An Analysis of Wage Inequality in Three Regions of China

With China's rapid economic growth since its accession to the WTO, the problem of inter-regional income inequality in China has become increasingly prominent. Comparing age, education, gender, hukou constraints, and Foreign direct investment (FDI), this paper finds that the earlier opening of eastern China to world trade and the better business environment has attracted a large amount of FDI, which creates jobs and pushes up income levels in the region. Currently, excessive urban pressure in the eastern region and under-utilized resources in the central and western areas will affect China's economic growth. Therefore, the government should make full use of the comparative advantages of each region for industrial layout, transferring low-end and medium-end industries from the east to the central and western areas, and making use of the resources of provinces and cities around the eastern cities for those industries that are inconvenient to relocate. In addition, the central and local governments should improve the social security system as soon as possible to alleviate people's worries about the future and promote personal consumption and investment.