Cambridge, MA – China’s massive investment in industrial parks have not only added to growth within the immediate commercial area; it has created new urban areas or "edge cities" beyond the boundaries of the industrial parks with increased productivity and higher wages.

Researchers in China and the United States have discovered a new urban phenomenon underway in China: the creation of industrial parks does not just add to growth within the area designated for manufacturing, it also significantly increases economic production and consumption well beyond the boundaries of the industrial parks. 

The spill-over effect is so striking that the researchers named these new urban centres “edge cities”, places that generate their own hubs of diverse economic activity and residential life, explains MIT, which participated in the study of 110 industrial parks near eight cities in China: Beijing, Shanghai, Shenzhen, Tianjin, Dalian, Wuhan, Xi’an, and Chengdu. This corresponds to nearly 10 per cent of all industrial parks in the country.

The new parks create “a spatially concentrated increase in local market potential” as well-paid workers look for nearby housing and retail opportunities. This leads to “sharp improvements in worker quality life”, notably a reduction in commuter times as new homes are constructed in these edge cities, which typically crop up in the 2-kilometre radius around the industrial parks. 

Other economic benefits include on average a 41 per cent increase in employment, an 8 per cent increase in total factor productivity, and a 3 per cent increase in wages. Retail activities also grew.

But as the researchers discovered, not all industrial parks resulted in an increase in productivity in the surrounding area. Those that fared best invested in human capital and had clearly defined connections with existing firms – such as a supplier-manufacturer relationship – located near the parks.