Exploring the association between shrinking cities and the loss of external investment: An intercity network analysis

Abstract

While China's urbanization has been characterized by ‘growth-oriented’ development models, the recent literature has highlighted the emergence of urban shrinkage in China, i.e., cities and regions that endure sustained population losses. For example, some mining towns in Northeast China have been losing both population and economic growth. Extending from Martinez-Fernandez et al.'s (2012) theoretical conjecture that urban shrinkage is a ‘symptom’ of the lack of global/external economic connections, this paper assesses whether the loss of investment precedes urban shrinkage. The empirical study draws upon a unique dataset of investment flows between mainland Chinese cities. The analysis shows that the correlation between investment network centrality and urban population changes is positively significant, and this significance is increased after the lag period of investment network centrality is prolonged. Furthermore, when the value of investment network centrality climbs, their effect on urban population changes is going to be enlarged. The results are highly policy-relevant and will inform future policies regarding urban shrinkage management.