Author：Canfei He
Date：2010-01-06
Summary：
China's economic geography was formerly heavily shaped by a socialist ideology that downplayed agglomeration economies. Economic transition, which could be conceptualized as a triple process of marketization, globalization and decentralization, gradually introduced market and global forces and granted local governments more authorities and responsibilities for local development. China is now a mixed economy in which socialist legacies and governmental intervene and planning exist side by side with new forces as a result of economic transition. Theoretically, market and global forces may foster the geographical clustering of Chinese industries to exploit comparative advantages and agglomeration economies while regional decentralization may discourage industrial agglomeration because of local protectionism and rational imitation strategy. Spatial restructuring of Chinese industries is the result of interactions between centripetal and centrifugal forces of industrial agglomeration.
Economic liberalization seems to have fostered both the macroeconomic and local conditions under which viable industrial agglomerations can emerge. Chinese industries have been increasingly agglomerated since the early 1990s. In 1980, the most agglomerated industries were capital-intensive and the dispersed industries were resource-based industries. In 2004, many agglomerated industries were highly globalized and privatized while the dispersed industries were either domestic-market oriented or profitable and strategic industries. Some were favored or protected by local governments. Industries and spaces that are undergone economic liberalization and globalization are those most prone to the formation of agglomeration economies.
The empirical analysis finds a positive relation between industrial agglomeration and labor productivity of industries. The positive relationship has been significantly strengthened as economic transition proceeds. In the 1980s, significant positive relations only held for a few industries, which were the first to allow non-state owned enterprises and utilize foreign investment or export. As most industries became increasingly agglomerated in the 1990s, more significant positive relationships between industrial agglomeration and productivity emerge, especially in industries that have gained prominence during economic transition. The heavily protected or state-controlled industries however have not significantly benefited from geographical agglomeration. Market and global forces have driven Chinese industries to agglomerate in the coast region and improved labor productivity of Chinese industries. Decentralization has promoted local development, but it also discouraged industrial agglomeration and sacrificed labor productivity. However, fierce inter-provincial competition would force locally protected industries to be more productive. Provincial governments have recently worked hard to promote industrial clusters within the province to improve the competitiveness of locally protected industries. The empirical investigations point to the importance of economic transition and its consequence in understanding industrial agglomeration and its relation with labor productivity in China. Market reforms and globalization has indeed pushed China’s industries in the direction of efficient outcomes.
Keywords：Industrial agglomeration；specialization；economic transition；labor productivity；Gini coefficient
