Transformation of China`s Urban Entrepreneurialism

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Transformation of China’s Urban Entrepreneurialism Case Study of the City of Kunshan
Shiuh-Shen CHEIN, Department of Geography, National Taiwan University, Taipei,
No. 1, Sec. 4, Roosevelt Road, Taipei, 10617 Taiwan(R.O.C), [email protected]
Fulong WU, School of City and Regional Planning, Cardiff University, Cardiff, CF10
3WA, UK. [email protected]
Abstract
This paper aims to explain formation and transformation of urban entrepreneurialism
in the context of China’s market transition. With the case study of Kunshan, ranked as
the top economically strong county-level administration, we argue that there are two
phrases of urban entrepreneurialism which can be roughly distinguished in the period
of 1990s till 2005 and from 2005 afterward. The earlier phrase of urban
entrepreneurialism is more market-driven and locally initiated in the context of
territorial competition. However, the second phrase of urban entrepreneurialism
involves more the planning mechanism, upper-governments coordination and various
territorial collaborations and cooperation. China’s newly transformed urban
entrepreneurialism is not a deregulated form, nor is it resulted from the retreat of the
state as seen in the first phrase, but rather re-regulated through great state involvement
in collaboration and cooperation.
1
1
INTRODUCTION
There is no doubt that local authorities over the world play a crucial role in promoting
economic development, particularly under the context of globalization because capital
flows much easily away from one locality to another both domestically and
internationally (Harvey 1989, Brenner 2003, Ward 2003, Jessop and Sum 2000).
Local authorities therefore face challenges and opportunities. On the one hand,
globalization may cause huge unexpected job loss when capital decides to shut down
their companies and move out; on the other hand, globalization also creates
opportunities of fierce territorial competition when capital announces that they want
to move around or built up new projects. To deal with these challenges and
opportunities, local authorities become very entrepreneurial to improve regulatory
environments so as to accommodate more inward capital and/or to enhance the quality
life of local citizens.
Scholars reach certain agreement that local entrepreneurial authorities have
transformed two kinds of governance relations. First, it is between governmental
organizations, vertically and horizontally. In terms of the formal organization, local
authorities seek more decentralized power and gain competence from the weakening
central state (Faguet 2006, Strumpf 2002, Keating and McEwen 2006). In terms of the
latter, local authorities become very competitive in vying with each other for many
development resources, for example, investment, financial grants, and skilled labours
and so on (D'Arcy and Keogh 1998, Cheshire and Gordon 1998, Chien and Gordon
2008). Second, the relationship between state and market has bee transformed. The
state is likely to (or forced to) be self-deregulated in order to attract more capital,
namely, the neoliberal tendency of retreat of the state from the market (Harvey 1989,
Peck and Tickell 2002).
As the specialists of urban China research in the post-Mao era, we generally consent
to the existing literature on the urban entrepreneurialism but argue that Chinese urban
entrepreneurialism has been evolving over time. Certainly, many local authorities
have been proved very bold, innovative and entrepreneurial in the process of the
China’s dramatic economic development over the past three decades (Duckett 1998,
Chien 2007, Jin, Qian and Weingast 2005, Chung 2001, Wu 2000). However, recent
development of China’s urban entrepreneurialism takes place in different formats in
terms of the inter-governmental relationship and the state-market relationship. With
the case of Kunshan, the topmost economically globalized and developed
county-level administration in the Yangtze River Delta, we witness the formation and
transformation of urban entrepreneurialism, which has not been fully researched.
The rise of Kunshan (more details below) is attributed to the strong interaction
between Kunshan and overseas, especially Taiwanese, investors. The development of
local economy was facilitated by economic devolution and aggressive urban
entrepreneurialism. Kunshan managed to break out from the institutional constraint
under state socialism but also innovatively promoted further devolution formally and
informally from the state towards development zone and town governance.
However, aggressive urban entrepreneurialism bought about chaotic land
development and loss of valuable land resources, creating the constraint of space for
2
further development. Meanwhile, economic growth and the rise of regional
governance in the Yangtze River Delta as a whole provides new development
opportunities (like the provision of regional transport infrastructure to integrate more
counties into a more regionally-based economy). In this period, we begin to witness
the transformation of urban entrepreneurialism towards a more coordinated form. The
central government has strengthened its control over land resources; the provincial
government provided more coordination and encourages the collaboration between
local county-level governments. The city of Kunshan prepared a new master plan to
coordinate economic development within its jurisdiction and designated different
functional zones to guide town-level governments. In other words, the latest
development of urban entrepreneurialism in Kunshan brings the role of the state back.
The state attempts to re-regulate and strategically lead the market. In addition, urban
governance is more cooperative with other neighbouring administrations under certain
regional coordination by upper-level governments. As the existing literature on
western cases pays little attention to the newly evolved state-led coordinative and
collaborative urban entrepreneurialism, this paper is to fill up this gap.
The rest of this paper is therefore divided into five sections. First, the debate in the
literature on urban entrepreneurialism in the West and China is revisited. Some
observation on China’s local governance operations is also discussed in order to offer
a general understanding of the formation and transformation of urban
entrepreneurialism in post-Mao China development. Second, the development of
Kunshan is sketched into three stages - early industrialization, engagement with
globalization, and development of high-tech industries and producer services. In the
third and fourth sections, we discuss respectively the first phrase and second phrase of
urban entrepreneurialism in Kunshan. While the first phrase is more territorially
competitive, locally initiated and led-by-the-market; the second phrase starting
roughly from 2005 involves more regional cooperation, upper-governments
coordination and the leading-the-market practices. And some theoretical and policy
implications about the transformative roles of the states behind urban
entrepreneurialism are reflected in the conclusion.
