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People's Republic of China and the IMF
Updated July 30, 2014

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Staff Papers
September 30, 2002 -- IMF Staff Papers - Volume 49, Number 3, 2002 - Centripetal Forces in China's Economic Takeoff by Anuradha Dayal-Gulati and Aasim M. Husain
This paper uses provincial time series data from the People's Republic of China to empirically investigate two propositions relating to economic development: (i) that economic takeoff—or an acceleration in economic growth—is associated with inflows of foreign direct investment (FDI), possibly through technological transfer; and (ii) that takeoff is accompanied, at least in the short term, by widening income inequality. The results indicate that FDI flows have increased the rate of convergence in per capita incomes across China's provinces. However, the pattern of FDI, which has gone mainly to the relatively wealthy provinces, has caused different provinces to converge toward different steady states.