An Analysis of Shanghai Government's Promotion of Creative Industry Clusters

Research report Received June 25, 2012; Accepted February 4, 2013

AN ANALYSIS OF SHANGHAI GOVERNMENT’S PROMOTION OF CREATIVE INDUSTRY CLUSTERS

Hyung-Kun YOON*, Soong-Chul RO**

*School of Media and Design, Shanghai Jiao Tong University [email protected] **University of Michigan-Shanghai Jiao Tong University Joint Institute, Shanghai Jiao Tong University [email protected]

Abstract: Since 2005, Shanghai government has been actively promoting creative industries with the ambition to become a leading design city of the world. The policy was spear-headed by the Shanghai Creative Industry Center (SCIC) which oversaw the formation of Creative Industry Clusters (CICs) as a main policy tool. This paper examines the general directions, achievements and issues relating to the Shanghai government’s policies to promote creative industries through clusters under the 11th Five Year Plan (2006-2010) and discusses the prospects for further development under the 12th Five Year Plan (2011-2015). Despite apparent success in terms of the growth of the number of clusters and their economic output, there are problems of over-commercialization and lacking inter-industry linkages. To adequately address these problems, Shanghai government needs to shift the focus from short-term profits to long-term benefits of the clusters to the businesses within and outside the clusters and improve the management of clusters through specialization. These then necessitates the improvement in governance as well as the promotion of broader education among the business and the public to appreciate the value of innovation and design. Key words: Creative Industry Cluster, Cultural and Creative Industry in China, Shanghai Creative Industry Center

1. Introduction UK’s GDP and output growth of this sector between 1997 and 1998 was 16 %, way over 6 % of the whole economy. 1.1. Creative Industry Clusters and Their Significance Especially in London, these industries came to be to Shanghai recognized as ‘London’s Core Business’ with outstanding The concept of Creative Industries was first formally contribution to the city’s job creation, output as well as defined by the Department of Culture, Media and Sports export. [3] Subsequently, the promotion of creative (DCMS) of the government of the United Kingdom in industries as a policy tool in itself became a successful 1998. Defined as “those activities which have their origin British export and the strategy was soon followed in in individual creativity, skill and talent and which have several Asian cities such as Hong Kong, Singapore, the potential for wealth and job creation through the Taipei, Seoul and Shanghai. [2] generation and exploitation of intellectual property”, The example of the UK also demonstrated the these industries were to form a major part of the New significance of clusters for the development of the Labor government’s policy for the economic development creative industries. Industrial clusters in general are and in 2001, the Secretary of DCMS claimed that these known for their benefits to participating businesses by industries had “moved from the fringes to the mainstream” providing shared services, skilled labor pool, labor with a common recognition of the importance of these specialization, various forms of collaboration, and the industries to national wealth. [1,2] information spillovers through horizontal linkages among Indeed, creative industries had contributed to 5% of similar or complementary sectors. [1,3,4,5,6] In addition,

