Industrial transfer and return migration have been occurring simultaneously in China．This article describes and examines the changing situation of this new phenomenon．The share of manufacturing sector has been declining in more developed eastern areas which are being transferred to central and west areas，with an increasing return migration to central and west areas．The article argues that this new phenomenon can promote proper division of industry，reduce high social and economic cost of migration of rural workers，and help to build a rational urban system．It is proposed that governments should value and follow the laws of market，and promote the integration of industrial transfer and return migration．Policy suggestions in doing so are discussed．