Unexpected negative socioeconomic consequences of China’s main functional area planning

For emerging nations aiming to harmonize rapid urban expansion with equitable wealth distribution, assessing the socioeconomic consequences of spatial policies is essential. In response to this need, the Chinese government introduced the Main Functional Area Planning (MFAP) in June 2011, marking the nation’s inaugural comprehensive spatial development strategy since its establishment. While this framework has demonstrably spurred urban growth, its specific capacity to alleviate wealth disparities remains empirically ambiguous. To resolve this critical uncertainty, this study utilizes a panel dataset comprising 277 prefecture-level municipalities spanning the period from 2007 to 2018. By employing a Difference-in-Differences (DID) methodology, we rigorously quantify the policy’s net impact on regional income distribution. We also performed a mediating effect analysis to reveal potential ways of how MFAP could affect income inequality in China. Our results show that implementation of MFAP has aggravated income inequality in optimized development zones, which is perhaps unexpected and its consequences warrant attention. We found that urban expansion caused by MFAP can be a potential trigger of widening income inequality. Therefore, considering the future implementation of MFAP, it is necessary that China’s government act sooner than later to control the exploitation and focus on population urbanization instead of unnecessary urban expansion.