creative industries clusters provide positive externalities contribution to the growth of the creative industry as a to other business sectors due to their nature of “generating new source of economic growth; second, stimulating the novelty”. [6] creative businesses participating in the clusters through This is a particularly important point for China as the easy access to shared facilities and services, the formation country strives to transform its industries from low-road of a talent pool and technology spill-over between firms manufacturing to high-road innovation-based economy. within the clusters; third, positive externalities of Besides, industrial clusters are known to be beneficial to innovation through forward linkages and spread the small and medium enterprises (SMEs) [3,4,7] and this is innovation generated in the CICs into the overall an important point for China as SMEs accounted for “99 economy. These points can be used as references in percent of the total number of enterprises, 80 percent of assessing the success of Shanghai’s policies. jobs, 50 percent of the tax revenue and 60 percent of GDP” Next section will analyze the purposes and motives of in 2009. [8] Therefore, invigorating SMEs through the Shanghai government during the 11th FYP period, in clusters could help the expansion of domestic market relation to the national development plans, followed by an which is the first main objective of the 12th FYP. [9] assessment of the achievements. The final section will Apart from economic contributions, the creative discuss problems revealed during this period as well as an industry clusters (CICs) (see Note 1) also provide another assessment of current policies under the 12th FYP in benefit of improving the urban outlook of the cities for addressing these problems so as to fulfill Shanghai’s the more prosperous cities in China. As cities expand, aspiration to become a world-class design city and an manufacturing activities moved away from the central innovation center for China. parts of the cities leaving unsightly empty factories and 2. Development of Creative Industry Clusters in warehouses. Creative industries, clustered in these sites Shanghai during the 11th Five Year Plan period. provided an alternative use of the space without redeveloping the whole area. 2.1. Creative Industries in China’s Economic Thus, around the turn of the millennium, cities in Development Strategy China started to consider the promotion of creative Creative industries received particular attention from industries. In Shanghai, the municipal government started the central government of China in the early 2000s active involvement in creating CICs in 2005 with the because of its potential for upgrading the whole industrial establishment of Shanghai Creative Industry Center system of the country. Though China is now the second (SCIC). These industries then received a nation-wide largest economy of the world, Chinese industries are still th attention with the promulgation of the China’s 11 Five locked in the lower end of the global value chain. It is Year Plan (FYP) in 2006 and of all the cities in China, it therefore an imperative for China to develop innovative was Shanghai that experienced the most notable growth capacities to ensure long-term competitiveness of its in creative industries during the same period. [10] economy and shift its focus from ‘made in China’ to 1.2. Research Objectives ‘created in China’. [7,11,12] Thus, Chinese governments at various levels have This paper aims at assessing Shanghai government’s been actively promoting creative industries, and in 2006 policy of promoting CICs during the 11th FYP period the 11th Five-Year Plan (2006-2010) identified (2006-2010) and the prospects for further development “enhancing independent innovation capability” as a since the start of the 12th FYP period (2011-2015). The national strategy to “shift economic growth from relying study was done through the analysis of policy directions on the input of capital and substance factor to relying on and their effects using official documents and literature. science and technology advancement and human The main question is whether the policies of Shanghai resources”. [13] Then in 2010, the Fifth Plenary Session government are conducive to achieving the success of the of the 17th Central Committee of the Communist Party of creative industry clusters in other countries. China suggested the cultural industry as a pillar industry Summing up the experience of the UK, the benefits of for the 12th Five-Year Plan (2011-2015) [14]. CICs can be arranged into three points: first, the This led to an explosive growth of creative industries