2
URBAN ENTREPRENEURIALISM: THE WEST AND CHINA
Western urban entrepreneurialism and its debates
Urban entrepreneurialism in policy formation and growth strategies has been proven
as a version of urban governance in the late capitalism, particularly in the West like
the United States and western Europe (Jessop and Sum 2000, Harvey 1989, Ward
2003). Local and city governments started to transform themselves into
market-friendly agents whose key goals are to form an alliance with more capitals to
promote local economic development.
The ways that local and city governments become entrepreneurial can be
characterizes into three different but inter-related aspects. First, the focus of the city
agenda was shifted from social policies to economic plans (Harvey 1989, Harding
2005). Related to that is the functionality of city governments is also changed from
mainly social welfare deliverer to economic development promoter. Second, different
formats of public-private partnership working along with the city governments
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become very popular to boost local economies. Key players include elected politicians,
land owners, chambers of commerce, utility developers, local bankers and so on
whose self interest can be realized through these collective actions of urban
re/development (Harvey 1989, Molotch 1993, Mossberger and Stoker 2001, Harding
1994). Third, practices and discourses initiated by these public-private partnerships
(like pro-growth urban machine) were very proactive, innovative and
business-friendly. City-marketing, land-use design, image-making and competition
with other localities are all cases in point (Jessop and Sum 2000, Ashworth and
Woogd 1990).
Local and city development under the China’s market transition
The transition towards a market economy in post-Mao China is largely driven by
active and entrepreneurial city governments. Great policy innovations are made in
order to promote local economic development. On the one hand, China follows the
global trend of urban entrepreneurialism. For example, under the context of economic
and fiscal decentralization, the central government granted much power and
competence to urban governments to facilitate them to build up more infrastructure
and attract investments (Ma and Norregaard 1998, Qian and Weingast 1996, Zheng
2007). In addition, urban governments competed with each other in economic
development for two reasons. Materially, development can be linked to local cadres’
personal pockets in both legal and illegal ways (like local corporatism, see Oi 1998,
Oi 1995). Politically, development can be also related to cadres’ career advancement
(Chien 2010, Zhao 2006).
On the other hand, however, China’s urban entrepreneurialism is quite different from
its Western counterparts. First of all, the context is different. In the West, urban
entrepreneurialism is regarded as an institutional fix to the crisis of Fordism and the
Keynesian welfare state. Entrepreneurial cities were then the nodes of capital
accumulation in the context of post-Fordism and post- Keynesian workfare state
(Jessop 1994, Goodwin and Painter 1996). In China, urban entrepreneurialism
happened under the post-socialist context, in which marketization and
commoditization of urban services and local business environments were introduced
in order to respond to the crisis of state-led socialist development in general and the
Cultural Revolution in particular (Chien 2008, Wu 2003, Wu and Ma 2005). For
example, many market-preserved and business-friendly policies in China were part of
gradual reforms that the state was requested to be retreated from direct resource
allocations, which is very different from the west where the state was retreated
because of the global neoliberal pressure(Wu 2010).
Second, the operation of the political system is different. The Western urban
entrepreneurialism likely takes place in the liberal democracies, where local elections
and private property rights are highly institutionalized. However, in China there is a
strong party-state leadership in administration of all spatial scales from national,
provincial, prefecture, county down to town and township. This difference reflects
different motivation of inter-jurisdictional competition in the West and China (Chien
2008, Chien and Gordon 2008). In China the asymmetric transformation of the
political and economic spheres is the main cause of aggressive urban
entrepreneurialism. Namely, economic decision making has been decentralized to the
localities, while the political system remains centralized and cadre promotion is based
on the evaluation of the economic performance of their jurisdictions.
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Related to that is the strong capability of Chinese state as compared with those in the
West. Through the centralized political system, local cadres are likely to be under
state coordination as their positions are assigned by the upper governments instead of
through local elections. In addition, local cadres in careerism are motivated to follow
up evaluation indicators assigned by the upper governments. Some indicators are even
operated as veto power (yi piao fou jue)- carders would be demoted if they could not
accomplish the assigned tasks (Chien 2010). This operation, for example, arable land
conversion quota becomes a key institution to guide and constrain entrepreneurial
behaviour of local officials.
To sum up, we argue that China’s urban entrepreneurialism shares some
commonalities and differences with its Western counterparts. This paper uses the city
of Kunshan as an empirical case to see how China’s urban entrepreneurialism is
formed and transformed in order to enrich our understanding of urban governance in
China. We have been involved in the planning of Kunshan as policy researchers and
consultants for the city government of Kunshan in 2008 and 2009. The data we use
for this research include semi-structure interviews and written materials collected.
3 HISTORY OF KUNSHAN DEVELOPMENT: A SKETCH
Kunshan can be regarded as one of the most outstanding county-level governments in
China since its economic reform. Administratively, Kunshan is a county-level city
under Suzhou prefecture-level city of Jiangsu province. Nowadays, Kunshan is a top
economically strong county-level administration (jin ji bai qiang xian) in China.
Despite its county-level status, Kunshan generated more than 175 billion Yuan gross
domestic products (GDP) in 2009 (Figure 1), which was even higher than some
provinces like Hainan, Ningxia, Qinghai and Tibet.
