The city of Zheng’an produces six million guitars a year, which makes it something of a global market, considering it’s all produced in one place – even if the instruments are actually built over many small workshops. Thus, news agency Xinhua published a report on Zheng’an on Thursday. The reason: the pandemic has caused a rise in global demand for guitars, with the region seeing a 440 percent increase in sales.
What sounds like an overly specific detail actually stands for the secret of Chinese export success. And this is not only of particular interest for competing for export nations such as Germany, but for other emerging markets as well. The creation of production locations centered around individual product groups has proven to be enormously effective. When several companies are focused on a single place for the same product, in turn, all of them become stronger, Felix Lee analyses.
For weeks, there have been rumors about problems regarding Daimler’s cooperation with Chinese battery manufacturer Farasis. Chairman of the board Ola Källenius has now presented the company’s electric vehicles’ strategy for the coming years. Surprisingly early, the premium manufacturer no longer wants to rely on pure combustion engine cars anymore and instead is planning the construction of several large battery cell plants in preparation. Ambitious – and yet necessary because the Chinese competition is known to be setting a breathtaking pace in the transition to e-mobility. Our analysis reveals what this could mean for collaboration with Farasis.
With a population of just 800,000, Danyang is considered a rather small city by Chinese standards. Located on the edge of the Yangtze Delta, it tends to stand in the shadow of booming cities like Shanghai, Suzhou, Nanjing and Hangzhou. And yet, Danyang is an economic heavyweight. Today, around half of all eyeglass lenses produced worldwide, including sunglasses, are being produced in Danyang. In China, Danyang is therefore also known as the “City of Glasses”.
Danyang is a particularly impressive example of how China has managed to transform itself from a backward economy to the world’s technological leader within just a few decades. And this is just one of many examples. Economists Aoife Hanley from the Kiel Institute for the World Economy (IfW) and Gong Yundang from King’s College in London have studied this phenomenon in detail. Their survey has evaluated data of 170,000 companies in China. The conclusion: The strongly export-oriented approach of Chinese companies across many sectors has contributed significantly to their success. According to the study, a surge in innovation can be observed in companies that mainly focus on exports.
An even more exemplary success story for China is the city of Shenzhen, located on the Pearl River Delta in southern China. By the end of the 1970s, a small fishing village bordering the then British Crown Colony of Hong Kong, Shenzhen slowly became “the workbench of the world”, focusing primarily on the production of sporting goods, plastic toys and cheap electronics. Today, not only 90 percent of all e-cigarettes are being produced in Shenzhen, but the city is also one of the most innovative metropolises in the world and, with its myriad of tech companies, has long since rivaled Silicon Valley.
The development history of these economic centers is all similar. At the beginning of the 1980s, Danyang only harbored few manufacturers of glass lenses. As the economy continued to open up to the rest of the world, their numbers grew. The city government encouraged the foundation of additional factories by establishing the first Glasses Market in 1986. At that time, it mainly consisted of market stalls where manufacturers offered their glasses. Later, the stalls were replaced by a shopping mall with hundreds of eyeglass shops. But that’s not all: Today, the entire city is filled with eyeglass shops and production facilities. If you combine them all, the companies of Danyang are the global market leader.
Economist Hanley refers to this type of industrial development as “spillovers through labor mobility”, when several companies all concentrate in one place for the same product. The employees of each company will then specialize. The arrival of other competing firms in no way results in a displacement effect. On the contrary, through exchanges between employees of similar companies producing the same product, workers acquire additional skills and transfer knowledge. In addition, competitive pressure increases – which generates further innovations.
However, experts see the most important effect in physical proximity. “Highly specialized employees in a city like Danyang know each other’s work – and thus acquire valuable skills,” Hanley explains. In her observation, “Labour spillovers” occur above all when companies are located in the same city. At the same time, synergy effects emerge, for example, with the construction of infrastructure such as port and rail facilities for exporting goods. “Is one company in Danyang able to produce lenses of higher quality if the whole neighborhood is geared up for exports? The answer is definite yes,” says Hanley .
In fact, this type of industrial development has a long-standing tradition in China. As early as the Song Dynasty (10th to 13th centuries), the inhabitants of the city of Jingdezhen specialized in the production of ceramics. To this day, Jingdezhen is considered the capital of porcelain. And this kind of concentration of an entire industry branch in one place can also be observed in other Chinese cities. The city of Haining, also located in the Yangtze Delta, specializes in leather processing. The city of Yiwu is the world’s largest exporter of Christmas articles. Yet, Christmas is not celebrated at all in China.
