In recent years, local governments have viewed the reception of industrial relocation as a new avenue for attracting investment, and their achievements in both “going global” and “bringing in” have been noteworthy.If we liken industrial relocation to “waiting for the stars and the moon”—a metaphor reflecting the intense longing many regions feel—does this mean that when enterprises relocate, the process is truly smooth sailing and results in a seamless integration? In reality, this is not the case. Industrial relocation is much like planting a tree: one must dig a proper hole, fill it with good soil, and water it thoroughly before it can take root and sprout.
01. Becoming the “Darling” in a New Location
Industrial relocation is a spatial shift and an economic phenomenon—a dynamic process that achieves industrial clustering and diffusion through cross-regional corporate investment. Why do enterprises relocate? Is it for profit? Is it driven by environmental pressures? Or is it for transformation and upgrading?
Cost Is the Lifeblood
Low land costs, low labor costs, and low logistics costs… these are the primary factors enterprises consider when investing in new factories—as I’m sure you’re all well aware. Among them, manufacturing enterprises seek locations that offer the “lowest costs and largest markets.” Looking solely at basic production factors, inland regions certainly have an edge over coastal areas. Labor-intensive industries like textiles and apparel have shifted to central and western regions precisely because of the lower labor costs in inland areas. In addition to policy support, many local governments have established textile industrial parks. These serve not only as key platforms for industrial relocation but also as a calling card for external “engagement.”
Environmental Protection Is a Lifeline
In recent years, the growth rate of China’s industrial development has been on the rise, particularly in regions such as the Yangtze River Delta and the Pearl River Delta. However, this development has been accompanied by mounting environmental pressures. Due to strict environmental inspections, many enterprises are teetering on the brink of survival, while some manufacturing firms have been “forced” to relocate their production bases, facing unprecedented pressure. As a typical example of a high-energy-consuming industry, metal smelting and processing has seen the largest-scale relocations from regions such as Shanghai, Liaoning, Beijing, Tianjin, and Shandong, with Hebei, Ningxia, Fujian, and Guangxi serving as the receiving areas. During the relocation process, enterprises can choose locations with relatively lenient environmental policies or utilize monitoring equipment for the discharge of “three wastes” (wastewater, waste gas, and solid waste). Whether for enterprise development or regional economies, environmental protection must be prioritized; collaboration across multiple sectors, resource integration, and concerted efforts are essential.
Supporting Capabilities Act as Accelerators
Regions with robust industrial foundations and strong supporting capabilities are often the preferred destinations for industrial relocation. As industrial clusters in inland areas continue to mature, supporting enterprises are strategically relocating their production bases to these regions in pursuit of better development opportunities. In terms of investment promotion, corporate site selection has shifted from being “investment-driven” to “innovation-driven,” leading to increasingly higher demands for industrial support systems. In the booming automotive sector, while traditional automakers are concentrated in the established bases of Jiangsu, Zhejiang, and Shanghai, regions such as Anhui, Jiangxi, and Guangdong are seeing a surge of new energy vehicle manufacturers. It is evident that a region’s supporting industrial capabilities serve as the icing on the cake; they not only enhance the industry’s supply chain and improve production efficiency but also drive regional economic growth.
02. The “Government’s Hand” Must Not Be Relaxed
Industrial Investment Promotion Must Stay One Step Ahead
For regions receiving industrial transfers, host areas must conduct proactive industrial research, reasonably identify key target zones and leading industries for investment promotion, and preemptively reserve space in development zones.Strict controls must be maintained at the entry point of industrial relocation, with a focus on long-term cultivation and development. All efforts should be guided by planning, grounded in process, and judged by results, while reserving interfaces for both near-term and long-term industrial upgrading and transformation. Additionally, a negative list management system should be implemented to strengthen resource conservation and environmental protection. Resource carrying capacity and ecological environmental capacity should serve as key criteria for accepting industrial relocation, encouraging enterprises to achieve green, low-carbon, and circular development.
A "One-Step-Ahead" Investment Environment
Relocated enterprises should be able to efficiently and effectively handle all component procurement, rather than having to repeatedly communicate with suppliers to coordinate shipping schedules and logistics transfers. Therefore, local authorities must gradually improve the infrastructure supporting industrial relocation, establish industrial alliances and industry-research platforms, remove all “stumbling blocks” hindering industrial development, and foster a favorable environment for receiving industrial transfers. More importantly, the spatial layout of the logistics industry must be optimized to promote deep integration between logistics and industry. At the same time, cooperation among small and medium-sized logistics enterprises within the region should be accelerated to form “logistics alliances,” offering free parking, low-cost loading and unloading, and convenient warehousing. This will continuously improve logistics efficiency, reduce logistics costs, and ultimately achieve coordinated development.
"Swift Action" in Service Models
Streamline industrial relocation procedures, improve the institutional mechanisms for receiving relocated industries, and ensure smooth coordination and transition for business registration of relocating enterprises to promote the optimal allocation of production factors. For enterprises relocating to the region, local governments must focus on resolving the issue of “successful settlement,” utilizing targeted policies and industrial funds to facilitate the reception process. Implement innovative management models and operational mechanisms, establish systems for overall coordination and support services for major relocation projects, and set up a performance evaluation system for industrial relocation targets, incorporating these into government performance assessments to enhance the effectiveness of project services.
03. Is a distant relative really no match for a close neighbor?
Do regions experiencing industrial spillover necessarily exert strong influence on their surroundings? Are they always capable of successfully absorbing these industries? Not necessarily. As a source of industrial spillover, Beijing presents unprecedented opportunities for investment promotion in neighboring regions.Hebei appears to be the biggest beneficiary, but the mismatch between the spilling-over industries and its own needs has led to a slow pace of industrial relocation. This has created a situation where the industries Hebei wants are not being released by Beijing, while the industries spilling over are not what Hebei wishes to attract. Furthermore, manufacturing costs in Beijing are high, and the number of enterprises relocating to Tianjin and Hebei has not increased significantly. Even when enterprises do relocate, they often experience difficulties adapting within a few years and end up relocating again.From a corporate perspective, the focus is on reducing costs and improving efficiency. Whether this involves completely shedding the old structure, gradually integrating into emerging industries, or undergoing transformation and upgrading to enter a new phase, none of this is dependent on geographical proximity. Therefore, since Hebei and Tianjin are not suitable destinations, might regions further afield—such as Shandong and Anhui—be able to secure a share of the pie?
Conclusion
In summary, what matters most to companies relocating their operations is the investment environment and supporting infrastructure of the destination region; factors such as costs, policies, and location come second. Amid the wave of industrial relocation, local governments’ short-term price wars and concessionary offers may not necessarily yield long-term benefits. The “survival period” of relocating companies will ultimately test the service capabilities of local governments. In the future, industrial relocation will bring not only capital, projects, and technology, but also advanced concepts and ideas.