[Figure 1 in here]
Kunshan’s economic performance is mainly contributed by notebook and related
information technology industries, evidenced by the fact that only did Kunshan
produce 50% of global notebooks and create 2.5% of China’s national trade and 0.5%
of China’s national GDP.1 However, prior to 1978, Kunshan was a poor county with
agriculture as its main economic sector. Its underdevelopment at the time was
nicknamed the little sixth (xiao liu zi) as its industrial output was ranked as the last
among other five counties in Suzhou (Wei 2002, Chien 2007). Kunshan’s
development of course is an evolving process with three stages: (1) early
industrialization in the 1980s, (2) engagement with globalization in the 1990s, and (3)
formation of high tech clusters and planning for producer service centre after the 21st
century. Each stage is briefed as fellows.
The 1980s: early industrialization under rural collectivenism
Kunshan successfully initiated its industrialization process by two major policies.
1
News source:
http://www.chinareviewnews.com/doc/1012/8/9/6/101289685.html?coluid=0&kindid=0&docid=10128
9685, accessed by 2011/03/15 5
First, Kunshan ‘secretly’ built up its industrial district (gong ye xiao qu) in 1985
without any permission granted by the central and provincial governments. The
district, later changed under the name of Kunshan Economic and Technology
Development Zone (KETZ, Kunshan jing ji kai fa qu), provided major modern
infrastructure in order to attract investors.
Besides, Kunshan also took an advantage of its proximity to Shanghai to attract
domestic enterprises in the inner China, like those in the Third Front area (san xian).
The strategy, called ‘relying on Shanghai in the east and depending on the Third Front
in the west (dongyi Shanghai, xituo san xian), successfully introduced some inland
factories which could not afford high land price in Shanghai but would like to seek
any investment relocation possibility nearby Shanghai. Those relocated collective
factories included Sichuan Hongyan motor factory, Hubei Huangshi textile machine
factory, and Guizhou Hongshan ball bearing factory, and so on.
Taken together, KETZ attracted about 70 factories to invest in 1985, 38 of which were
from Shanghai (Marton 1999, Wei 2002). In 1989, KETZ created 500 million Yuan of
industrial outputs, even more than average of 14 state-granted economic and
technological development zones (ETDZs) At that time, each ETDZ produced about
400 million Yuan in terms total industrial output. In this stage, Kunshan became one
of the most productive development zones despite its low administration (county-level)
and secret status (no permits granted by upper governments). Its development was
mainly driven by the contribution of domestic rural collectivism.
The 1990s: engagement with globalization
The astonishing productivity of KETZ was soon discovered by upper governments,
whose encouragement and support pushed Kunshan to seek the state endorsement.
The seeking for the national-title aimed to cope with then difficulty facing Kunshan in
attracting foreign direct investment. For example, by 1989, KETZ attracted only 2
million US dollars of FDI, in sharp contrast to 25 million US dollars of FDI located in
each state-level development zone in average. Foreign investors were suspicious
about whether or not KETZ could maintain appropriate business environment with its
county-level status as well as its secret/illegal process of establishing KETZ (Wei
2002, Chien 2007).
In August 1992, the State Council granted KETZ national status. Li Peng, then Prime
Minister, further openly encouraged other localities to learn from Kunshan developing its own zone first and looking for the state title after obtaining certain
achievement. Partly because of the national title and partly because of Deng’s
southern tour, FDI injection in Kunshan grew dramatically after 1992 (K. Choe, A.
Laquian and Kim 2008). And most of FDI in Kunshan came from Taiwan, which
mainly focused on printed circuit boards, PC connectors, food processing and the
rubber industry (Chen, Melachroinos and Chang 2010, Chien 2007, Wei 2002) (Table
1). In addition, Taiwanese transformed Kunshan economically and socially as
Taiwanese invested in both manufacturing industries and services. The latter includes
restaurants, karaoke bars, hospitals, banks and even elementary and high schools,
creating a Taiwanese home atmospheres and making Kunshan called ‘little Taiwan’.
[Table 1 in here]
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The 21st century: the development of high-tech and producer services industries
In the late 1990s, Kunshan faced another development difficulty as the then custom
service could not meet the demand of fast delivery of global production networks
(Yang and Hsia 2007), which for example required the infrastructure to satisfy the 955
principle - 95% of goods have to be produced and exported within 5 days of orders
being placed. After many learning-cum-visiting tours to Taiwan (arranged by
Taiwanese investors in Kunshan) (Chou and Lin 2007, Chien 2007, Wang and Lee
2007), whose custom service is well-known to satisfy the information technology
related production, Kunshan proposed an idea of export processing zone (EPZ). With
the help of the centre, Kunshan EPZ was officially in operation in 2001 and soon
became a very popular zone in attracting more FDI and creating more exports. Top
five of the world’s notebook companies, all from Taiwan, moved to Kunshan EPZ to
establish their notebook production lines (Chen et al. 2010, Lai, Chiu and Leu 2005,
Chien and Zhao 2008). The importance of Taiwan’s investment to Kunshan in this
period can be vividly evidenced by a catchphrase ‘five, six, seven, eight, and nine’,
meaning that since the 21st century, 50% of fiscal revenue, 60% of taxation, 70% of
employment, 80% of investment and 90% of export have been generated by
Taiwanese investment.
And in the later first decade of the 21st century, Kunshan decided to develop Huaqiao
business zone focusing not only on manufacturing but also on service industries,
targeting two kinds of service business - one is back-door office for the financial
sector and the other is domestic logistic centre for Taiwanese investment products.