Another thing the authors discovered was that companies that overall did not seem very creative or innovative were suddenly part of an innovation offensive when they were located in the same area as successful exporting companies (export processing). “It’s an important discovery,” says Hanley. “Export processing can also be a path leading to more innovation.”
Is China’s export model also suitable for other developing countries? Hanley would be inclined to agree. Special economic zones with special tax rates or other benefits, like the countless ones set up all over China, have also been adopted by countries such as South Africa with its Dube TradePort in Durban. And yes, these zones are also successful in terms of exports and are proving to be highly innovative.
Gone are the days when Western news anchors were given stage directions on how to pronounce Xi Jinping’s last name, “like the word ski.” Today, the name is familiar to them, after all, dozens of biographies have long been published about China’s most powerful leader since Mao.
But anyone who tries to understand the person behind the facade China has built around its head of state is still left in the dark. Since Jinping ascended to party and state leadership at the end of 2012, he no longer agrees to interviews and does not reveal any details on his life. Apart from official speeches on important occasions or on foreign trips, his other essays and speeches are only published by the propaganda machine after a considerable time and usually selected passages only.
As a provincial official, he was more informal, even to reporters. He spoke about his privileged childhood and later bitter youth after his revolutionary father Xi Zhongxun fell into political disfavor with Mao in 1962 and was not rehabilitated until 1978. The whole family was placed under collective arrest. Xi’s earlier interviews are one of the very few sources that help in understanding his personality.
This also applies to a curriculum vitae written by none other than Xi himself. He wrote it for an encyclopedia of biographies, published in 2003, on 381 doctoral students from Fujian, whose academic talent the coastal province wanted to boast about. Xi, who ruled the province as vice chief and then governor from August 1999 to September 2002, also chaired the advisory committee to edit the encyclopedia (福建博士风采), ranking himself among the 381 doctoral students and wrote an article about himself spanning two pages. In it, he revealed that he was a doctoral student at the Faculty of Humanities and Social Sciences of Tsinghua University in Beijing from March 1998 to January 2002. He earned a doctorate for his thesis, “A Tentative Study on China’s Rural Marketization.” He does not reveal how he (and if he himself) managed to earn the doctorate while simultaneously working a full-time job as provincial chief of Fujian.
I discovered the encyclopedia, which was published publicly in June 2003 with a release of 2,000 copies, in a second-hand bookshop in Beijing. In it, Xi describes his career in the first person. After being forced to drop out of his Beijing middle school education as a 15-year-old amidst the chaos of the Cultural Revolution in December 1968, he spent the next seven years until 1975 working in the fields in a village brigade in North China’s Shanxi province.
Xi’s curriculum vitae begins like this: “In 1969, I arrived from Beijing in the Liangjiahe Production Brigade of the Wenanyi People’s Commune to ‘put down roots’. (…) I was very far from home, without any relatives. (…) At first, we were 20 to 30 school-educated youths who came to the village. All of them came from functionary military families. After half a year, most of them left again, they went into army service. After a year, they were all gone. Only I stayed behind. I felt very lonely.”
For the first time, Xi reveals how he repeatedly tried in vain to be allowed to join the Party during his seven years in the countryside. He was not allowed to join because of his father’s political persecution. “I wrote ten applications to join the Party. But they were rejected because of my family situation.” (我先后写过十份入党申请书，由于家庭的原因，都未.) Today, Xi surely must take great satisfaction in the fact that the party, which only admitted him in 1974, has more than tripled in size from just under 30 million members at the time to 95 million and obeys unconditionally. He even had their statutes amended to enshrine his “Xi Jinping Thought” in writing as a guiding ideology for the new era.
Back when Xi was a young farmer, he faced all the adversities of rural life and worked hard. This is how he finally was accepted by the village community: “Every evening, old and young farmers came to me, chatted with me about history and the current situation. (…) the cave I lived in became a meeting place. Even the party secretary of the brigade came to confer with me. (…) Eventually, he approved my party admission. He made sure that I later became the head of the party cell in our village.”
