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Industrial agglomeration and labour productivity in transition: an empirical study of Chinese manufacturing industries

China has experienced substantial spatial restructuring of manufacturing industries since the economic reforms. Chinese manufacturing industries reversed an early drop in industrial agglomeration and have been increasingly agglomerated since the early 1990s. Resource-intensive industries have been relatively dispersed while export-oriented industries have been progressively agglomerated. Industries driven by market and global forces are agglomerated while those favoured and protected by local governments are widely dispersed. Statistical analysis confirms a significant positive relationship between industrial agglomeration and labour productivity in China. This positive relationship was particularly prominent in liberalised and globalised industries in the 1980s and has been found in most industries since the 1990s. The empirical results imply that marketisation and globalisation have stimulated industrial agglomeration and thereby raised industrial competitiveness in China.