China's Regional Economic Development

The following sections are included:

• About the Authors
• Contents

Since the reform and opening-up, Wenzhou, located in the eastern coastal area, has become a pilot area of large-scale institutional change and rapid economic development in China and exerted huge demonstration effects on the reform and opening-up and economic development in the other regions…

Since the reform and opening-up, due to differences in historical and cultural traditions and economic development of various regions, a “one system, multiple modes” situation has emerged in the course of industrialization and marketization in China; namely, under the precondition of an identical basic system of society, each region applies diversified economic system reforms and economic development modes. Among them, the influential ones are Pearl River Delta model, South Jiangsu model, Wenzhou model, etc. Moreover, Wenzhou model has aroused much concern for its particular high spontaneity…

Two kinds of reform costs exist in the course of transforming from planned economy to market economy: implementation cost and friction cost. Implementation cost includes all the efficiency loss arising from the “incomplete information”, “incomplete knowledge”, and instability of system prospects when the reform starts; friction cost includes the consumption of time and materials caused by the social friction during the reform (Fan, 1993). Reform means the readjustment of the interest pattern; its essence is “non-Pareto change”. Therefore, the circumstances in which some people get benefits and some people suffer losses is inevitable, thus causing reform resistance and frictional cost. In China’s institutional environment which was long dominated by the ideology and philosophy of planned economy, it is necessary to divide the frictional cost into political cost and adjustment cost for the progressive reform of the economic reform. Political cost refers to the risks of making “political mistakes” for breaking through the ideology and philosophy of planned economy in order to push forward the marketization reform. Adjustment cost refers to the compensation that the “non-Pareto” feature of the reform requires for the “victims” of the reform, characteristics of the reform to reduce reform resistance. Once the political cost of “freeing the mind” is introduced, the demand-induced institutional transformation will become the “quasi-demand-induced institutional transformation” (Jin, 2000a). Wenzhou model was a product of the progressive reform featuring quasi-demand-induced institutional transformation pushed forward in the course of pursuing the reform plan with minimized frictional cost (political cost), regarding “freeing the mind” as the national institutional environment evolved. The difference between the institutional transformation characteristics demonstrated by Wenzhou model and the traditional demand-induced institutional transformation was as follows: The microeconomic unit of Wenzhou model was used to seek benefits in promoting the institutional transformation in the institutional environment long dominated by the ideology and philosophy of planned economy; it must “free the mind” to break through the political cost barrier caused by the ideology and thinking inertia of planned economy. Therefore, the significance of Wenzhou model lay in exploring a reform path with minimum friction cost (i.e., political cost) of “freeing the mind”.

The following sections are included:

• Issues of regional economic development
• Neoclassical regional industrialization mode
• Characteristics of regional economic development
• Trend of regional economic development
• Challenges in economic development

The most significant thing in modern economic systems is the formation of rational market subjects. There was once an influential debate in the domestic economic circles. One side held that the establishment and perfection of the socialist market economy should focus on defining the property rights of enterprises, while the other side thought that the perfection of the market system, especially the competition order and the rationalization of the price system, was more important. Although there were great differences between the two sides, there was not much difference between the two sides of the argument regarding the shaping of the rational market subject being the key to the establishment and perfection of the socialist market economy system. Differences mainly focused on how to shape a reasonable market subject…

The following sections are included:

• Introduction
• Development overview of Chint Group
• Growth of Chint: Association and absorption of small enterprises
• Change of property rights and decision-making control of Chint Group
• Marketing, R&D, and personnel management of Chint Group
• Existing problems and development trends of Chint Group
• Relationships between private enterprises and the growth of private enterprises

In the era of social division of labor, “economy begins with the threshold of exchange value” (Braudel, 1993), and the market is the core of the whole economic system and the most important part of the economic process. There is no doubt that in the course of the great economic and social changes in Wenzhou since China’s reform and opening-up, the wholesale market of centralized industrial products has played the most active role in this historical drama. This is because the wholesale market of centralized industrial products is an indispensable point for Wenzhou to break through the barriers of the planned economic system and move toward market economy, and it is also an important driving force for Wenzhou’s marketization. It is the inter-regional trade developed from the fringe and gap of the planned economy and it is the source of motive force for the initiation of private industrialization; it is the most important carrier of “path dependence effect” in the process of marketization of Wenzhou’s history and regional culture. It is the main way of spreading and transplanting Wenzhou model and commercial culture. Therefore, the wholesale market of industrial products is an ideal window for the analysis and interpretation of Wenzhou model.

The following sections are included:

• Introduction
• Development and changes of the leather shoes industry in Wenzhou
• Quality decision-making of firms in competitive markets
• Market structure and competition distortion during the transition period
• Research conclusions and policy implications

In China’s social and economic transition period, Wenzhou embarked on a path of industrialization and marketization characterized by the development of family industry and professional market, gaining an economic first-mover advantage and achieving outstanding performance. In 1978, the total GDP of the whole city was only 1.32 billion yuan, which increased to 82.5 billion yuan by 2000, and the average annual growth rate was as high as 15.6% according to comparable prices. At the same time, millions of Wenzhou people created Wenzhou streets, Wenzhou villages, and Wenzhou cities throughout the country and throughout the world. The rise of Wenzhou model has aroused widespread concern in academic circles. When people study the origin of Wenzhou model, they mostly analyze the unique location factors and the stock of old system in Wenzhou. In fact, Wenzhou model is no longer just a regional economic phenomenon in a special spatial sense. Wenzhou model is closely related to Wenzhou people, which cannot be explained simply by location or institution. In order to further analyze and study the origin of Wenzhou model and the motive for Wenzhou’s economic development, it is necessary for us to introduce the new variable of culture and analyze Wenzhou model from the angle of Wenzhou’s humanistic spirit. Wenzhou is located on the border between Zhejiang and Fujian. The origin of local residents is complex, the dialects are numerous, and the local rural residents live in a large number of ethnic groups. Clan conflicts have been frequent in history. At the same time, in the process of industrialization and marketization in recent years, most of Wenzhou’s private enterprises have had a very strong family system. It can be said that in the cultural factors that influence the economic development of the Wenzhou region, the family culture factor is also prominent…

The following section is included:

• Bibliography