Agriculture Reference
In-Depth Information
The smulaton results also show that the eastern coastal regon gans
more from the WTO accesson than the nland regons. The order of ncrease
in total utility and equivalent variation is: eastern, western and central.
Ths result suggests that regonal ncome dsparty would worsen after the
accession, although all regions may gain. The eastern region gains most of
the benefit from the expanding sectors. For example, apparel output in the
eastern region increases by over 17 per cent, while this sector's outputs
in the central and western regions increase by only 0.3 per cent and 1.5
per cent, respectively (Table A6.3). Similarly, textile output in the eastern
region increases the most, while it falls in the central region.
The results show that the output level n the central regon may declne
after WTO accession, as indicated by the negative change in real GDP.
Ths result seems surprsng because t s generally perceved that the
western regon s the least developed regon and thus should be the most
adversely affected. However, the result may be justified in the following
way. First, the western region has the cheapest labour, which helps in
the development of labour-intensive sectors. Second, the western region
has relatively abundant natural resource endowments, which leads to
its comparative advantage in resource-intensive products. Finally, the
ndustral base n the western regon may not be as poor as people thnk.
The Chnese government has made huge nvestments n the so-called 'thrd
lne' program whch brought about development n some sectors.
The results of ths smulaton show that WTO accesson would worsen
rural-urban income inequality in all regions. That rural households
experence a smaller ncrease n utlty and welfare s understandable
because rural households receve part of ther ncome from agrcultural
sectors, which decline in all regions following WTO accession.
Smulatng wth no change n the trade balance
This closure would have a similar impact on regional economies, despite
some differences in the macroeconomic dimensions. The fixed exchange
rate in the previous closure brings about domestic deflation, while the fixed
trade balance with a floating exchange rate leads to depreciation of the
RMB by 5.5 per cent—which in turn causes domestic inflation of 2.45 per
