building engines for growth.pdf

How Do SEZs and Industrial Clusters Drive China’s Rapid Development? 31of quantity without quality; as a result, they offered low prices butsuffered from a bad reputation. To correct this problem, the municipalgovernment issued strict regulations and quality standards forWenzhou shoes and helped firms develop branded products. 29 Sucha measure actually saved the cluster. In Guangdong in recent years,some cities set standards for investment quality to ensure efficiency,including better use of land and less pollution, for example. 30 In thePuyuan textile cluster in Zhejiang Province, when market competitionforced firms to use cheap materials at the expense of quality in thelate 1990s, the Puyuan township government issued two decrees: theQuality Control and Inspection System in the Cashmere Marketplacein Puyuan, Tongxiang, and the Product Quality Guarantee Stipulationin Cashmere Sweater Marketplaces. These regulations were strictlyenforced by the Administrative Committee of Puyuan Marketplaceand ensured the quality of the products.• Technology, skills, and innovation support. Given the importance ofinnovation and technology learning for a cluster’s survival, local governmentsare increasingly emphasizing technology innovation andupgrading. Because imitation within a cluster is easy, firms hesitate toinvest in innovation and technology upgrading, and thus governmentintervention can be justified. In Guangdong since 2000, the provincialgovernment has invested RMB 300,000 in each specialized town,with matching funds from local governments, to build a public technologyinnovation center (TIC) to support the clusters’ innovationand technology activities. In the case of Xiqiao, the township governmentfirst set up the Fabrics Sample Manufacturing Corporation in1998 to develop new fabrics, new dyeing processes, and new printingformulas. After initial success, and with the support of provincial andmunicipal governments, in 2000 the town of Xiqiao established theSouthern Technology Innovation Center to provide technology andinnovation services to enterprises at below-market prices. With thesupport of the Textile Industry Association of China and R&D institutes,the Xiqiao TIC was able to provide new products and innovationservices, such as information and technology consulting; intellectualproperty rights (IPR) protection; and professional training, testing, andcertification. It has since become a platform for cooperation amonggovernment, industry, and research institutes and a facilitator forenterprise innovation. 31 A comparison of the economic performanceof the Xiqiao cluster before and after the establishment of the TICreveals quite positive results (see table 1.6). In Wenzhou, the local