2 52 B U L L E T I N O F JSSD Vol. 60 No. 1 2013 THE SCIENCE OF DESIGN creative industries clusters provide positive externalities contribution to the growth of the creative industry as a in China. The number of CICs in 12 cities of China traced back to 2002 when the government of Shanghai to other business sectors due to their nature of “generating new source of economic growth; second, stimulating the increased from 58 to 125 between 2005 and 2006 [10] introduced official classifications of creative industries. novelty”. [6] creative businesses participating in the clusters through and during the same period, creative industries’ value [15] Nothing concrete had been done, however, until This is a particularly important point for China as the easy access to shared facilities and services, the formation added increased by 17% and China’s balance of payment 2004. In the meantime, Shanghai Academy of Social country strives to transform its industries from low-road of a talent pool and technology spill-over between firms from cultural services export also increased by 20%. [15] Sciences, an influential academic institution, urged the manufacturing to high-road innovation-based economy. within the clusters; third, positive externalities of promotion of the industry from the turn of the century. 2.2. The Establishment of Shanghai Creative Industry Besides, industrial clusters are known to be beneficial to innovation through forward linkages and spread the [19] As the contributors to the Bluebook of Shanghai’s Center small and medium enterprises (SMEs) [3,4,7] and this is innovation generated in the CICs into the overall Cultural Development summarized in 2006, the creative an important point for China as SMEs accounted for “99 economy. These points can be used as references in Before 2005, the development of CICs in Shanghai industries were important for Shanghai because they percent of the total number of enterprises, 80 percent of assessing the success of Shanghai’s policies. was led by the private sector: individual artists, industrial could help transform Chinese economy from jobs, 50 percent of the tax revenue and 60 percent of GDP” Next section will analyze the purposes and motives of start-ups and universities that opened design incubators. investment-driven to innovation- driven model along with th in 2009. [8] Therefore, invigorating SMEs through the Shanghai government during the 11 FYP period, in These groups were seeking affordable, large and quiet other benefits such as modernizing service sectors, clusters could help the expansion of domestic market relation to the national development plans, followed by an space in the city and spontaneously occupied dilapidated preparing for the Shanghai Expo 2010 and transforming th which is the first main objective of the 12 FYP. [9] assessment of the achievements. The final section will factories and warehouses. [16,17] Shanghai into a post-industrial city following the path of Apart from economic contributions, the creative discuss problems revealed during this period as well as an M50 (from no.50 Moganshan Road) is a case in point. the other great cities in the world. [20] th industry clusters (CICs) (see Note 1) also provide another assessment of current policies under the 12 FYP in In 1997, a Taiwanese architect, Deng Kunyan, converted These discourses resulted in more concrete actions benefit of improving the urban outlook of the cities for addressing these problems so as to fulfill Shanghai’s a ware house on the bank of Suzhou Creek into a design from the government. In the second half of 2004, the the more prosperous cities in China. As cities expand, aspiration to become a world-class design city and an studio. Other artists soon followed and the Shanghai Municipal Economic Commission laid down manufacturing activities moved away from the central innovation center for China. 41,000-square-meter site of former engineering and directions for the future development of the creative parts of the cities leaving unsightly empty factories and textile factories came to accommodate 130 studios and 2. Development of Creative Industry Clusters in industries, which then led to the establishment of warehouses. Creative industries, clustered in these sites workshops. Others chose different parts of the city such Shanghai during the 11th Five Year Plan period. Shanghai Creative Industry Center (SCIC) under the provided an alternative use of the space without as the Culture and Media Centre (Jingan District) and the umbrella of the Shanghai Municipal Party Committee 2.1. Creative Industries in China’s Economic redeveloping the whole area. famous Tianzi Fang (Luwan District), where renowned Propaganda Department and the Shanghai Municipal Development Strategy Thus, around the turn of the millennium, cities in painters such as Chen Yifei, Wang Jieyin, Er Dongqiang, Economic Commission in January 2005. China started to consider the promotion of creative Creative industries received particular attention from and Li Subai opened studios in 1998 [16,17,18] The SCIC was to use public non-financial resources industries. In Shanghai, the municipal government started the central government of China in the early 2000s to promote the overall development of creative industry active involvement in creating CICs in 2005 with the because of its potential for upgrading the whole industrial by cooperating with the government in formulating establishment of Shanghai Creative Industry Center system of the country. Though China is now the second creative industry development plans and strategies, and (SCIC). These industries then received a nation-wide largest economy of the world, Chinese industries are still by building a comprehensive platform to mobilize th attention with the promulgation of the China’s 11 Five locked in the lower end of the global value chain. It is enterprises, institutions and individuals involved in the Year Plan (FYP) in 2006 and of all the cities in China, it therefore an imperative for China to develop innovative creative industry. [21] was Shanghai that experienced the most notable growth capacities to ensure long-term competitiveness of its The SCIC then focused its energy on creating and in creative industries during the same period. [10] economy and shift its focus from ‘made in China’ to improving CICs in Shanghai. The official aims are 1.2. Research Objectives ‘created in China’. [7,11,12] summed up in the following four points: Thus, Chinese governments at various levels have 1) construction of a public platform This paper aims at assessing Shanghai government’s been actively promoting creative industries, and in 2006 2) formation of industrial clusters policy of promoting CICs during the 11th FYP period the 11th Five-Year Plan (2006-2010) identified 3) sharing resources (2006-2010) and the prospects for further development “enhancing independent innovation capability” as a 4) promotion of the rapid development of cultural and since the start of the 12th FYP period (2011-2015). The national strategy to “shift economic growth from relying creative industry [21] study was done through the analysis of policy directions on the input of capital and substance factor to relying on These policy objectives are broadly in line with the and their effects using official documents and literature. science and technology advancement and human three main features of CICs identified in the introduction: The main question is whether the policies of Shanghai Figure 1 "Tianzi Fang", "the 8th Bridge", "1933", resources”. [13] Then in 2010, the Fifth Plenary Session "Tongle Fang", "Red Town" (from top left to bottom promoting creative industries, stimulating participating government are conducive to achieving the success of the of the 17th Central Committee of the Communist Party of right) businesses and providing positive externalities to creative industry clusters in other countries. China suggested the cultural industry as a pillar industry (Source: SCIC website) industries outside the clusters. Summing up the experience of the UK, the benefits of for the 12th Five-Year Plan (2011-2015) [14]. We will examine these items in more details in the CICs can be arranged into three points: first, the This led to an explosive growth of creative industries The first sign of the government’s attention can be following; however, it must be noted at this stage that the

