Transcript Institutional Transition, Improvement of Investment

Institutional Transition,
Improvement of Investment
Environment, and Poverty
Reduction: The Models of Sunan
and Wenzhou
__Institutional Innovation Case
Study For Shanghai Poverty
Conference
Main purpose for the case study
 To show that the Institutional
innovations have long been a major
instrument for reducing poverty in
China through the successful story of
TVE Models of Sunan and Wenzhou.
Main contents
1.Implementation
2. Impact
3. Driving Factors
4. Lessons Learned
1.Implementation
 Introduction
Sunan : includes Suzhou, Wuxi, and Changzhou, 14
million. located in the Yangzi River Delta Plain. Close
to Shanghai. Traditional industrial base.
Wenzhou:7 million, located in the mountainous region of
the south of Zhejiang Province. remote from big cities,
poor transportation system.
Both regions:
 arable farmland per head has been minimal.
 one of the highest population densities in China.
ModeIs
 Sunan Model
developed large-scale collective processing
industries initiated and run by local
governments
 Wenzhou model
developed low-end light products individual
iniatative based, relying on small private
businesses within a favorable environment
created by local government
Development of the Sunan Model
 Started up before the reform
Motivation: Solve the serious unemployment problem, the
low income.
 Fast-paced growth during mid 80s-mid 90s
Almost at least one member in the local families working
in a TVE, half of family income came from TVEs
 promoted the upgrading and optimizing of industrial
structure after the reform of ownership since mid 90s
Constructing a unified social security system for urban
and rural residents so as to eliminate poverty
institutionally
Evolution of the Wenzhou Model
 Up to mid 1980s:family-based, sole trading handcraft
industry.
Local government just focused on creating favorable
investment environment by instead of involving
running TVEs
 Mid-80s to mid-90s:development of corporations and
industrial associations and promotion of
competitiveness of Wenzhou’s industries
 Mid-90s to present: Innovation and brand
development for “Credible Wenzhou”
To build the region into an international light industrial
production and exchange center
2. Impact
 Speeded up the process of China’s marketoriented reform and provided new ways to
reduce poverty caused by poor institutional
arrangements.
 Speeded up the transition of local economic
structure
 Generally solved the rural unemployment
problem
 Greatly increased the income of farmers and
improved their living standards
 Greatly increased regional GDP per capita
 Contributed to rural modernization and to
urbanization
3.Driving Factors
 Commitment and Political Economy for Change.
Innovative spirit_ looking for opportunities
Proactive role of local government
 Institutional Innovation
Protecting property rights.
Forming an effective mechanism for capital formation.
Agriculture_Trade; Formal _ Informal;
Establishing market-oriented product development
mechanism.
Technology importing system for pushing the enterprises
upgrading constantly. I
3.Driving Factors (continue)
 Learning and experimentation
Technology diffusing path: innovation—
imitation—extension
 Effective breeding ground for entrepreneur
From farmer-entrepreneurs to young
professional managers
 External Catalysts
Sunan and Wenzhou quite benefited from
historical opportunities
4.Lessons Learned
 Institutional innovation is the fundamental instrument
for poverty reduction based on a spirit of self-reliance
and of continuously trying new ideas ahead of others;
building on their comparative advantages.
 Government leadership is the institutional guarantee
for poverty reduction. Effective regulations provides a
guarantee that respects people’s actions, brings order
and stability to complicated economic relations.
 A virtuous cycle of Learning and experimentation is an
effective way for poverty reduction.
Sunan_ driven by government;
Wenzhou_ spontaneous process. driven from the
grassroots upwards.