We study how political distortions resulting from government preference towards state-owned enterprises (SOEs) affect the regional sales distribution of private firms in China.Using data from a survey conducted by World Bank, we find conclusive evidence that the prevalence of SOEs in a industry will affect the regional sales distribution of private firms in the same industry.Specifically, high prevalence of SOEs increases the propensity to sell to remote markets of firms with higher foreign equity holdings or who have access to favorable loans.The opposite is true for firms with low foreign equity holdings or who doesnt have access to favorable loans.We build a toy model which links market demands, market access cost and credit constraint to explain these patterns.