Using　the　theoretical　framework　of　spatial　econometrics,　we　estimate　the　impact　of　capital　markets,　i.e.,　stock　markets,　medium-and-long　term　bond　markets,　and　medium-and-long　term　loan　markets,　on　industrial　structure　upgrading　(ISU)　across　31　provinces　in　China　from　1998　to　2015.　We　apply　an　explanatory　spatial　data　analysis　(ESDA)　to　detect　the　presence　of　spatial　dependence　and　use　a　spatial　Durbin　model　(SDM)　to　examine　spatial　distribution　and　spatial　association.　Although　our　overall　estimation　results　from　the　31　provinces　indicate　a　degree　of　correlation　between　capital　markets　and　industrial　structure　upgrading,　the　magnitude　of　spatial　spillover　effects　in　three　sub-markets　on　ISU　differ.　We　divide　the　31　provinces　into　four　economic　zones,　and　explore　the　impact　of　three　submarkets　on　ISU　in　the　eastern　zone,　central　zone,　western　zone,　and　northeastern　zone.　Using　our　results,　we　provide　policy　suggestions　that　better　facilitate　ISU　in　China.　(C)　2018　Elsevier　B.V.　All　rights　reserved.