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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. Main purpose for the case study.

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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

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.

Main contents

Main contents



3.Driving Factors

4.Lessons Learned

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.



  • 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

Development of the sunan model

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

Evolution of the wenzhou model

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

2 impact

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

3 driving factors

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

3 driving factors continue

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

4 lessons learned

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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