Globalization, Institutional Change, and Industrial Location : Economic Transition and Industrial Concentration in China

Marketization and globalization in China may stimulate industrial clustering, while decentralization may lead to protectionism and industrial dispersion. This paper examines industrial distribution in China during 1980-2003. While Chinese industries have been increasingly concentrated geographically, the study found significant temporal and sectoral variations in concentration. Least protected industries have become increasingly concentrated, and most globalized industries are clustered in the coastal region. The analysis indicates that globalization and internal scale economies have contributed to geographical concentration, while protectionism has hindered industrial specialization. While industries are more likely to locate based on comparative advantages, external scale economies have not fostered industrial concentration