A Study On The Impact Of Foreign Trade On China’s Income Gaps Among Regions

China adopted a balanced regional economic development strategy before1978when the reform and opening-up policies were launched. Related policies supporting the central and western regions resulted in small economic benefits because there were no sufficient factor endowments. Meanwhile, the strategy sacrificed the interests of the eastern region, which hindered China’s economic growth, widening the income gap with other countries. After1978, China changed its strategy, aiming at boosting the economy of eastern seaboard which contributed to China’s economic growth. This kind of policy caused a growing income gap among the regions in China even though it contributed to China’s rapid growth in economy.In this article, China will be divided into three regions to analyze the impact of opening up on the income gaps among those three parts and the income gaps within regions from the perspective of factor endowments. Relevant theoretical basis and literature will be summarized at first. Then the difference in trade development, economic output and per capita GDP among those three regions will be graphically demonstrated. After that, Theil index will be applied to show that inter-regional income gap is the main reason for the overall income gap. Following the analysis of how trade affects income gaps among regions through factor endowments, data of20years from29provinces, municipalities and autonomous regions will be used to study the foreign trade’s effect on income gaps among regions. It is concluded that foreign trade exacerbates income gaps both within and among regions.In addition, the influence of capita, technology and education on regional income inequality is also discussed in the open condition. It is found that when capita and education are combined with foreign trade, they will increase inter-regional income gaps and narrow those within regions while the effect of technology is just the other way around. In the open condition, technology will ease the level of inter-regional income disparities and aggravate the income gaps within regions. Finally, related policies will be put forward according to the results above, aiming at offering a way to solve the problem from the perspective of the trade.