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third feature, creating linkage with industries outside did Yanan Elevated Road, or the ‘one axis’, and along the two not receive as much specific attention as the others from rivers of Suzhou Creek and Huangpu River. [10,22] the SCIC. At a broad rhetorical level, the SCIC emphasized the importance of "cross-border work” so as to “construct a creative intelligence platform integrating modern service industry and advanced manufacturing” [21] but this seems to have been envisioned as the inclusion of different industries within the clusters rather than promoting forward linkages with businesses outside the clusters. Although this is understandable since SCIC’s main mandate was the development of CICs, it shows a relative weakness in Shanghai’s CICs for the broader development goal of China’s economy.

2.3. Growth of Creative Industry Clusters

Since 2005, the number of CICs in Shanghai grew exponentially under the management of the SCIC. As in the figure 2, the number of creative industries increased from the first batch of 18 in April 2005, to 35 after the Figure 4. Distribution of Shanghai CICs by District second batch by November 2005; then to 64 with the (Source: based on SCIC website) third batches by May 2006; and then to 75 with the completion of the fourth batch by November 2006. Economic contribution of the creative industries in general also grew rapidly. In 2004, creative industries 300 268 generated total value added of 49.3 billion RMB 250 221 contributing to 5.8% of Shanghai’s GDP but by 2010, the 200 creative industries in Shanghai generated total 134 billion RMB value added (7.94% of GDP) with total output of 150 120 100 441.8 billion RMB. 100 75 80 36 35 48 50 18 (100 million RMB) 0 5000 4418 early late 2006 2007 2009 4500 3900 2005 2005 4000 3413.55 3500 Number of Creative Industry Clusters 2902.98 3000 Gross Floor Area (10,000 sq meters) 2500 2291.7 1866.21 Figure 2. Growth of Creative Industry Clusters in 2000 1340 Shanghai 1500 1048.75 1149 857.8 (Source: based on Creative City Shanghai Website) 1000 549.4 674.59 500 By the end of the 11th FYP in 2010, the number has 0 Year 2005 2006 2007 2008 2009 2010 increased to over 80 with the floor area of 2.7 million Value Added Total Output square meters, accommodating 8,200 enterprises with total employment of 1,550,000. The distribution of Figure 3. Development of Shanghai Creative clusters in Shanghai can be described as ‘one axis and Industry , 2005-2010. two rivers’ formation, mainly concentrated along the (Source: Creative City Shanghai Website)

