China's north-south gap not because of weather

Statistics of the first three quarters show that Beijing is now the only northern city to rank among China's top 10 largest city economies, indicating the economic gap between the north and the south of the country is widening.

Many think it is because the south enjoys a better climate. But that overlooks the fact that, despite its long and bitter winters, Northeast China was the industrial center and economic engine in the country for most of the 20th century.

The true reason behind the widening economic gap between the north and the south lies in their different economic structures.

State-owned enterprises in heavy industries account for the bulk of the north's economy. For instance, the annual output of steel in Tangshan, a city in North China's Hebei province, could be ranked among the top 10 in the world in its heyday.

But as the central government has imposed harsher requirements on environmental protection and introduced stricter measures to limit greenhouse gas emissions, the operating costs of the heavy industries in the north have unavoidably risen.

In contrast, the export-oriented private-sector in the south puts more emphasis on innovation to satisfy consumers' fast-changing demands, improve competitiveness and secure a bigger share of the world market.

In other words, the business environment in the south is more favorable than in the north. The north is closer to being a planned economy and people prefer an "iron rice bowl", a secure job with an SOE, rather than pursuing the uncertain rewards of an adventurous spirit and entrepreneurship.

Also, governments in the south, particularly in the Yangtze River and the Pearl River deltas are generally considered more efficient, attentive and thoughtful than their counterparts in the north.

No wonder the south attracts more investment and talents than the north.

Another important reason is the north's once rich coal, ore and oil resources are being depleted, which has triggered chain reactions in the State-owned enterprise system that is heavily dependent on these natural resources.

As such, the economic gap between the south and the north is not that easy to bridge as some argue, since it is not only historical, but also institutional.