Demand-oriented policy tools and industrial convergence: evidence from cross-regional government procurement in China

Abstract Demand-side government procurement policies play a crucial role in promoting industrial modernization and high-quality development, and they profoundly shape the evolution of regional industrial structures. Using city-pair panel data from 2015 to 2022, this paper examines the impact of cross-regional government procurement on the similarity of industrial structures between cities. The results show that cross-regional procurement significantly increases industrial structure similarity, reflecting a form of “desired convergence” driven by coordinated interactions. This effect operates through three main channels: facilitating cross-regional investment expansion, strengthening innovation and R&D collaboration, and reinforcing policy support for resource complementarity. Heterogeneity analysis further reveals that the effect is more pronounced in non-cluster cities, in cities with similar resource endowments, and when suppliers are predominantly located in southern regions. An extended analysis of broader economic and social outcomes shows that cross-regional procurement helps narrow intercity disparities in the share of technology-intensive firms, employment absorption capacity, corporate social responsibility, and overall firm performance, thereby fostering mutually beneficial outcomes across cities. However, in procurement-originating cities, the improvement in firms’ operating performance under such policies remains relatively limited.