Spatial and Temporal Variations of the Relationship Between State Investment and Industrial Output in China

Considerable efforts have been made by the Chinese government to achieve a spatially balanced pattern of industrial development. However, regional inequality has persisted after four decades of socialism in China. This article attempts to analyze spatially and temporally the relationship between industrial output and state investment, the major vehicle to implement regional development policies. Regression analysis shows that the relationship between investment and output was poor in 1953 and extremely poor in 1965 when large amounts of investment were channeled into interior development. It became stronger in 1978 and was the best in 1990. The expansion method suggests that the relationship weakens with increasing distance from the coast, and investment efficiency was poorer in the interior. This article has found that state investment did not bring in the expected industrial development, which significantly contributed to the persistence of regional inequality. The changing relationship between state investment and industrial output in China is a result of historical, political, economic, and geographical factors.