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Finance and Cluster-Based Industrial Development in China

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Author Info
Jianqing Ruan
Xiaobo Zhang

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Abstract

China's rapid industrialization over the past several decades, which has occurred in the absence of well-functioning financial markets, seems to defy conventional wisdom on the causal role of finance on industrialization. By conducting an in-depth case study on a fast-growing cashmere sweater cluster in China, we show that through clustering an integrated production process can be divided into many incremental steps. As a result, there is a wide range of investment options in the cluster, and in many types of production, capital barriers to entry are modest. Within clusters, enterprises can often acquire trade credits from upstream or downstream firms and obtain informal financing from friends and relatives, which are used to mitigate working capital constraints. Local governments can play an active role in providing necessary public goods and promoting cluster growth. (c) 2009 by The University of Chicago. All rights reserved..

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File URL: http://www.journals.uchicago.edu/doi/pdf/10.1086/605208
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Publisher Info
Article provided by University of Chicago Press in its journal Economic Development and Cultural Change.

Volume (Year): 58 (2009)
Issue (Month): 1 (October)
Pages: 143-164
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Handle: RePEc:ucp:ecdecc:v:58:y:2009:i:1:p:143-164

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  3. Robert Cull & Lance E. Davis & Naomi R. Lamoreaux & Jean-Laurent Rosenthal, 2005. "Historical Financing of Small- and Medium-Sized Enterprises," NBER Working Papers 11695, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Yuri Sato, 2000. "Linkage Formation by Small Firms: The Case of A Rural Cluster in Indonesia," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 36(1), pages 137-166, April. [Downloadable!] (restricted)
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  7. Jiahua Che & Yingyi Qian, . "Institutional Environment, Community Government, and Corporate Governance: Understanding China's Township-Village Enterprises," Working Papers 97043, Stanford University, Department of Economics. [Downloadable!]
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  8. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August. [Downloadable!] (restricted)
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  9. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542. [Downloadable!]
  10. Allen, Franklin & Qian, Jun & Qian, Meijun, 2005. "Law, finance, and economic growth in China," Journal of Financial Economics, Elsevier, vol. 77(1), pages 57-116, July. [Downloadable!] (restricted)
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  11. Eiji Yamamura & Tetsushi Sonobe & Keijiro Otsuka, 2003. "Human capital, cluster formation, and international relocation: the case of the garment industry in Japan, 1968--98," Journal of Economic Geography, Oxford University Press, vol. 3(1), pages 37-56, January.
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  13. Ravallion, Martin & Chen, Shaohua, 2007. "China's (uneven) progress against poverty," Journal of Development Economics, Elsevier, vol. 82(1), pages 1-42, January. [Downloadable!] (restricted)
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  14. Abhijit Banerjee & Kaivan Munshi, 2004. "How Efficiently is Capital Allocated? Evidence from the Knitted GarmentIndustry in Tirupur," Review of Economic Studies, Blackwell Publishing, vol. 71(1), pages 19-42, 01. [Downloadable!] (restricted)
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