In recent years, Chinese policy makers have tried to balance development in different regions of the country by relocating industrial production from prosperous zones to less developed areas. However, this type of industrial relocation is usually accompanied by the transfer of pollution problems. To shed more light on the costs and benefits of this important policy tool, this study looks at the relocation of ceramics production from one region of Guangdong Province to another. The study finds that the transfer of some ceramics production from populous Foshan to less densely populated Qingyuan would be an effective way of reducing the overall negative effect of the industry's air pollution. However, the study underlines the importance of using effective pollution-abatement technology. It recommends that such technology should be implemented in Foshan and in any new ceramics factories in Qingyuan. It finds that the value of the health benefits produced by installing this technology will greatly exceed the cost of putting the technology in place.