Examining Convergence Clubs in Chinese Provinces (1952-2017): New Findings from the Simplified Clustering Convergence Test

Abstract

This paper empirically investigates the convergence clustering in 31 Chinese provinces regarding the popular and important economic indicator of GDP per capita over the period 1952-2017. Using the club convergence and clustering procedure of Phillips and Sul (2007) with necessary simplifications, a few provincial clusters are identified. It is clearly verified as expected that the Chinese provincial GDP per capita series contain significant nonlinear components. It is found that there are two or three convergence clubs depending on different starting years or initial conditions, and the clustering results are somewhat stable with respect to different starting years. The results can help local and central governments to select appropriate growth promotion strategies for different groups of provinces in general and, due to the evidence that GDP per capita in China heavily inclines to a few major provinces (such as Beijing, Shanghai, Tianjin, Jiangsu and Zhejiang), can also help provide useful information to relevant authorities to fight against the increasing income inequality across provinces in particular.