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__ Institutional Innovation Case Study For Shanghai Poverty Conference

Institutional Transition, Improvement of Investment Environment, and Poverty Reduction: The Models of Sunan and Wenzhou. __ Institutional Innovation Case Study For Shanghai Poverty Conference. Main purpose for the case study.

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__ Institutional Innovation Case Study For Shanghai Poverty Conference

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  1. Institutional Transition, Improvement of Investment Environment, and Poverty Reduction: The Models of Sunan and Wenzhou __Institutional Innovation Case Study For Shanghai Poverty Conference

  2. 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.

  3. Main contents 1.Implementation 2. Impact 3. Driving Factors 4. Lessons Learned

  4. 1.Implementation • Introduction Sunan : includes Suzhou, Wuxi, and Changzhou, 14 million. located in the Yangzi River Delta Plain. Close to Shanghai. Traditional industrial base. Wenzhou:7 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.

  5. 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

  6. 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

  7. Evolution of the Wenzhou Model • Up to mid 1980s:family-based, sole trading handcraft industry. Local government just focused on creating favorable investment environment by instead of involving running TVEs • Mid-80s to mid-90s:development of corporations and industrial associations and promotion of competitiveness of Wenzhou’s 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

  8. 2. Impact • Speeded up the process of China’s 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

  9. 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

  10. 3.Driving Factors (continue) • Learning and experimentation Technology diffusing path: innovation—imitation—extension • Effective breeding ground for entrepreneur From farmer-entrepreneurs to young professional managers • External Catalysts Sunan and Wenzhou quite benefited from historical opportunities

  11. 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 people’s 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.

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