Domestically Flying Geese

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