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28 Building Engines for Growth and Competitiveness in Chinaopening up. 22 In Xiqiao, almost no one from the first generation ofentrepreneurs had graduated from any textile university or college,but most of them had had some processing experience in the past andhad acquired some professional knowledge and skills. 23• Foreign direct investment and the diaspora. Clusters benefiting fromFDI and the diaspora are concentrated mostly on the eastern side ofthe Pearl River Delta region, in the Dongguan, Huizhou, and Shenzhenareas. The economies of these clusters are driven mainly by overseasChinese and foreign firms because of the region’s proximity to HongKong, China and the preferential development policies in 1980s. 24• Natural and human endowments. Such factors are especially importantfor natural resource–based clusters, such as those in seafood processing,fruits, stone carving, aquaculture, ceramics, and furniture, amongothers, in Guangdong Province. The abundant low-cost but relativelyeducated labor force is also an important resource that the clusters canleverage.• Market pull. When China was first opened up, there was a huge shortageof almost everything as a result of the centrally planned economy. Thesedesperate market needs provided a powerful reason for the existence ofthe numerous clusters that sprang up in a short period of time.• Government facilitation and industrial transfer. In recent years, becauseof rising costs, limited land, and tough environmental requirements,many coastal clusters have begun to move inland; some clusters in themiddle and western regions were formed through such transfer. Insome cases, the moves were highly influenced by deliberate governmentpolicies; however, such transfers are still based largely on marketchoice, where government plays mainly a facilitating role. An exampleis the footwear manufacturing cluster in Chengdu, in SichuanProvince, which was a result of cluster diffusion. By the end of 2005,this region had agglomerated more than 1,200 footwear firms andmore than 3,000 related firms that produced more than 10 millionpairs of leather shoes per year, accounting for more than 50 percent ofthe leather shoe exports in western China. 25Many of these factors can be found in the industrial clusters in otherdeveloping countries, including some African countries as well (Zeng
How Do SEZs and Industrial Clusters Drive China’s Rapid Development? 292008), but some factors appear to be unique to China, such as the longhistory of production in many small towns, industrial transfer, and the like.How the Clusters Succeeded and Took OffClusters survive and succeed mainly because they are able to increasethe diversity and sophistication of their business activities to achievegreater productivity and efficiency. In an export-led growth model,this ability is especially important. Besides the well-known low-costlabor factor, many other elements have contributed to the success ofChinese industrial clusters. These include, among others, efficiencygains and lowered entry barriers through business value chains, productionspecialization, and division of labor; effective local governmentsupport; knowledge, technology, and skill spillovers throughinterfirm links, including those with state-owned enterprises (SOEs)and foreign firms; entrepreneurial spirit and social networks; innovationand technology support from knowledge and public institutions;and support from industrial associations.Efficiency gains and lowered entry barriers. In most Chinese clusters,many firms operate in different manufacturing segments as well as inrelated services, thus forming well-functioning value chains and productionnetworks with efficient division of labor. For example, the Datangsocks cluster in Zhejiang Province comprises 2,453 socks firms, 550 rawmaterial firms, 400 raw material dealers, 312 hemstitching factories, 5printing and dyeing plants, 305 packing factories, 208 mechanical fittingssuppliers, 635 sock dealers, and 103 shipment service firms. In addition,Datang Light Fabric and Sock City has 1,600 shops (Wang 2009). In theWenzhou footwear case, more than 4,000 firms operate in supply, production,sales, and service networks. Because the production process is technicallydivisible, each small and medium enterprise (SME) tends to cover anindividual phase of production and is connected by specialized transactionnetworks to coordinate interfirm cooperation. 26 Such value chains andproduction specialization reduce operating costs and greatly enhance theproductivity and efficiency of all the business activities in the clusters.In addition, research on the Wenzhou cases also reveals that clusteringdeepens the division of labor and specialization and helps lower the technologicaland capital barriers for new entrants, allowing a large number ofsmall entrepreneurial firms to enter the industry by focusing on a narrowlydefined stage of production. Such specialization requires much lessfixed investment. Meanwhile, small firms in clusters are able to obtain
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Page 7 and 8: ContentsForewordAcknowledgmentsAbbr
Page 9 and 10: ContentsviiThe Major Achievements o
Page 11 and 12: ContentsixMaps1.1 Economic and Tech
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Page 16 and 17: xivForewordThe key experiences of C
Page 18 and 19: xviAcknowledgmentsProgram sponsored
Page 20 and 21: xviiiAbbreviationsKETDLCDLtd.MISMNC
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Page 52 and 53: 32Table 1.6 Performance of the Xiqi
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China’s First Special Economic Zo
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CHAPTER 3A Case Study of TianjinEco
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A Case Study of Tianjin Economic-Te
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164Map 5.1 Shoemaking Companies in
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CHAPTER 6Cluster Development and th
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Cluster Development and Government:
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Map 6.2 Industrial Clusters in Guan
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203Table 6.5 Evolution of Local Gov
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Table 6.7 Xiqiao’s Clusters Befor
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IndexFigures and tables are indicat
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Index 225GDP contributions of, 13t,
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Index 227footwear manufacturing in,
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Index 229enhanced development phase
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Index 231Provisional Regulations on
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Index 233oral agreements of, 34in t
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Index 235service sector in, 108succ
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Index 237Zhejiang province, industr
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This book reveals fascinating insig
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