The former aims to respond the development of Shanghai’s financial centre, including
banking, insurance and alike, in which they do need some office spaces to backup
their IT data and store hardcopy documents. Those physical spaces should not be too
far away from headquarters of financial sectors as those backup data and stored
documents might be needed in hand if necessary. Kunshan again took advantage of
being near to Shanghai and built Huaqiao to meet the huge ‘backup’ demand for
Shanghai’s financial corporations. The second is to respond the complaints by Taiwan
companies which wanted to further develop domestic consumption markets in China
but could not make it without appropriate marketing channels. With the improving
relationship between Taiwan and China after 2008 when Ma, a pro-China Taiwan
president, won the presidential election, Kunshan proposed to build up the first
comprehensive business centre for Taiwanese. In other words, the development of
high-tech ICT industries and producer services in Huangqiao reflects the transition of
the economy of Kunshan towards a more mature stage.
4
EMERGENCE OF URBAN ENTREPRENEURAILSM IN KUNSHAN
The early stage of urban entrepreneurialism in Kunshan before 2005 has three features:
(1) establishment of locally initiated projects, (2) introducing the market system, and
(3) territorial competition as driving forces. These three shared the common
characteristics of de-regulation and retreat of the (central) state. First, locally initiated
projects mean that those reforms were implemented by local government initially
without any permission from the upper-level governments. The action of secretly
building up the industrial zone is a case in point. The action needs to be particularly
7
understood as a very risk and bold (i.e. entrepreneurial) policy under the context that
there was a political struggle between market-oriented reformers and
conservative-minded reformers. In the 1980s, China’s reform was an ‘oscillating’
process between (1) the relaxation and open toward more market mechanisms and (2)
the contraction and reliance on more centrally-planned systems (Lichtenstein 1991,
Crane 1990, Howell 1993). However, then leaders of Kunshan were scared by such
uncertainty of being punished and the fear that conservative-minded reformers might
be in power again; instead, they persuaded other local people to support the
development of self-financed development zone (Chien 2007, Wei 2002). The process
of initiating local projects certainly shows that the local state played a very
entrepreneurial role in promoting the local economy.
Second, regarding the introduction of the market mechanism, the best example is the
land leasing policy in Kunshan in 1989, which was the first county-level
administration to charge land-use fees to investors. During the Mao’s time, land was
state-owned and land-use right should not be transferred to private investors due to its
communist principle. However, in 1988, by declaring that land should be recognized
as a special commodity, China amended its constitution to separate the land use right
and its ownership (Yeh 2005, Wu and Yeh 1997). The centre took a very cautious step
to allow only very few cities to try this policy, which still made some conservatives
angry as they viewed the land leasing policy as a forfeiture of sovereignty and an
insult of the state. Kunshan officials dared to push this market-friendly land policy
because they were requested by a then foreign investor, who considered factory
expansion in Kunshan but felt uncomfortable to build his new factory on the land that
were not leased to or owned by him. The business-friendly environment in Kunshan
was extremely successful as it became a key tool in attracting foreign investment. For
example, about 400 land leasing projects until 1995, accounting for the two thirds of
total 600 projects, were not with domestic companies but with foreign counterparts. In
addition, land leasing policy became another important finance resource as a main
supplement to the gap between budgetary revenue and cost of building infrastructure.
Finally, competition among localities pushes Kunshan to be more entrepreneurial. By
2002, around 1,400 zones were established by various levels of governments in
Jiangsu, Shanghai and Zhejiang.2 Therefore, there was inevitably serious territorial
competition between zones. Competition can be either in a direct way of vying in
capital or in an indirect way of upgrading the business environment. In terms of the
former, Kunshan and Shanghai used to be competitors when some industrial investors,
like Taiwan Semiconductor Manufacturing Company, the top leading semiconductor
play foundry, came to the Yangtze Delta to look for factory locations. Rumour
suggested that this is a reason why Shanghai had a project named “173” in the 1990sto build 173 km2 of industrial land to compete with other counties nearby Shanghai. A
local catchphrase ‘yao qi san gan kunshan’ that ‘173’ (pronouncing in Chinese as yao
qi san) is for catching up Kunshan becomes very evident to the competition between
Kunshan and Shanghai.
In terms of the latter, at the beginning, KETZ offered basic standards of infrastructure
with five kinds of utilities and land refilling (wutong yiping). The five utilities
2
News source: lingdao juece xinxi (based in Beijing), 2004/ April No. 15
8
included access to: electricity, roads, communications, water and sewerage. By 1989,
KETZ raised its standard to seven utilities plus one land refilling (qitong yiping) by
additionally offering access to steam and gas. Nowadays, nine utilities including
optical fiber and internet are provided along with land-refilling. Similarly, in 1996,
Kunshan established a ‘foreign investor service centre’, coordinating different
departments to provide a one-stop-shop service. In 1997 Kunshan cancelled 73 items
of fee and lowered the prices for another 44 items. In addition, in 1997 Kunshan
launched a campaign ‘Never Say “No” to Foreign Investors’, showing again the
feature of market-driven deregulation of urban entrepreneurialism.3
5
TRANSFORMATION OF KUNSHAN’S URBAN ENTREPRENEURAILSM
We argue that urban entrepreneurialism in Kunshan has been transformed since 2005.
