City-industry growth in China

- Investigated the two leading theories of city-industry growth in Chinese context.
- Specialization is important for the growth of mature industries in China.
- Diversity is crucial for the development of China's new and fast-growing industries.

This paper investigates the relevance of two leading theories of city-industry growth (i.e., specialization and diversity theories) in accounting for the fast yet uneven growth of industries in China's cities. Using a comprehensive dataset of manufacturing industries in 231 China's cities for the period 1998-2005, we find that specialization promotes city-industry growth, whereas diversity has no effect at all. In addition, we find that specialization is important for the growth of mature industries in China, but diversity is crucial for the development of China's relatively new and fast-growing industries. Our study contributes to the literature by examining the relevance of the specialization and diversity theories for a large and fast-growing developing economy.