In China, alongside fast economic growth has come a new challenge: increasing regional disparity. Using GDP and industry output data, this paper examines trends in regional disparity during the period 1985-1994, from the aspects of both income distribution and production agglomeration. This period has been chosen not only because it reflects the latest trend, but also because it reflects the most intensive effects of globalization and economic liberalization in the Chinese economy. It is shown that the income disparity between the coastal area and the interior had been increasing, and industrial production showed strong agglomeration toward the coastal area, while within coastal provinces there was a trend of convergence. Further this paper investigates the reasons behind the increasing regional disparity from the aspects of regional development policy, globalization, and economic liberalization, Biased regional policies had some effect, but their role was limited. More importantly, globalization (measured by export and FDI) and economic liberalization (indicated by the decline of the share of state-owned enterprises and the growth of township and village enterprises) had significant influence on the increasing regional disparity.
