22 Urbanization and West China Development 1 Ding Lu and Wing Thye Woo Introduction Two features are notable in China's economic growth over the past two decades. One is the hyper-growth rate of GDP, which averaged over nine per cent per annum. The other is the widening per capita income gap between the coastal and the inland areas, due to the uneven pace of market opening and regional growth (Table 22.1). A visitor who travels from the east coast city of Shanghai to the inland provinces and regions of the west will find him/herself going from the "First World" to the "Third World". Many factors have contributed to the regional disparities in growth performance. Although the vast territories of western China boast rich mineral resources, they are severely constrained by their land-locked geographic locations. The quality of local human capital, underdeveloped market institutions, and state policies all favour the coastal open cities and are partially responsible for the relatively slow growth and development of the west. (Bao et al, 2002; Demurger et al, 2002). In this paper, we assess the role of urbanization in China's regional development. Urbanization is the process of transferring labour and other inputs from predominantly rural agricultural activities to urban manufacturing and service industries. As it is integral to the process of economic development, it is essential to identify the distinct features of urban systems which may affect the environment for economic growth. Specifically, we attempt to evaluate the impact of the varying pattern of city-size distribution on local economic growth performance. 493