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Cluster-based industrialization in China: Financing and performance

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  • Long, Cheryl
  • Zhang, Xiaobo

Abstract

China's rapid industrialization despite the lack of a well developed financial system seems to defy the conventional thinking on the role of finance in development. This paper tries to explain the puzzle from the clustering point of view. Based on firm-level data from two recent censuses, we find that within industrial clusters: finer division of labor lowers the capital barriers to entry; closer proximity makes the provision of trade credit among firms easier. With less reliance on external financing, more small firms emerge within clusters, leading to higher levels of export and total factor productivity thanks to the resultant more fierce competition.
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Suggested Citation

  • Long, Cheryl & Zhang, Xiaobo, 2009. "Cluster-based industrialization in China: Financing and performance," IFPRI discussion papers 937, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:ifprid:937
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    More about this item

    Keywords

    Clustering; Industrialization; Finance; export; productivity; Development strategies;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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