Domestic Market Potential, Export Openness And Urban Growth

With the steady progress of the reform and open policy, the urbanization level in China enhances increasingly and the scale of the city’s population and build area expands as well. At the same time, some problems appear. Different cities have different growth rates, which vary a lot. Some cities are expanding rapidly while others are shrinking. Which factors do influence the growth of the city scale in China and what is the trend of urban scale growth (divergence or convergence)? This paper focuses to answer these questions.This paper investigates the related literature reviews on the study of urban growth factors and pays more attention to market potential and export openness. It respectively discusses the relevant theoretical and empirical researches. Besides, this paper conducts a correlation analysis using recent data to receive a more intuitive understanding of the relationship between urban growth and the two. Later on, the theory and mechanism how market potential and export openness affect city growth is illustrated. The theory model is set up in the framework of new economic geography. Then the panel data of the cities in China from 2004 to 2012 is used to empirically analyze the effects of the market potential and export openness on city growth. Random effects model and instrumental variable method are used.Empirical analysis reaches the following main conclusions:First, the domestic market potential is the main factor affecting the urban growth including population growth and build area growth. The higher the domestic market potential, the quickly the city grows. Second, export openness has no significant influence on urban growth. The possible reason is that the foreign market demand has far less impact than the domestic market demand on city growth. In addition, the export openness does not measure foreign market demand well. Third, the influence of the base size is significantly negative, which suggests that China’s urban scale growth show a trend of convergence. Finally, based on the above research conclusion, enlightenments and suggestions related to urban development policy are put forward.