Unequal Development Between Inland and Coastal Areas

During China’s reform and opening up, a significant inequality of development emerged between the coastal and inland regions. The coastal provinces were prioritized for investment and established Special Economic Zones (SEZs), such as Shenzhen, Xiamen and Shantou. These SEZs created suitable environments for foreign business to operate in, as private property rights were well protected and tax incentives were provided to attract foreign investors.(Zakalskiy) Due to the benefits of geographical location and the assistance from government policies, coastal provinces rapidly urbanized and integrated into the global economy. These regions became the center of manufacturing and export.

In contrast, many inland provinces, especially in the west and northeast, had fewer opportunities to gain investment and have access to the global economy. Inland areas’ economies relied heavily on agriculture and heavy industry. A massive state-owned enterprise (SOE) plan was launched on a national scale in the 1990s. One of the major reasons is that a reform policy, which introduced market competition against SOEs and encouraged private enterprises development, was formulated in 1992.(Fang) The layoffs in the state-owned enterprises caused the economies of the interior provinces, especially three northeastern provinces, to suffer a severe decline. The problem of long-term loss of young population and economic stagnation still continues today. As a result, income gaps widened between the coastal and inland areas, with coastal provinces achieving far higher GDP. For example, coastal provinces account for half of China’s GDP, while twice as many inland provinces account for the other half. This regional imbalance has become a major problem of China’s reform and opening up. 

Fang, Hanming. “Reluctant Entrepreneurs: Evidence from China’s SOE Reform.” Reluctant Entrepreneurs: Evidence from China’s Soe Reform, 9 Oct. 2023, voxchina.org/show-3-328.html. Accessed 06 Nov. 2025. 

Zakalskiy, Vitaly (LBS MiM. “Special Economic Zones Unveiled: Lessons from China’s Success...” WheelerBlog, 12 Feb. 2025, wheelerblog.london.edu/special-economic-zones-china/. Accessed 06 Nov.