Abstract: Based on such characteristics as product heterogeneity and product space non-uniformity, this paper conducts an empirical research on China's industrial upgrading path. The findings show that the production capacity endowment has a dual impact on the transformation and upgrading of the regional industrial structures, while promoting regional industrial upgrading, it will also curb the exit of the existing industries, but the former is weaker than the latter. In terms of regions, the production capacity endowment of the eastern region is relatively richer, and its role in promoting potential product upgrading and curbing the withdrawal of superior products is weaker than that of the central and western regions. The industrial upgrading is realized mostly through the process of“self-revolution”and“creative destruction”. In the central and western regions where production capacity endowment is relatively weaker, industrial upgrading is more likely to follow the comparative advantage path. Therefore, in order to transform and upgrade its industries, it is inevitable for China to choose the path of being guided by industrial policy planning, improving market exit mechanism, and upgrading in different ways according to the regional conditions.

Key words: product space, product density, product proximity, revealed comparative advantage