Since the initiation of China's opening up policies four decades ago, the coastal areas have attracted foreign companies with their easy accessibility, cheap labor costs, political incentives, and market potential. Although in later years inland regions have also been opened up to foreign businesses, they had no real edge over their coastal counterparts. Economic development was further fueled by intensive migration of workers into coastal cities and led to the formation of the Pearl River Delta and Yangtze River Delta into what was soon coined the world’s factory. In recent years, these regions have been successful in moving further up the value chain and – like Shanghai, Shenzhen, or Hangzhou – developed into centers of finance, research, and information technology.
This uneven economic development and prospects of social unrest already caught the attention of the government in the 1990s. Various political measures were taken to speed up development in central and western regions of China. Massive investments in the infrastructure, political incentives, as well as social programs helped to improve the situation. A general shift to a growth model based on consumption also contributed to a more balanced development. The economic prosperity in less progressed regions began to catch up and the number of poor people in the countryside declined considerably. Many labor-intensive industries moved from coastal Eastern and Southern China to Central and Western China.
However, it still proves difficult to close the economic gap between different regions in China. The global economy has too strong an influence over the distribution of the Chinese domestic economy to be overcome easily. Well-connected coastal cities are still favored by leading industries and their economic development is too far ahead to be matched easily. In recent years, several western regions displayed higher growth rates than the East, but economic development is still on a far lower level. Regions in the northeast, the rust belt of China, are even falling back and have no real prospect of catching up with the economic centers.