Institutional Transition, Improvement of Investment Environment, and Poverty Reduction: The Models o

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Institutional Transition, Improvement of
Investment Environment, and Poverty Reduction
The Models of Sunan and Wenzhou

• __Institutional Innovation Case Study For
  Shanghai Poverty Conference

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Main purpose for the case study

• To show that the Institutional innovations have
  long been a major instrument for reducing poverty
  in China through the successful story of TVE
  Models of Sunan and Wenzhou.

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Main contents

• 1.Implementation
• 2. Impact
• 3. Driving Factors
• 4. Lessons Learned

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1.Implementation

• Introduction
• Sunan includes Suzhou, Wuxi, and Changzhou,
  14 million. located in the Yangzi River Delta
  Plain. Close to Shanghai. Traditional industrial
  base.
• Wenzhou7 million, located in the mountainous
  region of the south of Zhejiang Province. remote
  from big cities, poor transportation system.
• Both regions
• arable farmland per head has been minimal.
• one of the highest population densities in
  China.

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ModeIs

• Sunan Model
• developed large-scale collective processing
  industries initiated and run by local governments
• Wenzhou model
• developed low-end light products individual
  iniatative based, relying on small private
  businesses within a favorable environment created
  by local government

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Development of the Sunan Model

• Started up before the reform
• Motivation Solve the serious unemployment
  problem, the low income.
• Fast-paced growth during mid 80s-mid 90s
• Almost at least one member in the local families
  working in a TVE, half of family income came from
  TVEs
• promoted the upgrading and optimizing of
  industrial structure after the reform of
  ownership since mid 90s
• Constructing a unified social security system for
  urban and rural residents so as to eliminate
  poverty institutionally

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Evolution of the Wenzhou Model

• Up to mid 1980sfamily-based, sole trading
  handcraft industry.
• Local government just focused on creating
  favorable investment environment by instead of
  involving running TVEs
• Mid-80s to mid-90sdevelopment of corporations
  and industrial associations and promotion of
  competitiveness of Wenzhous industries
• Mid-90s to present Innovation and brand
  development for Credible Wenzhou
• To build the region into an international light
  industrial production and exchange center

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2. Impact

• Speeded up the process of Chinas market-oriented
  reform and provided new ways to reduce poverty
  caused by poor institutional arrangements.
• Speeded up the transition of local economic
  structure
• Generally solved the rural unemployment problem
• Greatly increased the income of farmers and
  improved their living standards
• Greatly increased regional GDP per capita
• Contributed to rural modernization and to
  urbanization

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3.Driving Factors

• Commitment and Political Economy for Change.
• Innovative spirit_ looking for opportunities
• Proactive role of local government
• Institutional Innovation
• Protecting property rights.
• Forming an effective mechanism for capital
  formation. Agriculture_Trade Formal _ Informal
• Establishing market-oriented product development
  mechanism.
• Technology importing system for pushing the
  enterprises upgrading constantly. I

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3.Driving Factors (continue)

• Learning and experimentation
• Technology diffusing path innovationimitationex
  tension
• Effective breeding ground for entrepreneur
• From farmer-entrepreneurs to young professional
  managers
• External Catalysts
• Sunan and Wenzhou quite benefited from historical
  opportunities

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4.Lessons Learned

• Institutional innovation is the fundamental
  instrument for poverty reduction based on a
  spirit of self-reliance and of continuously
  trying new ideas ahead of others building on
  their comparative advantages.
• Government leadership is the institutional
  guarantee for poverty reduction. Effective
  regulations provides a guarantee that respects
  peoples actions, brings order and stability to
  complicated economic relations.
• A virtuous cycle of Learning and experimentation
  is an effective way for poverty reduction.
• Sunan_ driven by government
• Wenzhou_ spontaneous process. driven from the
  grassroots upwards.