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As shown in the Table 1 below, the average annual 2) Invigorating effects on related industries needs to third feature, creating linkage with industries outside did Yanan Elevated Road, or the ‘one axis’, and along the two growth rates of the total value added of creative industries be strengthened and the awareness of the not receive as much specific attention as the others from rivers of Suzhou Creek and Huangpu River. [10,22] during this period was 19.68 much higher than the importance of the innovation among related the SCIC. At a broad rhetorical level, the SCIC average annual growth rate of GDP in Shanghai which industries needs to be heightened. emphasized the importance of "cross-border work” so as was 13.04%. Growth rates in terms of value added and 3) Clusters exhibit uneven performances and to “construct a creative intelligence platform integrating total output were especially high between 2006 to 2007 specialization among clusters is not sufficient, as modern service industry and advanced manufacturing” ranging over 20% annual growth and this period well as their ability to function as industry carrier. [21] but this seems to have been envisioned as the coincides with the rapid growth of CICs. Clusters 4) Over all industry’s environments need inclusion of different industries within the clusters rather themselves accounted for roughly half of the output of the improvements with policies to encourage more than promoting forward linkages with businesses outside creative industries and in 2010 CICs generated total openness, stricter intellectual property rights the clusters. Although this is understandable since SCIC’s revenue of 67.3 billion RMB and total tax income of 2.9 protection, financial support and expanding main mandate was the development of CICs, it shows a billion RMB. [23]. talent-pool. [22] relative weakness in Shanghai’s CICs for the broader Underlying this official diagnosis is the problem of development goal of China’s economy. Table 1. Value Added and Total Output of Shanghai over-commercialization of these clusters. Many of the Creative Industries, 2005-2010 prominent CICs developed during the 11th Five Year Plan 2.3. Growth of Creative Industry Clusters (Source: Creative City Shanghai; National Bureau of Statistics of China) period have gradually become dominated by consumption Since 2005, the number of CICs in Shanghai grew Shanghai and entertainment oriented businesses. Tianzi Fang (in exponentially under the management of the SCIC. As in GDP Value Added Total Output growth Luwan District) has already become a tourist destination the figure 2, the number of creative industries increased (100 as % growth (100 growth rate* dominated by souvenir shops, restaurants and bars even from the first batch of 18 in April 2005, to 35 after the million of rate million rate Figure 4. Distribution of Shanghai CICs by District Year RMB) GDP (%) RMB) (%) (%) though some studios and galleries still remain. Tongle second batch by November 2005; then to 64 with the 2005 549.4 6.00 1866.2 Fang (in Jingan District) also seems to be developing to (Source: based on SCIC website) third batches by May 2006; and then to 75 with the 2006 674.6 6.50 22.79 2291.7 22.80 13.24 become an entertainment district with fashionable bars completion of the fourth batch by November 2006. Economic contribution of the creative industries in 2007 857.8 7.03 27.16 2903.0 26.67 17.58 and clubs, and over 80% of New Factories (in Jingan general also grew rapidly. In 2004, creative industries 2008 1048.8 7.65 22.26 3413.6 17.59 12.38 District) is occupied by entertainment establishments, 300 268 generated total value added of 49.3 billion RMB 2009 1149.0 7.71 9.56 3900.0 14.25 8.77 retail shops and luxury restaurants rather than cultural or 250 221 contributing to 5.8% of Shanghai’s GDP but by 2010, the 2010 1340.0 7.94 16.62 4418.0 13.28 13.23 creative activities. [17] 200 creative industries in Shanghai generated total 134 billion Since creative industries tend to attract urban RMB value added (7.94% of GDP) with total output of By 2011 creative industries in Shanghai had generated middleclass of cosmopolitan Shanghai, such development 150 120 100 441.8 billion RMB. the added value of more than 10% of the city’s GDP and might be natural and incorporating the element of urban 75 80 th 100 the 12 FYP’s target is to increase this to 12% by 2015. attraction into the clusters is not negative in itself. By 36 35 48 50 18 (100 million [24] attracting more members of the public, clusters could RMB) serve as an outlet for the products of creativity as well as 0 5000 3. Issues and Prospects 4418 early late 2006 2007 2009 4500 a space for public education to heighten the awareness of 3900 3.1. Limits of the Creative Industry Clusters in 2005 2005 4000 the importance of innovation and design. 3413.55 3500 Shanghai Nevertheless, over-commercialization accompanies Number of Creative Industry Clusters 2902.98 3000 Although the CICs in Shanghai grew in terms of the danger of squeezing the creative activities out of CICs. Gross Floor Area (10,000 sq meters) 2291.7 2500 th 1866.21 numbers and output during the 11 FYP period, it also One noted problem is the rising rents, which is especially Figure 2. Growth of Creative Industry Clusters in 2000 1340 displayed limits in terms of their impacts in stimulating acute for not-so-well-known artists, young designers and Shanghai 1500 1048.75 1149 857.8 businesses within the clusters and in creating positive start-up companies. Even in M50, which is known to (Source: based on Creative City Shanghai Website) 1000 549.4 674.59 500 externalities to the industries outside the clusters. These keep its creativity intact by maintaining a good ratio By the end of the 11th FYP in 2010, the number has 0 limits were also noted by the government as shown in the between studios and galleries, only established artists can Year 2005 2006 2007 2008 2009 2010 increased to over 80 with the floor area of 2.7 million four problems of CICs identified by the Shanghai operate under the current rental hikes. [16] This Value Added Total Output square meters, accommodating 8,200 enterprises with government in preparation for the 12th FYP: compromises the potential contribution of clusters to the total employment of 1,550,000. The distribution of 1) Overall industry lacks international developments of local SMEs through shared services, Figure 3. Development of Shanghai Creative shared equipments, increased chance of face-to-face clusters in Shanghai can be described as ‘one axis and Industry , 2005-2010. competitiveness and developments of various two rivers’ formation, mainly concentrated along the (Source: Creative City Shanghai Website) sectors are not balanced. interaction and easier access to other industries.