It does not mean that the features we identified in the earlier stage of urban
entrepreneurialism, namely, initiation by the local, the market mechanism, and
territorial competition, were completely disappeared at time being. Instead, while the
above features still exist, different features are found: (1) the planning mechanism to
govern the market; (2) coordination by upper-governments; and (3) the territorial
cooperation. These new aspects show that the Chinese local state after the 21st century,
certainly still very entrepreneurial, has changed in terms of state-market relationship,
vertical inter-governmental relation, and horizontal interregional relation.
The development of planning mechanism: the new master plan
Along with the growth of its economic strength, business-friendly Kunshan has
become more selective towards new investment projects. In the 1980s and 1990s,
Kunshan welcomed every possible investment project. However, in 2005, for the first
time, the city of Kunshan announced that new investment must fulfil two criteria:
minimum investment intensity of 100,000 Yuan per square metre and completion of
the project within two years. The projects that failed to reach this minimum
investment intensity and completed construction within two years are asked to return
the land to the city government. The purpose of this regulation was to prevent land
speculation by occupying land without substantial investment and production.
Moreover, investors are encouraged to increase their land use intensities. Office and
factory buildings that exceed three floors are waived from some local infrastructure
construction fee (chengshi jianshe fei). This change shows that urban
entrepreneurialism began to change from attracting investment to selecting investment.
Increasingly, the city of Kunshan began to think a more strategic approach to
enhancing its economic competitiveness.
In 2008, the city of Kunshan initiated a strategic vision study and subsequently started
the preparation of its new master plan (2009-2030). This new master plan is a revision
of its earlier one (2002-2020). The new master plan recognizes the problems of
uncoordinated growth and rapid conversion of rural land into industrial uses under
rapid urbanization. The new master plan aims to provide an overall development
3
See: Suzhou Almanac (1987), page 68-71; Suzhou Almanac (1990), page 655-659; Kunshan
Almanac (1994-1997), page202-203; (1999), page115
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framework for the whole jurisdiction of Kunshan rather than leaving individual town
governments to develop their land. Under land-centred urban entrepreneurialism, the
speed of land conversion is astonishing: from 2002 the city of Kunshan grew 24 km2
every year, a growth rate of 16% of its built-up areas. In 2009, the built-up area of
Kunshan reaches around 400 km2, almost half of its vast territory of 927 km2 (Song,
2010). More problematically, industrial land development spread over small towns
and various development zones set up by town governments. Some ancient towns
such as Qiandeng, Zhouzhuang, Jinxi are known for their southern Jiangsu water and
town landscapes. But, they are now encroached by industrial development and
scattered development areas.
Although the previous master plan requires that industrial development should
concentrate in designated industrial zones, in reality the growth of industrial land was
out of control. Industrial development scattered all over the whole area of Kunshan.
The lack of land resource began to constrain the future development of Kunshan.
Under the national system of basic agricultural protection, 280 km2 agricultural land
in Kunshan is reserved for protection. The development of basic agricultural land is
strictly forbidden. Kunshan is a place of water landscapes. The water surface accounts
for 176 km2. The developable land in Kunshan is estimated to be 129 km2. At the
current pace of land conversion, this could only provide land for development for the
next five to six years. The constraint of land resource means that Kunshan must adopt
a more compact and smart growth approach.
Despite the land constraint, Kunshan enjoys new development opportunities resulted
from regional transport infrastructure development. The new inter-city train from
Shanghai reaches the Kunshan station within 20 minutes. There are three inter-city
train stations built within Kunshan. The new high-speed train from Shanghai to
Beijing has the first stop in the station of Kunshan. The extension of Shanghai No. 11
metro line to Kunshan connects the city of Kunshan with Shanghai. There are three
new stations in Kunshan. The development of Shanghai Hongqiao hub combined with
Hongqiao international airport, high-speed train, and metro lines provide new
accessibility to Kunshan.
Faced with the land constraint and transport opportunities, the new master plan
proposes a pattern of transit-oriented development and requires that new development
should concentrate in the areas around the new stations in Kunshan. The new master
plan thus designates three new functional zones: the central development zone of 470
km2, the zone of recreational and holiday resort of 136 km2, and the zone of water
landscape and ancient town tourism of 321 km2. The plan requires that major future
development should be located within the central development zone where the three
stations are based. The other two zones should be protected from industrial and land
development. The new master plan also suggests that, in order to implement the plan
of functional zones, the performance of officials should be evaluated differently in
these zones. Under urban entrepreneurialism in the past, officials were mainly
evaluated by their achievement of GDP growth rates. Now, for the town governments
within the designated zone of recreation and tourism, the key performance indicator
should emphasize less on economic growth rates and more on environmental
protection and greening.
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The preparation of new Kunshan master plan and promulgation of the development
framework show that the city of Kunshan is trying to move away from its earlier
development approach, namely using cheaper land to attract investment so as to speed
up local economic growth. The new development approach begins to emphasize that
some areas of the city-region should be protected and used for post-industrial
functions such as recreation and tourism. Different from previous master plans, the
new master plan proposes a series of key performance indicators (KPIs), including
some new indicators such as R&D expenditure in GDP, Gini coefficient to measure
household social inequalities, unemployment rates, per GDP energy consumption, and
the coverage of forest and green spaces. While it is not clear how these KPIs would be
actually enforced, they do reflect the effort of the city of Kunshan to transform its
earlier single emphasis on GDP growth rates. The new master plan reflects the
transition of Kunshan from dominant industrial development to a more
comprehensive approach to development. The new master plan was awarded as the
national best urban and rural plan in 2009.
