The case of specialized towns in Guangdong, China

Abstract

The illustration of some preliminary results of an ongoing research on the industry in Guangdong, China, is the core of this article. In particular focus is on the so called ‘specialized towns’ and the industries that characterize them as complex actors of Chinese industrial development. The evidence on these specialized towns is quite interesting as such, being not yet well acknowledged in the international literature. However, it is also believed that an investigation of these realities may contribute to the understanding of new engines of industrial development in the context of contemporary global economic relations—what is called the ‘new industry’. Furthermore, some light is shed on the nature of the competitive challenge that China poses to traditional European industry: it is not only cheap labour, cheap land, dumping, and the like. In the new emerging China government visions, policies and industrial organization architecture seem to play a central role. In this context, the authors conclude proposing a framework of questions relevant to some of the most industrialized areas of Europe, that is the Italian regions characterized by a great diffusion of industrial districts.

Acknowledgements

The authors wish to thank Lauretta Rubini (University of Ferrara and L'Institute), for her precious collaboration during all the phases of the research activity. The authors also thank Mario Biggeri, Giovanna Hirsch, Alessandra Echtner and Annalisa Caloffi (University of Florence), Giorgio Prodi (University of Ferrara), Qiu Haixiong, Wang Jun, Li Xin-chun and Fu Zhengping (Zhongshan University), and Hailin Lan (South China University of Technology). Finally the authors thank two anonymous referees, and the audiences and organizational committees of three conferences where previous versions of this paper were presented: XXVII Convegno Nazionale di Economia Politica Industriale, under the auspices of Rivista L'industria, Parma, 27 September 2003; Seminar at the Zhongshan University Research Institute for Guangdong Development, Guangzhou, Guangdong, China, 18 November 2003; Workshop on Spatial Networks and Clusters. Dévelopment local et governance territoriale. Université de Toulouse I de Sciences Sociales, Toulouse, 11–12 March 2004. This paper takes again and brings forward the topics discussed by the authors in an Italian paper published in Economia e politica industriale, 121, 2004.

Notes

1. The figures are even more impressive if observed in detail from a sectoral perspective: China will represent 15% of global output of the textile sector and 10% of textile global exports; in the clothing sector it will produce 20% of total output and 47% of exports, and also 8% of output and 6% of exports in the production of metals. The productive and export capacity is not only confined to traditional products; China has in fact made considerable progress in the high-tech sector, where in the year 2000 exports amount to 18.6% of total Chinese manufacturing export, against the 34% in the US and 16.1% of the European Union.

2. “The China and Italy Joint Research and Learning Project on Clusters, Industry and Industrial Policy”, coordinated by L'Institute—Institute for Industrial Development Policy (joint venture of the Universities of Ferrara, Birmingham and Wisconsin (www.linstitute.org)). This project is being carried out in collaboration with the Zhongshan University of Guangzhou and it is supported and sponsored by the Regions of Tuscany, Lombardy and Emilia Romagna, by the Ministry of Foreign Affairs, by the General Consulate of Italy in Guangzhou, by UNDO-ITPO, by the Department of Economic Sciences of the University of Florence, by the Faculty of Economics of the University of Ferrara, by the Institute of ‘Economia dell'impresa e del lavora’ Milan Catholic University, and by the Department of ‘Ingegneria gestionale e dell'automazione’, Ancona University.

3. As the title tells, this research project aims at exploring the possibility to establish cooperation linkages between Guangdong and three Italian regions: Emilia Romagna, Lombardy and Tuscany.

4. The interest for Italian districts and for the similarity they have with the geography of production of China has clearly emerged during the numerous meetings and congresses that the authors have attended and promoted in Guangdong; among these are the Second and Third Edition of the General Consultative Conference of Guangdong, promoted by the Province Government, the first and second edition of the Italy and China Research and Learning Forum (Guangzhou, November 2000 and 2001) promoted by L'Institute, the Faculty of Economics of Ferrara and the South China University of Technology (Guangzhou, March 2001 and June 2003). Finally the conference on Regional Innovation Systems and Science and Technology Policies in Emerging Economies; Experiences from China and the World, Zhougshan University, UNESCO, and Institut de Recherche pour le Développement IRD, 19–21 April 2004. See: Bianchi et al. (2000), Di Tommaso and Rubini (2001, 2002, 2004), Bellandi and Caloffi (2004).

