On the social side, infant mortality is twice as high (around 14 deaths per 1,000) in the poor investment climate cities as in the good investment climate cities (7 per 1,000).

What this correlation means is that there is no contradiction between creating a good investment climate for private investment, and meeting important environmental and social objectives.

The same local governments that have created a good climate for investment have also done a better job with environmental and social management.

Because of this correspondence between good investment climate and good environmental and social outcomes, we are able to identify six "golden cities" that are both good places for firms to produce but also good places for people to live in terms of natural environment and social harmony: Hangzhou, Qingdao, Shaoxing, Suzhou, Xiamen, and Yantai.

Just below them are 13 other cities that have good investment climate and good environmental and social outcomes: Beijing, Dalian, Dongguan, Foshan, Fuzhou, Guangzhou, Jiangmen, Ningbo, Shanghai, Shenzhen, Tianjin, Weihai and Zhuhai.

A critical issue for China is that local government needs to improve investment climate in many central and northeast cities.

Much of the inequality in China results from the large gap that has developed between standards of living in coastal cities compared to interior cities.

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