China’s regions have been experiencing impressive growth over the past decades, but their potentials could be better exploited by creating a single product and labour market. Local protectionism increases transaction costs and hinders competition, thereby taking a toll on productivity. Administrative monopolies have long thrived and are hard to dismantle. Restrictions on the hukou and the fragmented pension system limit labour mobility. Local regulations aim at, among other things, securing the collection of local taxes, without which cities could not afford to offer the same public services to migrants as to urbanites. Hence, dismantling local regulations and creating a single product and labour market needs to go hand-in-hand with the reform of inter-governmental finances

EXECUTIVE SUMMARY

Key Policy Insights

The economy remains strong, though with signs of growth slowdown

Towards stable and inclusive growth

References

Chapter 1. Realising regional potentials through better market integration

Phasing out local protectionism to create a single product market

Creating a single labour market for stronger growth and inclusiveness

Regional policies to help laggard regions catch up

References

Annex A. Gauging disparities across regions in multiple dimensions

Annex B. The three initiatives

Annex C. The four mega-regions