We show that the climatic potential for Plasmodium falciparum malaria transmission constituted a locational fundamental that influenced the spatial distribution of urbanization since the early start of the southward expansion of the Han Chinese around 200 BCE. This effect is still detectable in today's distribution of urbanization and economic activity even though the risk of malaria falciparum has been successfully eliminated. We do not find any indication of convergence between high- and low malaria potential regions after eradication. Our identification strategy relies on a climate-based measure of Plasmodium falciparum malaria transmission intensity which is fitted to experimental data on mosquito and parasite development from laboratory studies. This measure is exogenous with respect to human population densities.