Prior studies have failed to examine the spatial dimension of FDI productivity spillovers in transition economies. Using data from China, this article investigates how FDI in one location may affect the productivity of domestic firms in another location. The study finds strong evidence that FDI in the growth pole on the coast adversely affects the productivity of domestic firms in the peripheral interior. There is also some evidence that FDI in the peripheral interior positively affects the productivity of domestic firms in the growth pole on the coast. The findings indicate that the inflows of FDI contribute to the widening regional disparities in transition economies like China.