much smaller or larger?
Garrett
Feb 28 2021 at 10:28pm
Would you consider this a good source?
David Henderson
Mar 1 2021 at 10:32am
Thanks. I’ll send the link to my friend and see what he says.
Scott Sumner
Mar 1 2021 at 12:13pm
I believe the figure of a million is the total number, not the number at a moment in time, but I am not certain. I’ve seen enough sources to believe that the story is basically true.
Luc Mennet
Feb 28 2021 at 7:41pm
I can’t read the original economist article due to the paywall so maybe it makes more sense in context, but isn’t grouping investment in factories and roads together kind of strange? Is that something that the Chinese government considers similar in terms of how it spends it’s resources?
Scott Sumner
Mar 1 2021 at 12:18pm
I believe that factory investment is more likely to be done by government in the north than the in south.
TMC
Mar 1 2021 at 11:28am
The North/South division is too broad to draw conclusions from. Try this by providences, there are several Southern ones doing better than some of the Northern ones. And I’d expect the figures would be per capita. https://en.wikipedia.org/wiki/List_of_Chinese_administrative_divisions_by_GDP_per_capita
Scott Sumner
Mar 1 2021 at 12:17pm
Yes, it’s mostly a coastal phenomenon. China gets poorer as soon as you go north of Jiangsu along the coast, and actually north of southern Jiangsu. Only the city of Beijing stands out in the north.
The interior south has lots of minorities.
David O'Rear
Mar 1 2021 at 2:27pm
The notion that Hong Kong “failed to grow under the British” is ludicrous, at best. More to the North-South point, however, is that Hong Kong moved more than one trillion US dollars into China – FDI and IPOs – since 1978, and the bulk of that went into the south. Taiwan’s role in the Yangzi River Delta might be considered a small reflection of Hong Kong’s role in the Pearl River Delta. There is no counterpart for the BoHai Gulf region up north.
Given that Hong Kong’s two-way trade is four times as large as its domestic demand, any notion about why GDP has (not) grown must take into consideration the pattern of international trade.
Real private consumption expenditure per capita, the more useful measure, rose 4.3% a year in 1962-2020, to about $30,000 per person last year.
Ethan Roberts
Mar 1 2021 at 8:14pm
I moved to China in 2009 for work. I now live in SE Asia, but travel there not infrequently for work and pleasure. My impression has always been that big brother is less smothering in the south. The presence of the state is still abundantly clear, but there is a bit less of it.
I’d say the same, but to an even greater extent, about Vietnam.
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