Domestic Flying Geese: Industrial Transfer and Delayed Policy Diffusion in China

Abstract

AbstractThis study illuminates the important yet under-studied phenomenon of industrial transfer in China: the migration of capital and investment from wealthy coastal areas into poorer central and western provinces, beginning in the 2000s. By 2015, the value of domestic investment in five central provinces alone was 2.5 times that of foreign investment throughout China. Compared to the original “flying geese” model of tiered production in Asia, China's experience is distinct in three ways: (1) industrial transfer occurred domestically, rather than across nations; (2) sub-national transfer followed cross-national transfer; and (3) industrial migration is accompanied by a delayed replication of government policies and practices. While coastal locales today resolve to expel low-end industries, inland governments cannot afford to be selective and have only recently adopted the aggressive investment promotion tactics that coastal cities abandoned years ago. Policy diffusion is delayed as policy adoption depends on economic conditions, which vary widely across China and change over time.