In China the performance of local officials has been mainly eval-uated based on GDP growth, and the manufacturing industry hasbeen a major source of generating local GDP and employment (Caoet al., 2008). Moreover, under the tax-sharing fiscal scheme, 60%to 70% of local government’s tax base is comprised of business tax,value-added tax (VAT), and income tax from all enterprises otherthan central state-owned enterprises (Cai, 2011), among which themanufacturing industry has been the biggest contributor of VAT,about 60% from 2001 to 2006 (China Tax Yearbooks 2002–2007).Different from the once-for-all land leasing revenue, the VAT hasbeen a sustainable income source of local revenue. Thus, it is notdifficult to understand why city/county government or township and village cadres are committed to attract investment in the man-ufacturing sector