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By Sun Zhiyan, Department of Development Strategy and Regional Economy, DRC

Research Report No 139, 2015 (Total 4824)

Abstract:

Ever since China's economy entered the state of new normal, divergence among regions has become much more prominent due to different development stages and capacities. The eastern developed region has witnessed a milder decline in economic growth and showed signs of stable rebound, while provinces such as Heilongjiang, Jilin, Liaoning, Inner-Mongolia, Shanxi and Hebei, known as resource-dependent and heavy chemical industry-based areas, are the first among all to encounter economic downturns and therefore, still face greater pressure in industrial restructuring. And in spite of belated economic slowdown, most of the provinces in the western region are still facing various risks due to smaller economic scale and poorer ability to counter risks. Disparity in innovation capability is the root cause for the occurrence of regional divergence at current stage. In some areas, intense path dependence, insufficient initiatives to make pilot reforms and regional disparity in public service have exacerbated regional divergence to some extent. The focus of the policy to ameliorate regional divergence at current stage is to optimize regional innovation policy and to enhance the internal development capability of those areas that are lagging behind in industrial restructuring. Moreover, China should also promote the transformation of local governments' competition model, construct new incentive mechanism and encourage various areas to conduct differentiated explorations to narrow regional divergence while promoting development and restructuring.