Under the Shadow of Asian Brown Clouds: the Unbalanced Regional Productivities in China with Environmental Concerns

China has seen the fruit of its rapid economic growth over the past two decades, but severe environmental problems have accompanied this, such as the looming danger of Asian Brown Clouds. This paper analyzes the regional development of China by examining economic performance as well as environmental factors. Technical efficiency and productivity changes of thirty-one regions in China during the period 1997-2001 are computed. In the case when regional GDP is simply concerned, the fast-developing eastern (coastal) regions experience higher technical efficiency and productivity growth than the inland central and western regions. When environmental factors are incorporated, the eastern regions still perform better than the inland ones both from static and dynamic analysis. This phenomenon is minted as the ‘double deterioration’ of the inland areas in China. Double deterioration is attributed to the lack of economic resources to replace highly-polluting production equipment and technology in those less developed regions.