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Abstract
Along with the rapid economic growth since China undertook economic reform in 1978, the
income gap among Chinese regions has widened. Using CERD, a computable general equilibrium
model of the Chinese economy with regional details, this paper investigates the impact
of China’s accession to the World Trade Organisation on regional development and finds that,
although all regions will gain from the accession, the trend of a widening gap among regions
will be reinforced rather than eased. Specifically, the eastern coastal region gains more than the
inland regions. The result is robust no matter whether the change in trade balance is left free
or fixed, although the scenario with zero change in the trade balance generates a lower overall
welfare gain and an even worse regional disparity. A retreat from WTO commitments in tariff
cuts in agriculture reduces welfare gains, but could to some degree ameliorate the worsening
inequality between rural and urban households and between coastal and inland regions. However,
this analysis incorporates only WTO commitments on tariff cuts and does not include
commitments on non-tariff barriers. Moreover, it does not model other domestic reforms that
may be adopted to offset the adjustment costs of the WTO commitments.