The uneven spatial distribution of manufacturing in China

Abstract

The rise of China's economy has attracted worldwide attention. After China's opening up, the manufacturing industries have continued to concentrate in the coastal areas, which has widened the regional gap between the coastal areas and the inland areas. Based on the analysis framework of the New Economic Geography, this thesis aims to use diversified and novel data sets, innovate empirical methods, and analyze at multiple spatial and industrial levels to construct a comprehensive analysis framework for China's manufacturing agglomeration to evaluate the pattern and explain the cause. We attempt to answer four questions. First, how strong is the concentration of industries in China? Second, is geography important in explaining the China's manufacturing agglomeration? Third, what are the roles of forward and backward linkages in shaping the spatial distribution of manufacturing? Fourth, is the New Economic Geography particularly useful for explaining locational choice of foreign direct investment? We found that between 2002 to 2008, China’s manufacturing agglomeration pattern has continuously strengthened. Small firms, private and foreign firms and new entrants show strong concentration tendency. At an overall manufacturing level, both first and second nature geography play important roles in explaining the agglomeration pattern. At a sector level, the forward and backward linkages between industries can generate significant impacts on the distribution of industrial production. With respect to foreign direct investment, economic geography remains important in explaining the location choice of foreign direct investment.