Regional industrial growth: evidence from Chinese industries

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. (C) 2003 Elsevier B.V. All rights reserved.