Development Imbalances in China: An Integrated Analysis with the Tsinghua China Balanced Development Index

XuXianchun(许宪春),ZhengZhengxi(郑正喜)andZhangZhongwen(张钟文).........................................

Abstract: The principal contradiction facing the Chinese society has evolved to be that between imbalanced and inadequate development and the people’s ever-growing needs for a better life. Given China’s vision for achieving moderate prosperity, it is relevant to conduct theoretical and empirical studies on the nation’s development imbalances. As a quantitative index, the Tsinghua China Balanced Development Index measures the extent to which development is uneven and insufficient across regions, reflecting the progress and shortfalls in China’s efforts to promote balanced development. Our findings provide implications for how policymakers may help people’s expectations for a better life materialize by spurring balanced economic, social, environmental and livelihood development across regions.

Keywords: Balanced Development Index, principal social contradictions, needs for a better life, imbalanced and inadequate development

JEL Classification Codes: C43, E60, H11, P0

DOI: 1 0.19602/j .chinaeconomist.2020.05.01

1. Introduction

Since the 18th CPC National Congress in 2012, the CPC Central Committee with Comrade Xi

1 2 Jinping at the core has implemented a “five-pronged strategy” and the “Four Comprehensives” to bring about steady progress on various fronts. With these policy initiatives, significant progress has been made in China’s social and economic endeavors amid a complex international environment and challenges to domestic reforms, development and stability. Using a people-oriented approach, the Chinese leadership has adhered to the basic principle that development should improve people’s livelihood and welfare. In recent years, the Chinese people have enjoyed a noticeably higher “sense of gain.” Yet some chronic and deep-seated problems, such as imbalanced and inadequate development, remain. With social and economic development come people’s expectations for a more prosperous and rewarding life. In this

context, General Secretary Xi Jinping’s Report to the 19th CPC National Congress in 2017 highlighted that in the new era of building socialism with Chinese characteristics, “the principal contradiction facing the Chinese society has evolved to be that between imbalanced and inadequate development and the people’s ever-growing needs for a better life.”

This shift in the principal contradiction facing the Chinese society is of historic importance to every facet of social and economic life in China. Uneven and inadequate development presents a key barrier to meeting people’s needs for a better life - a barrier that must be addressed if China is to achieve highquality development. In the theoretical and empirical research of the philosophical and social sciences, it is of great relevance to discuss pathways for addressing this conundrum. In this context, there is a need to create a Balanced Development Index to measure the extent of China’s imbalanced and inadequate development over the years. Formulating the Balanced Development Index thus takes priority since it will serve as the basis for macroeconomic policy-making.

2. Literature Review

The principal contradiction facing the Chinese society has shifted from satisfying people’s “material and cultural needs” to satisfying their “needs for a better life” and from “backward social production” to “imbalanced and inadequate development.” This shift is consistent with China’s development stage, and reflects the CPC Central Committee’s conviction that development should serve people’s interests and keep pace with the times. In drafting China’s Balanced Development Index, we have collected extensive domestic and international research literature on relevant indexes from the two aspects of the principal social contradiction. After reviewing, discussing and drawing upon other studies, we have finalized our approach for formulating the Balanced Development Index.

With respect to development evaluation, relevant indexes are focused on overall living standards, and both domestic and international academics often use such concepts as “people’s livelihood,” “wellbeing,” “happiness” and “quality of life” to measure living standards. Recognizing the limitations of GDP, academics have refrained from adopting single output indicators for measuring living standards. However, scholars have yet to agree on an integrated measurement tool beyond the GDP, and instead have come up with myriad indexes based on various perspectives. Internationally, the Human Development Index (UNDP, 2017), the Better Life Index (OECD, 2017) and the Social Progress Index (Porter et al., 2017) measure development beyond the GDP. The domestic academic community has also devised a slew of integrated indexes for evaluating overall development or development in specific domains. They include the People’s Livelihood Index (People’s Livelihood Index Research Group of the State Council Development Research Center, 2015), the Moderate Prosperity Index compiled by the National Bureau of Statistics (NBS) (Pan, Yang, 2011), the People’s Livelihood Development Index (“Report on People’s Livelihood Development in China” research group, Beijing Normal University, 2011), RUC China Development Index (National Survey Research Center at Renmin University of China , 2007), among others.

Studies have also been carried out to statistically measure inequalities, especially income inequality, without using “imbalance” or “inadequate” as key words. Most such studies employ methods like the Gini coefficient, the Theil index, and the poverty index (Cowell, 2011; Lu, 2007). Some studies focus on gender inequality using the Gender Inequality Index (UNDP, 2017) and the Global Gender Gap Report (World Economic Forum, 2017).

Based on their different measurement targets and evaluation methods, related indexes roughly fall into three categories: first, those that directly measure the level of development, such as the Human Development Index and the China’s Livelihood Index; second, those that measure the degree of inequality, such as the Poverty Index, the Gini coefficient, the Theil index, the Gender Inequality Index, the Global Gender Gap Report and the measurement of inequality under the OECD Better Life Index;

third, those that measure the level of development with inequality factors taken into account, including the UNDP’s Human Development Index adjusted for inequality.

