PROGRESS IN GEOGRAPHY ›› 2013, Vol. 32 ›› Issue (11): 1592-1601.doi: 10.11820/dlkxjz.2013.11.002

• Industrial Economy and Regional Development • Previous Articles     Next Articles

Impact of market segmentation on growth of manufacturing industry in China: Regional and industrial differences

WANG Jieyu1, GUO Qi2, ZHOU Yi1, HE Canfei2,3   

  1. 1. Shenzhen Graduate School, Peking University, Shenzhen 518055, China;
    2. College of Urban and Environmental Sciences, Peking University, Beijing 100871, China;
    3. Peking University-Lincoln Institute Center for Urban Development and Land Policy, Beijing 100871, China
  • Received:2013-05-01 Revised:2013-09-01 Online:2013-11-25 Published:2013-11-25

Abstract: Since the reform and opening-up policies first started, China has experienced rapid economic growth. From 1979 to 2011, average annual growth for China's GDP is nearly 10 percent. Economic growth is always the focus of attention of the general public. Economic theories emphasize that the quality and quantities of the input factors affect economic growth. With the development of economic geography, the new economic geography, represented by Krugman, provides a new direction for the study of economic growth. Under the framework of imperfect competition and increasing returns to scale, new economic geography takes the geographic factors into the mainstream economics to explain the phenomenon of spatial agglomeration and diffusion. At present, China is in a special period of economic transition. On the one hand, due to the tax reform, administrative decentralization and the economic performance evaluation system for local officials by the central government, market segmentation in China is serious, manifested by regional malignant competition, redundant construction and local protection. On the other hand, in recent years, China promulgated a number of regional development plans to coordinate the regional development, and urban agglomeration has become the leading area of economic development. Why market segmentation exists in some regions, but regional integration exists in some other regions? Considering the differences in market segmentation and the differences in economic growth, we can't help but wonder how market segmentation affects economic growth and whether the relationship between the two changes from region to region, and from industry to industry. Solving these problems is of great significance to the current situation of China's economic growth. In this paper, based on the actual situation of China's regional economic development, we study the impact of market segmentation, characteristic of China's economic transition period, on economic growth.We focus on the differences among the regions and industries and take the manufacturing industry as the breakthrough point. In the frame of new growth theory and new economic geography, this paper constructs a linear model for the impact of market segmentation on economic growth. And from different geographic scales, the market segmentation is divided into international market segmentation, domestic market segmentation and geographic segmentation. Our study resulted in a panel data model based on manufacturing industries data from 2003 to 2009. By estimating random effects, the results were robust to prove that: (1) international market segmentation and geographic segmentation have significant impact on the growth of manufacturing industry in China. (2) In terms of regional differences, the growth of manufacturing industry is more sensitive to international market segmentation and geographic location segmentation in Eastern China, more sensitive to geographic location segmentation and topography segmentation in Central China, and more sensitive to geographic topography segmentation in Western China, respectively. (3) As far as industrial differences are concerned, international market segmentation, geographic topography segmentation and domestic market segmentation each has significant effect on labor intensive industry, capital intensive industry and technology intensive industry, respectively. Thus, for the specific type of region or industry, reducing the specific type of market segmentation is of great importance for the economic development in the future.

Key words: China, growth of manufacturing industry, industrial difference, market segmentation, regional difference