Territorial cooperation
Territorial cooperation between neighbouring or trans-border administrations is
another important characteristic of the second phrase of entrepreneurial governance,
which reflects the changing attitude of local governments who began to understand
weakness of race to the bottom in territorial competition. In the case of Kunshan, two
examples in territorial cooperation are particularly illustrative. One is cooperation
between Kunshan and Taicang, both of which are located in the Suzhou
administration, and the other is cooperation between Kunshan of southern Jiangsu and
Suyang of northern Jiangsu. We brief in details below.
First, geographically Kunshan does not sit beside coastline or riverbank and therefore
has not any seaport or river port. The location disadvantage is crucial for development
export-oriented industries. Over years Kunshan used to rely on both the Shanghai
seaport and the Suzhou river port to proceed with necessary custom documentation in
order to transport trade goods in and out of Kunshan. However, with development of
Shanghai and Suzhou, the workload of both customs services has been close to the
maximum of institutional design. Kunshan no longer satisfied the slowness and
inconvenience offered by Shanghai and Suzhou ports and was eager to seek for an
alternative.
Taicang, another county-level administration under Suzhou, is situated close to the
Yangtze River with the only one river port in Suzhou (Map 1 below). The Taicang
river port became Kunshan’s favourite not only because its location was just nearby
Kunshan but also because of its unique status in the cross-strait relationship. Although
there had been some economic interaction between Taiwan and mainland China in the
1980s, it is not until 2008 that the first direct ocean shipping service was established
between Taiwan and China. Prior to 2008 Taiwan’s goods were forced to ship to
China via the third points like Isigaki (of Japan) and Hong Kong. In November 2008,
few months after a pro-unification president seated in the President Hall, the first four
ports in China were opened up for the direct shipping lines to Taiwan. These four
include Shanghai, Fuzhou, Tianjin and Taicang - the former three are seaports facing
the Pacific and Taicang is the only one river point along the Yangtze River. Further,
the Taicang Custom was empowered with the establishment of Taicang-Taiwan Free
Trade Zone.
11
[Map 1 in here]
The direct shipping line between Taicang and Taiwan certainly provides cheaper and
quicker transportation to benefit many Taiwanese companies investing in China,4
including those in Kunshan. Recognizing this advantage, Kunshan further cooperated
with Taicang under a concept of ‘Kun-Tai Links (kun tai lian dong)’. In 2009, KETZ
and the Taicang river port also built up a ‘Zone- Port joint meeting (qu gang shuang
bian hui yi), which is a more institutionalized way for cooperation between Kunshan
and Taicang. Though the cooperation, Kunshan can offer more convenient trade and
transport environment to its Taiwanese investors, and Taicang also can promote its
economy with more Taiwanese investors using the river port service.5 Such territorial
cooperation, which creates win-win situation to both sides without any formal
restructuring process of administration behind, is in sharp contrast to previous
territorial competition.
The second example is Kunshan cooperated with Suyang under the context of
so-called pairing assistance between south Jiangsu and north Jiangsu (sunan subei
duikou zhiyuan). Suyang is a county under Suqian, a prefecture-level city in northern
Jiangsu. Jiangsu province is divided by the Yangtze River into two parts- the southern
one and the northern one. Historically, southern Jiangsu was more developed than
northern Jiangsu. And with its location advantage close to Shanghai and the rise of
township and village enterprises, southern Jiangsu cities were able to develop faster
than their northern counterparts. The gap between the north and south was even
widened over the past two decades. In order to solve the problem of increasing
disparity within the province, Jiangsu provincial government initiated a south-north
pairing assistance system in 2001- one southern prefecture-level city is assigned to be
in charge of assistance to one northern prefecture-level city. Under such pairing
system, Suzhou is arranged to pair with Suqian. The pairing system was further
downscale to the county-level administration. Kunshan of Suzhou is therefore
responsible for the developmental assistance of Suyang of Suqian.
Interestingly, the Kunshan-Suyang pairing system actually is not a pure one-way
development aid from developed areas to underdeveloped regions but a mutually
benefit program for both sides. In the Cooperation Memorandum between KunshanSuyang Pairing Assistance (kunshan shi yu Suyang xian duikou bangfu guagou hezuo
yixiangshu), Kunshan agreed to financially and materially offer aid to Suyang, such as
providing cadre training programs, organizing certain business marketing activities,
purchasing more agriculture products, and creating more employment opportunities.
In return, Suyang agrees to help Kunshan to ‘lend for free’ the ‘land conversion’ quota
if necessary. 6 Such quota transfer is very crucial for Kunshan, which currently faces
a challenge of lack of development lands.
4
It is reported that companies in great Suzhou area can save about 1 to 3 days in the direct shipping
trip as compared to their previous round trip via Shanghai or somewhere else. 5
News source: China Central Television, 2010/12/14, accessed by 2011/03/01; also Taicang ribao
(based in Taicang), 2009/12/29;
6
The full text of the Memorandum, see subei fazhangwang, 2002/01/16,
http://www.sbfz.gov.cn/nbgg/jhrw7.htm, accessed by 2011/03/15
12
Land conversion quota is a ‘hard’ performance indicator assigned from the Ministry
of Land and Resource in Beijing to ensure the absolute quantity of farming lands
should not fall below the set limit. The land is not allowed to be transformed to
construction sites for any kind of non-agricultural development. Every administration
has its minimum quantity of preserving farmlands. As a top economically strong
county-level administration, Kunshan obviously has converted much agricultural
lands for various industries and therefore encountered the crisis of no more land to be
offered for further investment if there is no other quota to be found (Long et al.