Xi now hoped to be allowed to study in Beijing. Tsinghua University had offered two spots for the entire farming region in 1975. Xi was nominated by his village. But because of his politically ostracized father, he was blocked by the next level of hierarchy: “The university official in charge of farmer students didn’t dare to make a decision. He forwarded my application to the top university management. They were supposed to decide.” Xi writes, “but this became my chance since Tsinghua University was caught in the vortex of a cultural-revolutionary political campaign against the so-called ‘right winds of restoration’ in July, August, and September 1975.” The two (ultra-leftist) university leaders, who he names as Chi Qun and Xie Chengyi, had no time to attend to newly admitted students, and so Xi, a farmer student, eluded their attention. He writes: “At this time my father had just come out of exile and was sent to work in a factory in Luoyang. This factory then turned to me in a letter to Tsinghua: ‘Comrade Xi Zhongxun’s problems are among the people’s contradictions. They should not prevent his children from studying or working.’ It was enough of a letter of recommendation for me to attend university.”
Xi studied chemistry. When he graduated in 1979, he was hired as a secretary by then defense minister and political bureau member Geng Biao (a friend of Xi’s now fully rehabilitated father). But at his own request, Xi transferred to the county seat of Zhengding in the province of Hebei in 1982 and started in the position of vice party secretary. He recounts that at the time, many did not understand why he was leaving Beijing. “Besides me, others went back to the lowest administrative level as well, Liu Yuan for example, (Son of Liu Shaoqi, the former state president persecuted to death by Mao). Independently, we both came to the same conclusion to join the workers and peasants.”
In fact, working in the provinces is a classic way to make a political career in the People’s Republic. Starting in 1982, Xi’s 25-year ascent began across four provinces until he reached the center of power in Beijing in 2007.
In his CV, written in 2003, at no point, Xi critically reflects on what happened to him, even as he admits to having been treated unfairly. He concludes that his seven years of experience in the countryside made him a “down-to-earth” man. He is “not prone to false doctrines,” is not shaken by anything, and will go any distance to “to get ahead.”
Today, at 12:00 PM CEST, the Olympic Games will start in Tokyo. Athletes are already preparing in their respective disciplines, like athlete Zeng Wenhui of the Chinese skateboarding team.
The city of Zheng’an produces six million guitars a year, which makes it something of a global market, considering it’s all produced in one place – even if the instruments are actually built over many small workshops. Thus, news agency Xinhua published a report on Zheng’an on Thursday. The reason: the pandemic has caused a rise in global demand for guitars, with the region seeing a 440 percent increase in sales.
What sounds like an overly specific detail actually stands for the secret of Chinese export success. And this is not only of particular interest for competing for export nations such as Germany, but for other emerging markets as well. The creation of production locations centered around individual product groups has proven to be enormously effective. When several companies are focused on a single place for the same product, in turn, all of them become stronger, Felix Lee analyses.
For weeks, there have been rumors about problems regarding Daimler’s cooperation with Chinese battery manufacturer Farasis. Chairman of the board Ola Källenius has now presented the company’s electric vehicles’ strategy for the coming years. Surprisingly early, the premium manufacturer no longer wants to rely on pure combustion engine cars anymore and instead is planning the construction of several large battery cell plants in preparation. Ambitious – and yet necessary because the Chinese competition is known to be setting a breathtaking pace in the transition to e-mobility. Our analysis reveals what this could mean for collaboration with Farasis.
With a population of just 800,000, Danyang is considered a rather small city by Chinese standards. Located on the edge of the Yangtze Delta, it tends to stand in the shadow of booming cities like Shanghai, Suzhou, Nanjing and Hangzhou. And yet, Danyang is an economic heavyweight. Today, around half of all eyeglass lenses produced worldwide, including sunglasses, are being produced in Danyang. In China, Danyang is therefore also known as the “City of Glasses”.
Danyang is a particularly impressive example of how China has managed to transform itself from a backward economy to the world’s technological leader within just a few decades. And this is just one of many examples. Economists Aoife Hanley from the Kiel Institute for the World Economy (IfW) and Gong Yundang from King’s College in London have studied this phenomenon in detail. Their survey has evaluated data of 170,000 companies in China. The conclusion: The strongly export-oriented approach of Chinese companies across many sectors has contributed significantly to their success. According to the study, a surge in innovation can be observed in companies that mainly focus on exports.
