Regional competition surrounding economic development has been a critical element with distinctive Chinese characteristics during the reform and opening-up process over the past four decades. Based on a review and synthesis of existing literature, this paper first examines the historical evolution, key features, and institutional causes of regional competition in China, pointing out that promotion competition among local officials and market competition among local enterprises are the main driving forces. Subsequently, the paper explores significant impacts of regional competition on the political-economic interaction process with Chinese characteristics, focusing on three unique effects: first, it has shaped local governments that integrate three key roles of public service providers, competitive players, and market-participants; second, it has created a trinity government-market relationship involving the central government, local governments, and the market, rather than a traditional dichotomy between government and market; third, it has facilitated the formation of regional growth alliances and a government-business cooperative relationship based on the nexus between political achievements and economic performance.

We study the production-linkage effects of the 156 projects on regional industrial clustering at the beginning of the People’s Republic of China（PRC）. We use panel data from 1949 to 1975 to empirically analyze the impact of the 156 projects on local firms’ entries in the industrial production networks. The data are drawn from firm-level industrial surveys and prefecture-level information on industrial and social development. We find that the prefectures with the 156 projects have more firm entries than other prefectures. Industry-level analysis shows that the effects of the 156 projects on firm entries are larger for industries closer to the 156 projects in the production network. In addition, the effects in the network based on output linkages are larger than those in the network based on input linkages. These industry-level effects are concentrated in the period when the construction of the 156 projects was completed. We also show that the 156 projects have significant long-term effects on local production networks after 1978. To address the potential endogeneity issue in the empirical analysis, we exploit national defense considerations related to the 156 projects to conduct instrumental variable analysis and find robust results. We also identify some projects that moved from planned to actual sites because of the national defense considerations. Then we compare the production-network effects between the actual and planned locations and find those effects are concentrated in the actual locations. Our analysis shows that the 156 projects significantly improve regional industrial clustering and offers crucial empirical evidence for the establishment and development of the industrial system of the PRC.