Because of history, size, and economic potential China is a force to reckon with. It is a nation of 9.6 million square kilometers populated by 1.26 billion people with a varied geography: Traveling from west to east (Figure 6.1) one starts with the vast dry areas, moves to the mountains, valleys, and higher altitudes of the center, and ends up in the more temperate coastal regions, which have more rain, lower altitudes, and better communication and transportation systems. A main theme of this chapter is that, in great part owing to geography, but also owing to overt government policies, wealth and economic well-being tend to increase monotonically from west to east. That reality significantly conditions the past, present, and future of fiscal federalism in China.
A standard grouping of China's provinces is used in Table 6.1 to describe the economic geography. The Northern Region includes the large and rich cities of Beijing and Tianjin. These two cities, together with Shanghai in the Eastern Region and Chongqing in the Southwest Region, are granted provincial status, much as is the case for Moscow and St. Petersburg in Russia. The Northern Region also contains the relatively poor province of Inner Mongolia. The Northeast Region, also known as Manchuria, contains several relatively rich provinces with a long tradition of manufacturing dating back to Japan's occupation of this area in the first part of the twentieth century.