An even more exemplary success story for China is the city of Shenzhen, located on the Pearl River Delta in southern China. By the end of the 1970s, a small fishing village bordering the then British Crown Colony of Hong Kong, Shenzhen slowly became “the workbench of the world”, focusing primarily on the production of sporting goods, plastic toys and cheap electronics. Today, not only 90 percent of all e-cigarettes are being produced in Shenzhen, but the city is also one of the most innovative metropolises in the world and, with its myriad of tech companies, has long since rivaled Silicon Valley.
The development history of these economic centers is all similar. At the beginning of the 1980s, Danyang only harbored few manufacturers of glass lenses. As the economy continued to open up to the rest of the world, their numbers grew. The city government encouraged the foundation of additional factories by establishing the first Glasses Market in 1986. At that time, it mainly consisted of market stalls where manufacturers offered their glasses. Later, the stalls were replaced by a shopping mall with hundreds of eyeglass shops. But that’s not all: Today, the entire city is filled with eyeglass shops and production facilities. If you combine them all, the companies of Danyang are the global market leader.
Economist Hanley refers to this type of industrial development as “spillovers through labor mobility”, when several companies all concentrate in one place for the same product. The employees of each company will then specialize. The arrival of other competing firms in no way results in a displacement effect. On the contrary, through exchanges between employees of similar companies producing the same product, workers acquire additional skills and transfer knowledge. In addition, competitive pressure increases – which generates further innovations.
However, experts see the most important effect in physical proximity. “Highly specialized employees in a city like Danyang know each other’s work – and thus acquire valuable skills,” Hanley explains. In her observation, “Labour spillovers” occur above all when companies are located in the same city. At the same time, synergy effects emerge, for example, with the construction of infrastructure such as port and rail facilities for exporting goods. “Is one company in Danyang able to produce lenses of higher quality if the whole neighborhood is geared up for exports? The answer is definite yes,” says Hanley .
In fact, this type of industrial development has a long-standing tradition in China. As early as the Song Dynasty (10th to 13th centuries), the inhabitants of the city of Jingdezhen specialized in the production of ceramics. To this day, Jingdezhen is considered the capital of porcelain. And this kind of concentration of an entire industry branch in one place can also be observed in other Chinese cities. The city of Haining, also located in the Yangtze Delta, specializes in leather processing. The city of Yiwu is the world’s largest exporter of Christmas articles. Yet, Christmas is not celebrated at all in China.
Another thing the authors discovered was that companies that overall did not seem very creative or innovative were suddenly part of an innovation offensive when they were located in the same area as successful exporting companies (export processing). “It’s an important discovery,” says Hanley. “Export processing can also be a path leading to more innovation.”
Is China’s export model also suitable for other developing countries? Hanley would be inclined to agree. Special economic zones with special tax rates or other benefits, like the countless ones set up all over China, have also been adopted by countries such as South Africa with its Dube TradePort in Durban. And yes, these zones are also successful in terms of exports and are proving to be highly innovative.
Gone are the days when Western news anchors were given stage directions on how to pronounce Xi Jinping’s last name, “like the word ski.” Today, the name is familiar to them, after all, dozens of biographies have long been published about China’s most powerful leader since Mao.
But anyone who tries to understand the person behind the facade China has built around its head of state is still left in the dark. Since Jinping ascended to party and state leadership at the end of 2012, he no longer agrees to interviews and does not reveal any details on his life. Apart from official speeches on important occasions or on foreign trips, his other essays and speeches are only published by the propaganda machine after a considerable time and usually selected passages only.
As a provincial official, he was more informal, even to reporters. He spoke about his privileged childhood and later bitter youth after his revolutionary father Xi Zhongxun fell into political disfavor with Mao in 1962 and was not rehabilitated until 1978. The whole family was placed under collective arrest. Xi’s earlier interviews are one of the very few sources that help in understanding his personality.
This also applies to a curriculum vitae written by none other than Xi himself. He wrote it for an encyclopedia of biographies, published in 2003, on 381 doctoral students from Fujian, whose academic talent the coastal province wanted to boast about. Xi, who ruled the province as vice chief and then governor from August 1999 to September 2002, also chaired the advisory committee to edit the encyclopedia (福建博士风采), ranking himself among the 381 doctoral students and wrote an article about himself spanning two pages. In it, he revealed that he was a doctoral student at the Faculty of Humanities and Social Sciences of Tsinghua University in Beijing from March 1998 to January 2002. He earned a doctorate for his thesis, “A Tentative Study on China’s Rural Marketization.” He does not reveal how he (and if he himself) managed to earn the doctorate while simultaneously working a full-time job as provincial chief of Fujian.
