Domestically “Flying Geese”: Regional Manufacturing Investment Flows within China

Abstract

Abstract This paper examines the evolving patterns of bilateral city-to-city manufacturing investment flows from 2000 to 2015 in China, which are aggregated from detailed firm-level investment transactions based on the administrative business registration database. The coastal regions were a more favorable destination for manufacturing investment prior to 2006 despite their higher wage levels. Since then, the trend has reversed, that is, the inland regions have attracted a growing share of manufacturing investment. The pattern is more pronounced for labor-intensive manufacturing industries. The wage gap between coastal and inland cities is the main driver behind the giant “flying geese”—the relocation of manufacturing firms from coastal to inland areas.