China's consumer-goods manufacturing clusters with reference to Wenzhou footwear cluster

Jici Wang
Department of Urban and Regional Planning, Peking University, Beijing, China

PP: 160 - 170

Abstract

This paper provides a pilot study of the development of consumer-goods manufacturing cluster in China. The paper is divided into five sections. The first section introduces the contribution of 'made-in-China' to the global economy with China's clustering. In the second section, the context of the theory of agglomeration and cluster are reviews briefly. Subsequently, the paper draws the general picture of the development of consumer-goods manufacturing clusters in China and illustrates those clusters in two representative provinces - Zhejiang and Guangdong - in the third section. The fourth section analyses the case of Wenzhou footwear industrial cluster in detail. Finally, the paper discusses some problems facing Chinese consumer-goods manufacturing clusters and calls attention to their need of innovation and upgrading.

It is rather certain that China needs continuing production in traditional industries. The possibility of the continuation is only opened by means of improvement of quality and efficiency of the manufacturing. In cope with proliferation of costs, climbing up the value chain from OEM to ODM (original design manufacturing) and OBM (own brand manufacturing) is indispensable. Investment in environmental protection cannot be delayed any longer.

There is great room for the improvement of learning or cluster efficiency as well. All of these mentioned concern technical, organizational and managerial advancement, and require higher levels of human capital, in addition to physical capital. China is really in a new cross-corner of development.

Keywords

China manufacturing; agglomeration theory; consumer goods; footwear cluster; proximity; Wenzhou case; original equipment manufacturing; original design manufacturing; own brand manufacturing

Article Text

Since China opened to the outside world in the 1980s foreign companies have worked closely and actively with Chinese consumer-goods makers to promote original equipment manufacturing (OEM). They consider China a big market as well as an important partner in their global strategy. Now China is known as a promising supplier to demanding customers and as an intimidating manufacturer to competing producers. China's entry into the World Trade Organization brought its industry into global prominence. Many estimate that China will become a sophisticated manufacturing centre no longer just a low-cost source of cheap goods in the near future.

China's local clusters of consumer-goods manufacturers contribute greatly to bringing China's industry to global prominence, as the following news items show:

China's advantages in the global marketplace are moving well beyond cheap equipment material and labour. The country exploits clustering in a way that some countries just can't match. Drawing on its vast population and mix of free-market and central-command economic policies China has created giant industrial districts in distinctive entrepreneurial enclaves such as Datang. Each was built to specialize in making just one thing including some of the most pedestrian of goods: cigarette lighters, badges, neckties, fasteners. The clusters are one reason China's shipments of socks to the US have soared from 6 million pairs in 2000 to 670 million pairs last year. Meanwhile American producers pummelled by imports from China and elsewhere saw their share of the US hosiery market fall from 69% in 2000 to 44% in 2003 according to the latest industry data.
Los Angeles Times, April 10 2005

Buyers from New York to Tokyo want to be able to buy 500,000 pairs of socks all at once or 300,000 neckties, 100,000 children's jackets or 50,000 size 36B bras. Increasingly the places that best accommodate orders are China's giant new specialty cities. The niche cities reflect China's ability to form 'lump' economies where clusters or networks of businesses feed off each other building technologies and enjoying the benefits of concentrated support centres.
New York Times, December 24 2004

Since multifaceted reform began in the 1980s China's clusters of consumer-goods manufacturers have emerged and developed rapidly in the coastal area especially in backward rural areas. The trajectory and specialization of those clusters is attributable at least in part to networked industrial systems based on the Italian model. At first the concept of cluster in China was politically delicate. Until the end of the 1990s Chinese policy makers neglected those clusters which were inconsistent with the rapidly growing non-locally embedded high-tech branch plants. Since the economic performance of those clusters became more and more obvious the concept of industrial cluster has appeared on the policy-making stage and been adopted.

Cluster development in China has passed three decades already. How good is its performance? What problems might arise from their continuing development? How do these problems manifest themselves in China? What lessons are there for developing countries? The purpose of this paper is two-fold. Firstly to contribute to the understanding of local clustering of consumer-goods manufacturers in China with particular reference to the Wenzhou footwear cluster. Secondly it discusses problems with their upgrade and innovation processes.

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