Economic growth, spatial income inequality, and the role of education and training in China

China opened its economy and introduced economic reforms in 1978 that over the next three decades produced unprecedented economic growth sharply reducing household poverty, but also increasing spatial income inequality with higher median incomes in urban areas and the coastal region. This paper traces China's growth story and the contributing role of education and training. It highlights policies behind the development of education and training that have influenced the pattern of rising income inequality. It reviews China's efforts to provide universal basic education of 9 years, its expansion of secondary education and the emphasis on vocational and technical secondary education, and its movement to mass higher education. The paper identifies policies behind this expansion whose implementation contributed to spatial inequalities. These policies include: restrictions on labor mobility through residence permits; a low level of public expenditure on education by international standards, the commercialization of post-basic education to fill the spending gap, the decentralization of fiscal responsibility to local governments for education without sufficient attention to variance in fiscal capacity, and the addition of resources from private education and training that favored cities and highly developed markets. The paper also identifies differences in returns to rural and urban education.