Abstract
This paper examines several theories of regional industrial development in the case of China. It studies regional factors representing three broadly defined sources of regional growth: dynamic externalities arising from knowledge spillovers, natural advantage and local market conditions, and foreign trade and direct investment. Using provincial-level data on two-digit Chinese Industrial Classification industries over 1985–1993, we find that local competition is positively related to regional industrial growth. There is also strong evidence that provinces with a smaller state sector grow faster, and that a better transport system helps growth. Finally after controlling for various other regional factors, we find that exports and foreign direct investment have strong positive effects on regional industrial growth.
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