The convergence of manufacturing structure reduces the efficiency of resource allocation, which is a conundrum that has plagued China from “a big manufacturing country” to “a manufacturing power” for a long time. Using the panel data of manufacturing in 30 provinces and cities in China from 2000 to 2014, this paper empirically examines the game between market mechanism and government intervention in the optimal allocation of resources from the perspective manufacturing structure differences. For the results of the entire sample, there is a U-shaped relationship between the opening of the international market and manufacturing structure differences, and after the opening of international market reaches a certain critical value, it will be conducive to manufacturing structure differences. Domestic market opening optimizes the allocation of resources, which shows a significantly positive relationship with manufacturing structure differences. On the contrary, local government investment has distorted the allocation of resources and has hindered manufacturing structure differences. The results of sub-regional estimation show that the opening of domestic market has played an important role in promoting the manufacturing structural differences in the eastern, central and western regions, which shows strong robustness, while the impact of international market opening and local government investment have distinct space differences. The market force in the eastern region shows greater effect than the government power on promoting manufacturing structural differences, and the government policy dependence in the western region is more prominent. Further study finds that the role of the opening of the provincial market in promoting manufacturing structural differences has been undermined by local government investment, because in the interaction between the opening of the provincial market and local government investment, both of them are constrained.