I discovered the encyclopedia, which was published publicly in June 2003 with a release of 2,000 copies, in a second-hand bookshop in Beijing. In it, Xi describes his career in the first person. After being forced to drop out of his Beijing middle school education as a 15-year-old amidst the chaos of the Cultural Revolution in December 1968, he spent the next seven years until 1975 working in the fields in a village brigade in North China’s Shanxi province.
Xi’s curriculum vitae begins like this: “In 1969, I arrived from Beijing in the Liangjiahe Production Brigade of the Wenanyi People’s Commune to ‘put down roots’. (…) I was very far from home, without any relatives. (…) At first, we were 20 to 30 school-educated youths who came to the village. All of them came from functionary military families. After half a year, most of them left again, they went into army service. After a year, they were all gone. Only I stayed behind. I felt very lonely.”
For the first time, Xi reveals how he repeatedly tried in vain to be allowed to join the Party during his seven years in the countryside. He was not allowed to join because of his father’s political persecution. “I wrote ten applications to join the Party. But they were rejected because of my family situation.” (我先后写过十份入党申请书，由于家庭的原因，都未.) Today, Xi surely must take great satisfaction in the fact that the party, which only admitted him in 1974, has more than tripled in size from just under 30 million members at the time to 95 million and obeys unconditionally. He even had their statutes amended to enshrine his “Xi Jinping Thought” in writing as a guiding ideology for the new era.
Back when Xi was a young farmer, he faced all the adversities of rural life and worked hard. This is how he finally was accepted by the village community: “Every evening, old and young farmers came to me, chatted with me about history and the current situation. (…) the cave I lived in became a meeting place. Even the party secretary of the brigade came to confer with me. (…) Eventually, he approved my party admission. He made sure that I later became the head of the party cell in our village.”
Xi now hoped to be allowed to study in Beijing. Tsinghua University had offered two spots for the entire farming region in 1975. Xi was nominated by his village. But because of his politically ostracized father, he was blocked by the next level of hierarchy: “The university official in charge of farmer students didn’t dare to make a decision. He forwarded my application to the top university management. They were supposed to decide.” Xi writes, “but this became my chance since Tsinghua University was caught in the vortex of a cultural-revolutionary political campaign against the so-called ‘right winds of restoration’ in July, August, and September 1975.” The two (ultra-leftist) university leaders, who he names as Chi Qun and Xie Chengyi, had no time to attend to newly admitted students, and so Xi, a farmer student, eluded their attention. He writes: “At this time my father had just come out of exile and was sent to work in a factory in Luoyang. This factory then turned to me in a letter to Tsinghua: ‘Comrade Xi Zhongxun’s problems are among the people’s contradictions. They should not prevent his children from studying or working.’ It was enough of a letter of recommendation for me to attend university.”
Xi studied chemistry. When he graduated in 1979, he was hired as a secretary by then defense minister and political bureau member Geng Biao (a friend of Xi’s now fully rehabilitated father). But at his own request, Xi transferred to the county seat of Zhengding in the province of Hebei in 1982 and started in the position of vice party secretary. He recounts that at the time, many did not understand why he was leaving Beijing. “Besides me, others went back to the lowest administrative level as well, Liu Yuan for example, (Son of Liu Shaoqi, the former state president persecuted to death by Mao). Independently, we both came to the same conclusion to join the workers and peasants.”
In fact, working in the provinces is a classic way to make a political career in the People’s Republic. Starting in 1982, Xi’s 25-year ascent began across four provinces until he reached the center of power in Beijing in 2007.
In his CV, written in 2003, at no point, Xi critically reflects on what happened to him, even as he admits to having been treated unfairly. He concludes that his seven years of experience in the countryside made him a “down-to-earth” man. He is “not prone to false doctrines,” is not shaken by anything, and will go any distance to “to get ahead.”
Today, at 12:00 PM CEST, the Olympic Games will start in Tokyo. Athletes are already preparing in their respective disciplines, like athlete Zeng Wenhui of the Chinese skateboarding team.
