We investigate the effects of provincial characteristics on the distribution of Taiwanese investment in China. For the period 1996-2005, we find that the distribution of this investment can be attributed to the effects of industrial linkages, labour-market pooling and monitoring costs. Furthermore, we find evidence that the determinants of this investment not only differ across regions, but also change over time. Importantly, we find mild evidence that this investment is adversely affected by a market-crowding effect.