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This is what Kong (2009) recognized as adequate definition and classification of creative ‘contradictory conditions for simultaneous sustainability industries in China. A good policy should be guided by a and precariousness’. If sustainability is measured clear and detailed definition that allows policy makers to narrowly as economic viability, then Shanghai’s CICs accurately assess the current trends and make plans for have shown much success; however, this economic future development. However, the five categories of success in turn endangers the original purpose of the creative industries – namely, Research and Development long-term benefits of creative clusters to the creative of Creative Design, Innovative Architectural Design, professionals. Cultural and Creative Media, Creative Consulting and More worrying is that the rising rent and resulting Planning, and Fashion and Consumption – suffer from over-commercialization may not be a natural result of the ambiguity and any commercial businesses may disguise economic growth but a result of the way in which SCIC as creative industry by incorporating creative façade such intervened to promote the growth of the CICs. as creative food for restaurants, creative services for bars, Zheng(2010) convincingly argues that the short-term and creative display for retail shops. [17] profit motives on the side of the government is to blame Another problem for the classification is, as Ye(2008) for the over-commercialization of the CICs. Since land pointed out, that it does not reflect China’s own use rights and premises are owned by SOEs, land use circumstances and does not encourage inter-industry links. taxes are particularly low for the developers of CIC In his view, the inclusion of telecommunications in the projects and they are exempted from premise taxes. In creative industry over-states the economic contribution of addition, CIC projects provide rent incomes to the SOEs the creative industry while the exclusion of creative that own propriety rights without transferring land use related manufacturing clusters understates the importance rights which are not encouraged by Chinese government. of the creative industry. Therefore, he urged Therefore SOEs chose to cooperate with SCIC to bypass re-definition/-classification of creative industry in China complicated application procedures for land use changes. emphasizing China’s own current comparative advantage The developer, after converting the property into a or inclusion of more sectors that have forward linkage fashionable urban space, can then rent out the offices at with various manufacturing. [15] higher rates than Grade-B office buildings in the This calls for more detailed definitions based on commercial districts, thus creating a lucrative source of empirical research into the workings of the CICs in the income through rents for the developers. In addition, context of Shanghai. Measuring success through value different departments of government at district and added generated from a CIC is not sufficient in gauging municipal levels benefit from sharing the rents and the contribution of CICs to other industries. For instance, business taxes from CICs. Thus, in 2006, SCIC if the total value added reported by a CIC is largely due to established an investment arm called Shanghai Creative multinational companies selling its services to Chinese Industry Investment Co. Ltd (SCII) through a joint and other multinational companies outside the cluster, the venture with the Shanghai Automobile Asset Operation actual ability of the clusters to improve Shanghai’s design Co. Ltd., and Hokwins Consultation Institute, as an capability can be very much questioned. ‘aircraft carrier’ of the CICs market. This short-term There are other broader concerns that need to be interest in financial return motivates SCIC to focus on addressed in the future too. The overall awareness among maximizing profits from CICs by attracting multinational Chinese business circle regarding design and innovation corporations with brand power rather than local start-ups is still very low and this makes it difficult for creative and by accommodating consumption and entertainment professionals to develop their career. Related to this is the businesses that are more profitable than creative lack of standardized scale or practice relating to the businesses. International events held in the prominent remuneration for design or innovation. CICs are also used as occasions to market these spaces to The protection of the intellectual property rights (IPR) multinational corporations that promise higher returns in China is also a related issue. In the past, it was other [17] countries that insisted on China to implement strict IPR Another underlying problem is the lack of an standards. Circumstances, however, changed in recent