Notably, the numerous indexes developed by domestic academics are indicators of the sufficiency, rather than sufficiency and balance, of development, and cannot reflect China’s evolving principal social contradiction. Despite the considerations of uneven or unequal development, the few international indexes are designed in light of the conditions in developed countries and may not suit China’s reality. That is to say, the existing indexes either do not take uneven development into account or do but not apply to China. Hence, this paper creates a system of indicators that form China’s Balanced Development Index to monitor the status and evolution of balanced development in China. Guided by Xi Jinping’s Thought on Socialism with Chinese Characteristics in the New Era and in the spirit of the 19th CPC National Congress, China’s Balanced Development Index is intended to measure the satisfying of people’s needs for a better life based on the theory on the principal contradiction facing the Chinese society.

3. Methodology for China’s Balanced Development Index

Formulation of China’s Balanced Development Index generally follows a technical pathway from fundamental research to site survey, expert deliberation, and adjustment and optimization. Our research routine is shown in Figure 1.

First, our project group held study sessions on Xi Jinping’s Thought on Socialism with Chinese Characteristics in the New Era and the Report to the 19th CPC National Congress on the contradiction between people’s needs for a better life and the imbalanced and inadequate development. We systematically reviewed theoretical methodologies and practical experiences for formulating relevant indexes, laying the groundwork for designing the Balanced Development Index. Second, we organized site surveys in six provinces and municipalities and held index workshops3 to provide valuable experience for designing the index. Subsequently, seven meetings of experts were held with more than 90 participants4. Numerous rounds of discussion and analysis offered theoretical input on the index’s orientation, formation approach and calculation method. We carried out site surveys, engaged in expert deliberation, and performed repeated estimations to optimize the system of indicators and the index formulation method to ensure that the Balanced Development Index captures the reality and evolution of balanced development in China.

3.1 Implications of the Principal Social Contradiction

As stated by Xi Jinping, China’s new principal social contradiction contains two aspects: people’s desire for a better life and imbalanced and inadequate development. Before constructing our index, we need to interpret the connotation of these two aspects.

3.1.1 People’s desire for a better life

With rising productivity, the previous primary social contradiction no longer captures China’s reality. In the new era of socialism with Chinese characteristics, people’s needs for a better life extend beyond material and cultural needs and welfare at the individual or household level. A broader concept of integrated social development, therefore, comes into play. Based on our in- depth learning and understanding of Xi Jinping’s Thought on Socialism with Chinese Characteristics in the New Era and the Report to the 19th CPC National Congress, we believe that satisfying people’s needs for a better life is predicated upon economic development, social progress, and an improved ecological environment, and is reflected in the betterment of people’s livelihood and welfare. Among these elements, sound economic development is essential for people to enjoy a higher living standard, both materially and culturally. Social progress is important for people to feel a “sense of gain” from broader economic development. The goal of “ecological civilization” embedded into every facet of economic, political, cultural and social development is essential for achieving a balanced social and economic development to meet people’s needs for a better life. The fundamental goal of development is to improve and better protect people’s livelihood.

To fully reflect the implications of people’s needs for a better life, we created a basic framework for the Balanced Development Index with economic, social, environmental and livelihood indicators. Specifically, this paper provides a measurement of the state of balanced development in China in the four aspects of the state of balanced economic development, in terms of economic performance, economic structure, innovation-driven growth, infrastructure and human capital; the state of balanced social development in China in terms of social civility, fairness, public security, social governance and social protection; the state of balanced ecological development in terms of air quality, water quality, soil quality, environmental management and ecological protection; and the state of balanced livelihood development in terms of people’s income, employment, housing, education and health care.

3.1.2 Imbalanced and inadequate development and the measurement methods

While recognizing China’s important social and economic achievements, the Report to the 19th CPC National Congress also points to weaknesses and outstanding problems stemming from imbalanced and inadequate development that stand in the way of meeting people’s growing needs for a better life.

Inadequate development indicates a shortfall in bringing about development to an extent that could be achieved elsewhere, such as in advanced economies. The same principles of index standardization5 can be followed in measuring the extent of such gaps. Among common standardization methods, differential standardization allows development levels to be compared horizontally and vertically. With reference values properly specified, the level of development can be standardized within a fixed range of [0,1] (Qiu, 2003; Zhang and Yuan, 2010). For the Balanced Development Index, the differential

6

standardization method will be employed to measure inadequate development.

Imbalanced Development is mainly manifested in the imbalance across regions and between the countryside and urban. At the constant level of development, more imbalances mean poorer quality of development and thus larger loss in development. Judging by existing studies (Foster et al., 2003; Cowell, 2011; UNDP, 2017; OECD, 2017), there are an array of methods for measuring uneven development, including the Gini coefficient, the Theil index, the Atkinson Index, quantile method (such as the ratio between 10% quantile and 90% quantile), relative mean deviation, among others. After systematic trail analysis and evaluation of a series of methods, we finally adopt Gini coefficient to measure regional and urban-rural imbalances.

3.2 Framework

3.2.1 Idea and approach

After rounds of deliberation, we have developed a design approach for China’s Balanced

Development Index, as shown in Figure 2, which encompasses indicators for measuring people’s needs for a better life, and imbalanced and inadequate development. First, we have identified representative indicators to measure the sufficiency of development in various domains. Second, we have identified regional and urban-rural imbalances in various domains and adjusted the level of development with a coefficient. In this manner, we have formed a framework for an integrated evaluation.

3.2.2 Indicator system

Based on the principles of representativeness, importance, objectivity and operationality, we have identified appropriate indicators for the Balanced Development Index with available official data, focusing on the key areas and manifestations of imbalanced and inadequate social and economic development in China. The finalized system of indicators as shown in Table 1.