Economic Reform, Growth and Convergence in China

In this paper, we propose a new concept of convergence which is based on the metric entropy measure recently proposed by Granger et al. (2004) to investigate economic convergence in China. This entropy measure compares whole distributions of growth rates across individual provinces. Separately, based on this same entropy measure, we also implement cluster analysis to identify any convergence clubs. Our four main conclusions are: (1) while we certainly reject the null hypothesis that there exists a nation-wide convergence, we do find that there exist convergence clubs for both the preand post-reform periods, (2) we find a number of very small convergence clubs. In particular, there are eleven and six convergence clubs for the preand post-reform periods, respectively, (3) in comparing the number and size of convergence clubs for both the preand post-reform periods, it could be argued that the extent of convergence is more prevalent during the post-reform period than during the pre-reform period, (4) convergence groups cannot be simply characterized by such unique features as region or the extent of policy preference level that are commonly used in the literature.