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This is what Kong (2009) recognized as adequate definition and classification of creative years and as Montgoery and Fizgerald (2006) observed For this purpose, Shanghai has pledged itself to three ‘contradictory conditions for simultaneous sustainability industries in China. A good policy should be guided by a ‘the consumption of creative products by the upwardly main tasks. The first task is to create favorable and precariousness’. If sustainability is measured clear and detailed definition that allows policy makers to mobile urban middle classes in cities’ and the demands by environment for creative industries which include narrowly as economic viability, then Shanghai’s CICs accurately assess the current trends and make plans for creative professionals within China are making the shift building a complete chain of creative industries with clear have shown much success; however, this economic future development. However, the five categories of towards the stricter implementation of IPR. [25] Shanghai goals and focuses; promoting industrial cluster strategy success in turn endangers the original purpose of the creative industries – namely, Research and Development in particular has a plan to build an intellectual property for the development of creative enterprises and talents; long-term benefits of creative clusters to the creative of Creative Design, Innovative Architectural Design, rights center for the Asia-Pacific Region by 2020 to and strengthening the protection of IPR. The second task professionals. Cultural and Creative Media, Creative Consulting and enhance legislation, administration and adjudication of is the promotion of creative talent and business gathering More worrying is that the rising rent and resulting Planning, and Fashion and Consumption – suffer from IPR through international cooperation. [26] in co-operation with the universities. The third task is ‘to over-commercialization may not be a natural result of the ambiguity and any commercial businesses may disguise Yet, the problem is not just the existence or otherwise actively carry out exchanges and cooperation at home and economic growth but a result of the way in which SCIC as creative industry by incorporating creative façade such of rules and regulations relating to IPR. As Stenfeld (2007) abroad’ and included under this heading are the intervened to promote the growth of the CICs. as creative food for restaurants, creative services for bars, argues, with the growth in the scope and extent of legal strengthening public participation to foster universal Zheng(2010) convincingly argues that the short-term and creative display for retail shops. [17] codes, there also emerges the “proliferation of unclear creative consciousness as well as holding international profit motives on the side of the government is to blame Another problem for the classification is, as Ye(2008) rules, low level of trust, and frequent efforts to skirt the events and establishing domestic and foreign resources for the over-commercialization of the CICs. Since land pointed out, that it does not reflect China’s own boundaries of legal strictures”. [11] In other words, market. [27] use rights and premises are owned by SOEs, land use circumstances and does not encourage inter-industry links. without the shift to a rule-based society from the Then in 2011, Shanghai government produced taxes are particularly low for the developers of CIC In his view, the inclusion of telecommunications in the relationship-based society in Shanghai, creating more subsequent plan for the Cultural and Creative Industries projects and they are exempted from premise taxes. In creative industry over-states the economic contribution of rules may not in itself solve the existing problem. What is which further refined these policies into ‘three principles’, addition, CIC projects provide rent incomes to the SOEs the creative industry while the exclusion of creative needed is a significant reform in governance to increase ‘five targets’ and ‘seven tasks’. [22,28] Of the three that own propriety rights without transferring land use related manufacturing clusters understates the importance trusts between public and private sectors, based on greater principles, the principle of integrated development rights which are not encouraged by Chinese government. of the creative industry. Therefore, he urged transparency in decision making processes. advocates integrating cultural and creative elements into Therefore SOEs chose to cooperate with SCIC to bypass re-definition/-classification of creative industry in China other industries – primary, secondary, tertiary all included 3.2. Prospects for Shanghai’s Creative Industry during complicated application procedures for land use changes. emphasizing China’s own current comparative advantage – and the second principle calls for the specialization of the 12th Five Year Plan The developer, after converting the property into a or inclusion of more sectors that have forward linkage clusters and more attention on brand creation as well as fashionable urban space, can then rent out the offices at with various manufacturing. [15] Despite these problems, there are signs that Shanghai autochthonous innovation. Five targets include over 60% higher rates than Grade-B office buildings in the This calls for more detailed definitions based on is still on the right track to become an international centre increase in value added; increasing international commercial districts, thus creating a lucrative source of empirical research into the workings of the CICs in the of creativity and design. First of all, not all the CICs are competitiveness; refining distribution of creative income through rents for the developers. In addition, context of Shanghai. Measuring success through value dominated by entertainment and consumption businesses. industries to maximize the impacts of clusterization; different departments of government at district and added generated from a CIC is not sufficient in gauging Although some of the more prominent clusters in are expanding the pool of talents; and improving overall municipal levels benefit from sharing the rents and the contribution of CICs to other industries. For instance, dominated by consumption industries, many clusters still environment for creative industries. These are then business taxes from CICs. Thus, in 2006, SCIC if the total value added reported by a CIC is largely due to almost exclusively consist of design studios, small followed by detailed tasks in which supports for SMEs established an investment arm called Shanghai Creative multinational companies selling its services to Chinese software and media companies and agencies that provide are also mentioned. [22] Industry Investment Co. Ltd (SCII) through a joint and other multinational companies outside the cluster, the legal and business consultations in related fields. The problem of classification has also been addressed venture with the Shanghai Automobile Asset Operation actual ability of the clusters to improve Shanghai’s design Moreover, the admission of Shanghai as a City of and the official classification expanded from five to ten Co. Ltd., and Hokwins Consultation Institute, as an capability can be very much questioned. Design and a member of the Creative Cities Network by categories, with 102 sub-industry codes in September ‘aircraft carrier’ of the CICs market. This short-term There are other broader concerns that need to be the UNESCO in 2010 brought a new impetus for 2011 as in the table 2 below. [29] One prominent change interest in financial return motivates SCIC to focus on addressed in the future too. The overall awareness among improving creative industries in Shanghai. Apart from is the inclusion of ‘cultural and creative related industries’ maximizing profits from CICs by attracting multinational Chinese business circle regarding design and innovation increasing international links to Shanghai’s CICs, it binds which include manufacturing and sales activities related corporations with brand power rather than local start-ups is still very low and this makes it difficult for creative Shanghai’s policy makers to the responsibilities and to cultural and creative industries and encompass and by accommodating consumption and entertainment professionals to develop their career. Related to this is the duties as a member which is. . . production of toys, musical instruments, handicrafts, businesses that are more profitable than creative lack of standardized scale or practice relating to the . . . to promote the creative industries with the focus various types of household and office equipments, and businesses. International events held in the prominent remuneration for design or innovation. on design, improve the city image and quality of life, machineries used in production of cultural and creative CICs are also used as occasions to market these spaces to The protection of the intellectual property rights (IPR) enhance the social and economic benefits of the industries. This seems to be aimed at improving the multinational corporations that promise higher returns in China is also a related issue. In the past, it was other creative industries, actively carry out international inter-industry linkages. Somewhat oddly, however, [17] countries that insisted on China to implement strict IPR exchanges and services to contribute to the fashion design is not specifically given a code and the Another underlying problem is the lack of an standards. Circumstances, however, changed in recent development of the network. [27] industrial codes under ‘leisure and entertainment’ still

