On Chinese Regional Specialization and Industry Concentration

Given the large size and rapid growth of foreign direct investment in China, the subject of industrial agglomeration is of great interest to academics as well as to firms intending to invest in China. This study focuses on two sets of variables: industry concentration and regional specialization. We use Hoover´s coefficient of specialization and Krugman specialization index to explore the determinants of regional specialization in China´s industries. The results show that industries rely heavily on foreign trade and foreign investment intended to locate in regions with easy access to foreign markets. Our study also provides some evidence which supports the significant impact of endowments and scale economy on industry agglomeration.