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This article uses both cross-section and panel data approaches to study regional growth in China. Inter-regional income inequality increased, the rich regions became richer but poor regions poorer, over the data period 1978-95. Only after controlling for regional effects, population growth, and investment in both physical and human capital do the data show significant convergence. More interestingly, the degree of openness and transportation are two other important factors responsible for differences in regional growth. (DSE/DÜI)

PurposeFast growth in China has led to significant improvement in people's living standards and average income. However, it has also brought about a huge rise in inequality. The purpose of this paper is to analyse regional and rural‐urban inequality using a few income and consumption indicators.Design/methodology/approachData are collected from official statistical sources for all the Chinese provinces over 1978‐1995. Both parametric and non‐parametric methods are used to study the inequality between regions and between the rural and urban sub‐populations. The parametric approach is to test whether per capita incomes among provinces converged over time. The non‐parametric approach is the calculation and decomposition of the Gini coefficient by population sub‐group and income source.FindingsThe results show no evidence of growth convergence in per capita GDP, income and expenditure across provinces, but clear evidence of divergence in per capita rural (and urban) incomes and total expenditures. Three‐quarters of inter‐provincial income inequality are explained by inter‐rural/urban inequality. Inter‐provincial inequality explains more than half of rural inequality and less than half of urban inequality in most years.Originality/valueThis paper uses one of the most complicated datasets for the Chinese regions. It studies inequality using different economic indicators. It considers the different dimensions of inequality in China using two different approaches. The results are important for regional development policies.