Economic Transition and Changing Location of Manufacturing Industry in China: A Study of the Yangtze River Delta

Industrial restructuring is widely considered an important force in regional economic growth and sustainable development. With increased globalization and economic transition, a dramatic industrial restructuring has been taking place in China. Applying geographically weighted shift-share model (GW-SSM) and geographically and temporally weighted regression model (GTWR), we analyze (re)location dynamics and determinants of the manufacturing industry in the Yangtze River Delta (YRD) from 1999 to 2013, with particular attention to the implications of economic transition and institutional restructuring. We find that high-tech and capital-intensive manufacturing industries agglomerated in coastal cities, while labor-intensive and resource-based sectors have become spatially more dispersed to peripheral areas. We also find that the development of service and high-tech industries, rising labor costs, and more strict environmental regulations have facilitated the geographic dispersion of labor- and pollution-intensive industries. Moreover, regions with advantages in intermediate goods, preferential policies, and urbanization economies are attractive to capital- and technology-intensive manufacturing industries. Our research suggests that development policies should be tailored to specific regions to promote local production and innovative networks and make manufacturing industries more competitive.