Structural Changes in Employment and Investment in China: 1985–94

One of the most striking features of China’s economic reform is the increasing polarization between the prosperous eastern coastal provinces and the still relatively backward north and western parts of the country. Regional income inequality has been widening considerably under economic reforms (Yao, 1997). This has been accompanied by dramatic changes in the employment and investment structures at both national and regional level. First, there is an increasing surplus of labour released from agriculture owing to increased labour productivity and shortage of land. Second, an increasing number of workers and staff employed by state-owned industries have become unemployed or under-employed. Third, and most impressively, the country’s investment emphasis has been shifting or diversifying away from agriculture and manufacturing to the service sector, and from heavy and defence-based industries to light industries (Zhao, 1996). Indeed, economic reform has led to significant changes in employment and investments across regions. Such changes have contributed to substantial regional disparities in economic growth and incomes as different regions now have different industrial structures and development policies.