5. For example: Bianchi (1998), Porter (1998), Crouch et al. (2001), Becattini et al. (2003), Sugden et al. (2003), Cooke et al. (2004), Di Tommaso and Schweitzer (2004).

6. See Chen (2002), Chen and Feng (2000), Démurger (2000), Wei (1993).

7. Among others Stiglitz who has opened a wide debate on the role of international institutions in the liberalization process of Eastern European countries (and more in general of the so called Transition Economies). In the Italian debate see: Vaccà and Cozzi (2002).

8. See among others Zhang (2001), Golley (2002), Bao et al. (2002).

9. Shenzen, behind Hong Kong, Zhuhai near Macao, Shantou near Taiwan. See, among others, Chu (1985), Crane (1994), Ge (1999), Weber (2001).

10. Biggeri and Hirsch (2004), Christerson and Lever-Tracy (1997, pp. 582–584).

11. In addition, one should not forget the importance that Hong Kong has had (and in part still has) in organizing export and import flows, through its logistics, financial and promotional structures.

12. See, among others, Hook (1996), Vogel (1989), Yeung and Chu (1998), Jianwen and Yuqian (2000).

13. There is an immense literature on the TVEs. Some contributions take an approach of industrial economics and are particularly relevant for the themes faced in this study: Chung and Yijiang (1994), Putterman (1997), Perotti et al. (1998), Bowles and Dong (1999), Biggeri et al. (1999). For a synthesis see Biggeri and Hirsch (2004).

14. ‘Yi zhen yi pin’ or ‘yi cum yi oin’. Biggeri (2003).

15. For some references on districts in China see Christerson and Lever-Tracy (1997), Bellini et al. (1998). On the general relation between large firms and industrial districts: Bellandi (2001).

16. According to Zhongshan University (2002f), on average 55% of the industrial production comes from the main industry. Each of the cities hosts an average of 1500 enterprises, employing 30,000 workers, of which 1500 have technical and professional qualifications. As for the sectoral distribution: 39% of industries are specialized in labour-intensive productions; 21% in high-tech productions; 19% in agro-food and 24% in other sectors (such as heavy industries). According to the study, 43% of the specialized towns do not have a ‘key’ or ‘leading’ enterprise, while the remaining 57% do. Moreover, 41% of towns are based on local traditional production and 61% of towns are dominated by Chinese, rather than foreign, firms. Only 21% of cases experience a noticeable presence of state owned enterprises.

17. According to Zhongshan University (2002f), between 80% and 90% of the specialized towns organize fairs and exhibitions where local firms can promote their products and they also have specialized trade centres and industrial parks; between 50% and 60% of towns have centres providing services for innovation and trade. According to the same study, one of the major challenges for local governments is to increase the level of innovation and managerial skills in a context dominated by small and medium firms, managed by entrepreneurs of a rural origin in collaboration, in many cases, with members of their family.

18. The characteristics of the service centres established in the specialized towns will be discussed later on in this paper. It appears, from DST data, that nearly 50 recognized specialized towns have projects within the DST programme. See Qiu and Xu (2004).

19. In the same specialized town there can be more than one specialized industry, as happens in Dachong, where besides the main industry that produces wood furniture, there is a second important industry producing clothes.

20. There are dozens of ports, many of which endowed with customs. There are nearly 900 docks, with an annual loading capacity of 100 million tons (and it is now growing) and links with 130 countries of the world. To this one should add the airports, the highways, the railways and the underground lines in constant growth. Huikang (2002).

21. A report from the Australia–China Chamber of Commerce and Industry of New South Wales (http://www.accci.com.au/default.htm Chamber Reports on Recent Developments, China's Pearl River Delta, 8 March 2002), refers to the development, in the Pearl River Delta, of a ‘cluster of cities’. This type of development characterizes also four further areas: Liaodong Peninsula that goes from Dalian to Shenyang; Beijing-Tianjin-Tangshan; Yangtze River Delta from Shanghai to Nanging; Chongqing Municipality. These, together with Pearl River Delta are the zones where most of the Chinese economic development is concentrated; with a strong competition between the Pearl River Delta and the Yangtze River Delta (Enright & Scott, 2003). It could be interesting to see these areas as Regional Innovation Systems. See: Cooke et al. (2004) on the general issue; and, specifically, the 2004 International Conference referred in note 6 earlier and Turpin et al. (2002).

22. It is worth mentioning that the chief of the town is the first secretary of the communist party of the town and this is true also at higher levels. Among the ambiguous aspects of this mandate (fixed by the recent ‘three represents’ theory) is the assessment of the level of wealth of temporary workers. This point will be discussed further later in the paper.

