41 industrial enterprises in Jiuquan and Jiayuguan of Gansu, China were surveyed by questionnaires, and data of some large industrial enterprises were collected to analyze factors influencing location decisions and development of enterprises in these areas. It is found that cost factors and local market emphasized by Alfred Weber played the fundamental role in location decision and development of enterprises in Jiuquan and Jiayuguan. The most important cost factors were proximity to raw materials and preferential policies; Jiuquan and Jiayuguan are far away from large cities in western and coastal China, and this relative location disadvantage had negative influence on development of the majority of the enterprises surveyed; although only a few enterprises surveyed declared that water supply, quality and price had a negative impact on them, it is argued that water shortage had negative influences on local industrial development. However, the enterprises surveyed were not aware of such indirect influences; in comparison with other cities, agglomeration economy played a relatively small role in location decision of enterprises in Jiuquan, due to disperse distribution of enterprises across the city.