2007).7 On the contrary, Suyang, like many relatively less developed cities, has a
surplus of agriculture land use quota as current construction areas are still ample for
the demand of development. Suyang uses the surplus as an advantage to ask Kunshan
to do more development assistance. In order to use the quota ‘virtually’ released from
Suyang, Kunshan promises to move at least two investment projects to Suyang.
Kunshan’s aid becomes the most direct way to create jobs and promote development
in Suyang. Our interview with an official in Kunshan’s Bureau of Land Management
also confirms that Kunshan’s development would be much constrained without
‘borrowing’ the land quota from Suqian.
Coordination by upper governments
It is noted that Kunshan’s transformation is not facilitated by itself alone. Without
institutional assistance from the upper-level governments, Kunshan was unable to
overcome those institutional constrains due to its low administrative status at the
county level. Above the county level and below the central government, there are
prefecture and provincial authorities at sub-national levels.
The metro system between Kunshan and Shanghai is a case in point. It is widely
known that Kunshan suffered terrific public transportation linking with Shanghai. In
terms of distance, it only takes 30 minutes from Shanghai to Kunshan by train.
However, train tickets are precious due to limited frequency of train services. It is
commonly seen that people who do not make any ticket reservation in advance need
to wait 2 to 3 hours in the Shanghai station to get a latest available seat to Kunshan. In
order to resolve the problem, Kunshan proposed to extend the Shanghai mass transit
railway (MTR) system to Kunshan. However, the municipal government of Shanghai
gave a very lukewarm response to the Kunshan’s proposal. Fortunately, with the
coordination provided by the then Jiangsu governor, Kunshan was able to self-finance
the extension Shanghai MTR system from Anting, the closest station of Shanghai
MTR to Kunshan, to Huaqiao, the township of Kunshan just beside Shanghai. It is
believed that the reason why Shanghai could agree with the Kunshan’s proposal is
because LI Yuanchao, the then Jiangsu governor and the incumbent Minister of
Organization in CCP, on behalf of Kunshan negotiated with the Shanghai mayor. In
addition, implementation of regional cooperation between Kunshan and Taicang for
the industrial zone and river port link as well as between Kunshan and Suyang for
mutual benefits for the system of pairing assistance discussed earlier is coordinated by
the provincial government of Jiangsu.
7
The lack of agriculture lands available to convert to construction lands is a general problem facing
the so-called economically strong countries, said Liu, a then vice director of National Bureau of
Statistics in a conference on Forum of China’s the Most Developed County-Level Administration. See
http://finance.sina.com.cn/g/20050920/12021983475.shtml, accessed by 2011/03/15 13
[Map 2 is about here]
It is noted that given that Kunshan is at the very low administrative status, facilitation
of upper-level governments for local development has been started even earlier before
the 21st century. The most obvious example is the establishment of the Kunshan EPZ,
a special enclosed area enjoying many extra preferential treatments like more tax
rebate, less tariffs and convenient bank deposit and semi-finished products transported
to outside zones.8 From this perspective, the EPZ system is undoubtedly regarded as
special zones to provide the quickest custom service, the most favourable tax policy,
the most convenient arrangement, the most integrated facilities, and the simplest
procedures in reporting and documenting exported and imported goods. The process
of building Kunshan EPZ, which is the first administration of such kind, involved
negotiation and coordination between many high-level government organizations,
including the Ministry of Financial Affairs, the General Custom, the Ministry of Civil
Affairs, the Ministry of Construction, the Ministry of Commerce and so on. Without
the help from provincial and central officials, for example, WU yi, then senior vice
prime minister of China, Kunshan certainly could not be able to deal with so many
high-level relevant authorities (Almanac Office of KETZ 2000).9
6
DISCUSSION AND CONCLUSION
This paper examines the emergence of urban entrepreneurialism in the 1990s and the
subsequent change from de-regulation to re-regulation since 2005 in Chinese cities.
The city of Kushan uses a business-friendly approach and has managed to attract a
significant quantity of overseas investment, especially from Taiwan, and developed a
cluster of ICT industries. Converted from a former rural county, the city of Kunshan
has successfully inserted itself into the global production network (GPN), like many
other cities in the Yangtze River Delta (Wei et al 2009, Yeung 2009). Economic
growth is driven by land development. The conversion of agricultural to industrial
land provides cheaper production space to overseas investors (Yang and Wang, 2008
Hsing 2010). In the early 1990s, to promote land development, the city of Kunshan
tried to circumvent the regulation of its upper government and set up a self-funded
industrial zone which has later been recognized by the central government to become
one of the national-level ETDZs. Urban entrepreneurialism has led to fierce inter-city
competition, especially between Kunshan and Shanghai, in the process of competing
for manufacturing foreign direct investment (FDI). However, since 2005 locally-based
entrepreneurialism has been experiencing subtle yet important changes. After
tightening up land leasing in 2003 and 2004, the central government further adopted
land quotas to control the pace of land development in 2005.