23. For the production of ceramics, for instance, there has been established in Nanzhuang (Foshan) an exposition centre called ‘the Huaxia Ceramic Exposition City’, which hosts a centre for international fairs, several buildings for show-rooms and commercial branches of pottery enterprises, a centre for innovation and quality, a five stars hotel and several storage facilities. The project required 1 billion yuan (more than 100 million euros) of investment and is spread on 1 sq km of land. Nanzhuang has been recognized as ‘the No. 1 Ceramic Town of China’ and the investment is also directed to increase the reputation and the potential of local enterprises in terms of quality so as to increase the production for local as well as international markets.

24. Qiu and Xu (2004) point out that the experiences of business services centres in Guangdong is evolving towards a less direct participation by local governments and a larger involvement of private firms and associations—this too is not without problems, of course.

25. In particular, Huikang (2002, pp. 95–96) explains the first target of this programme: “A widely stretching urbanized corridor consisting of a group of medium-sized cities will be formed, with Guangzhou city proper as/being the center and with Hong Kong the out port of the South China economic region. Each satellite city will have its own features and assigned tasks of industrial development, which are connected with each other by expressways and subways”. Huikang does not cite the source of the programme, but it is, possibly, the Guangdong government together with the Guangzhou municipality. The other targets refer to the promotion of a variety of public services, a ‘big eco-city’ where local historical traditions are preserved, the diffusion of a science and technology culture and the development of urban civilization.

26. The data and information illustrated here again come or are confirmed by the interviews conducted directly by the authors and by the research of Chinese colleagues (Zhongshan University, 2002a, 2002b, 2002c, 2002d, 2002e).

27. Zhongshan University (2002e, p. 10). In the contacts that the authors had with a number of mayors these liked to stress the interest of local government in infrastructures and services to promote economic development, and for the general wealth of the local population. It could be just the expression of ‘politically correct’ slogans. However, together with the industrial infrastructures, a number of public parks and green areas are being established. Moreover, in Dachong, for example, inside a big laundry for jeans (sold autonomously on the local market, and under a foreign label in Europe and the US) a big purification plant of waste water has been established and it is fully functioning. This shows, at least in part, some degree of respect of the national law the imposes the limitation of the most dangerous industrial wastes. However, the attitude towards pensions and sanitary conditions is still not plainly revealed.

28. These come often from Chinese investors abroad, that maintain contacts with their origins (a kind of guanxi) and sometimes support also public investment, as it happened in Pengjiang with the establishment of schools and a university.

29. The innovation centre of Xiqiao has an office devoted to these kinds of service for textiles enterprises.

30. For example in 2001 the district government of Penjjiang established a centre of technological innovation for the producers of motorcycles and mechanical components. This centres operates in connection with the Department of Engineering of the Wuyi University.

31. Dachong hosts a museum of wood manufactures that exhibits several certificates that the city received as “first town of China for redwood furniture” assigned by the Chinese Association for Light Industry and by the Chinese Association for Furniture Industry; manufactures of master handicraftsmen and precious antique wood manufactures. Finally, compare cases of joint action in other developing countries (Nadvi & Schmitz, 1999) and the specificity of the ‘socialist’ market economy (Qiu & Xu, 2004, and, for an Italian view: Weber (2001).

32. See for example Di Tommaso and Rubini (2001). Despite this kind of competition, some countries never managed to attract investment and were never chosen for productive de-localization (e.g. Sub-Saharan Africa); and others have clearly been beaten by China in the attraction of FDI (among these are Thailand, Malaysia, Indonesia, and Vietnam).

33. See for example OECD (2001), Bianchi and Labory (2004), Di Tommaso et al. (2004).

34. See for example Becattini and Bellandi (2002), Menghinello (2004).

35. The authors refer to another occasion for the consideration of the challenge for high-tech clusters in industrialized countries of Europe and elsewhere. However see Cooke (2002), Bellandi (2003), Bianchi (2004), and Di Tommaso and Schweitzer (2004).

36. Of course the direct objects of reflection are the local production systems localized in the industrial districts of some Italian regions. But the field of application is in effect much wider: Porter (1998), Becattini et al. (2003), Sugden et al. (2003).

37. For cluster-to cluster policy applied to Italy and China: Bianchi (2003), Di Tommaso and Prodi (2004).