Assessing the Merits of the Urban-Led Policy in China: Spread or Backwash Effect?

Shanghai and Beijing, as two megacities, are often regarded as the most successful examples of China's growth pole policy, which has stirred up a great deal of controversy behind the spread backwash effects. It is believed that the spread backwash effects for these two mega metropolitan regions are particularly valuable when evaluating the merits of adopting an "urban-led" policy in China. Moreover, a great deal of effort has been devoted to the cross-section analysis of relevant data. What seems to be lacking, however, is a time-series econometric method. The estimation results using real gross regional product (GRP) over the last 50 years (1967-2016) reveal that a long-run equilibrium exists for these central cities and their suburbs. More noteworthy is the finding that spread and backwash effects coexist in these two metropolitan regions, namely, the central city has spread and backwash effects on its medium-level and low-level suburbs, respectively. Thus, how to diminish the city suburb gap is our concern and this argument is consistent with the spirit of new-type urbanization policy in China now to create a balanced and equalized metropolitan economy.