8
Four special favours to companies investing in EPZ can be identified: (1) companies investing in
EPZ could enjoy more tax rebate; (2) companies in an EPZ could freely transfer goods to other
companies within the EPZ; (3) companies in an EPZ were not required for the bank deposit system,
custom registration system, value-added tax or consumption tax on processed products; (4) imported
cargo through an EPZ could be exempt from tariffs and other complicated local duties before being
exported. See Chien (2007); Wang and Lee (2007)
9
Kunshan Almanac (2000), page 118. 14
There are three major changes in the city of Kunshan. First, the role of upper
governments (the central and provincial governments) is strengthened. The central
government also plays a significant role in coordinating large infrastructure projects,
for example, the high-speed and inter-city train and metro and functional production
zones like the Kunshan EPZ and Huaqiao Business Park. All these examples indicate
that urban entrepreneurialism has been transformed and up-scaled. Second, the role of
city plan is reinforced in order to provide guidance to land development in its
jurisdiction and prevented town governments from over competing in land
development. The new master plan tries to prevent scattered land development
initiated by urban entrepreneurialism in the 1990s when town governments and the
development zone competed with each other to convert agricultural land into
industrial uses.
Third, the city of Kunshan has begun to seek cooperation with neighbouring cities.
Instead of emphasizing competition, the city realizes the importance of inter-city
collaboration. For example, Kunshan negotiates with neighbouring Taicang so as to
use the port facilities in Taicang. In addition, directed by the Jiangsu provincial
government, Kunshan and Suyang became a pair of local governments. Kunshan
provides economic and financial support to Suyang, while Suyang transfers some land
quotas to Kunshan. They are both benefited from collaboration rather than
competition.
The case of Kunshan examined in this paper shows some new characteristics of local
development in China. While much of new development still relies on foreign
investment and land development, the model differs from urban entrepreneurialism in
the earlier stage which is characterized by local initiatives, aggressive market
de-regulation and race to the bottom territorial competition. To some extent, new
governance reflects more mature stage of economic development and emerging
constraint of resources. For example, Kunshan, like many other cities, began to
require that industrial projects should exceed the minimum intensity of investment per
square kilometre. The salient feature of new urban governance is the involvement of
the state across different scales in local development. The function of coordination is
strengthened by the upper levels of government, while lower levels of governments
begin to seek collaboration based on their own interests. The new mechanisms such as
land quotas and functional zones used in the mater plan are developed to achieve
more orderly development. The case of Kunshan also suggests that China’s urban
entrepreneurialism is evolving along the development of market. The market
development does not lead to the demise of the planning mechanism and state
regulation. Rather, excessive competition and chaotic development require more
coordination between local governments. In addition, economic restructuring and the
development of producer services raises new demand for governance of
infrastructural development. The transformation of local governance in China is a
response to the demand at a more mature stage of economic growth.
The transformation of local governance in China provides a chance to understand the
relation of state and market in the new phase of development. While the concept of
the developmental state has been widely applied to East Asian economies (Wade 1990;
Woo-Cumings, 1999), such a nation-state level analysis is inadequate to understand
the forceful driver of local economic development in China, resulted from
de-regulation and entrepreneurialism centred on land and industrial development. On
15
the other hand, Chinese urban entrepreneurialism is different from the widely
documented urban entrepreneurialism under western advanced capitalism (Harvey,
1989). Rather than based on the business association such as the chamber of
commerce or the coalition with the private sector and civic boosterism, the local state
continues to play a significant role in the process of development and regulation.
Chinese urban entrepreneurialism thus presents a hybrid nature of the developmental
state and urban entrepreneurialism. In terms of instruments, similar to the
developmental state, the local state can use a wide range of policies including land
incentives to foster economic development as well as making a strategic plan to
coordinate growth. But this urban entrepreneurialism does not operate through
national macro-economic management but rather relied on the consideration of
locally-based economic competitiveness. Further, this study reveals a new process of
emerging complex multi-scalar governance in China, which departs from the
prototype of neo-liberal entrepreneurialism described in the literature. To some extent,
China’s urban entrepreneurialism disapproves rather than supporting the common
wisdom that Chinese rapid local growth is centred on market de-regulation.
16
Table 1: comparison of key selected Taiwan-invested industry in Kunshan: 1991-1995
and 2001- 2005
Key industries and representative companies
1990-1995 - PCB (WUS (Kunshan)),
- motor vehicle parts and accessories (Liufeng Machinery),
- bicycle industry (Giant China),
- rubber (Cheng Shin Rubber China),
- food processing (Uni-President (Kunshan))
- houseware products (Sakura Bath and Kitchen Products)
- glass fibre (TG Changjiang Glass)
- IT components (Foxconn (Kunshan))
2001-2005 - Notebook PC (Getac Kunshan Computer, Vimax InfoComm
Kunshan, Compal Opt. Kunshan; Compal Info Kunshan, Compal
Info Tech Kunshan; WJ Info Comm Kunshan; Wistron Info
Commom Kunshan; Kunshan Kapol; Twinhead Kunshan)
- Glass fabre (Taichia Glass Fiber; PFG Fibre Glass Kunshan)
- projectors and optical components (Vimax Kunshan)
- motherboard and display card (Micro Unite Kunshan),
- exposy resin and copper clad laminates (Nan Ya Epoxy Resin
Kunshan; Nan Ya Electronic Material Kunshan)
Source: authored compiled from Chen et al. (2010)
17
Figure 1: GDP and export performance of Kunshan since 1987
Note: right axis as export (US$ 1 million) and left axis as GDP (billion Yuan)
Source: Author compiled from Kunshan Statistics Yearbook (different year)
18
Map 1: the location of Kunshan in the wider context of the Yangtze River Delta
Source: compiled by the author
19
Map 2: the metro extension from Shanghai to Kunshan
Source: compiled by the author
20
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