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provides much room for consumption to overshadow leadership of Chinese communist party after the 18th creation. National Congress in December is slowing the matter further as changes in leaders could also result in local Table 2. Classification of Cultural and Creative level changes in the policy direction or departmental Industries in Shanghai structures. (Source: Creative City Shanghai Website) no. of Nevertheless, some figments of information suggest Main category sub-industries that SCIC’s role as the developer of CICs may no longer 1 Media 17 be as significant in Shanghai since the focus seems to 2 Art 16 have shifted from the development of new clusters to 3 Industrial Design 3 4 Architectural Design 5 improving the quality of management of the clusters. In 5 Internet and Information 5 August 2012, the deputy director of the Municipal Office Software and Computer 4 6 for Promoting Cultural and Creative Industries, Shao Services Zhiqing revealed that Shanghai government has plans to 7 Consulting Services 9 8 Advertising and Exhibitions 2 gradually merge CICs and place them under uniform 9 Leisure and Entertainment 14 management and standards, in order to improve Cultural and Creative Related 27 10 management of the clusters. [34] This does not, of course, Industries rule out the role SCIC may play in the management of the Total 102 clusters or in the establishments of more clusters in

outlying regions of Shanghai, but it is too early to make These changes are likely to affect the role of the SCIC th any informed guess on this topic as of now. under the 12 FYP; however, details on this issue have not been publicized yet. This is in part due to the way 4. Concluding Remarks plans are made in China. Once broad blue print of FYP is The 11th FYP period saw the rapid growth of Creative approved, various ministries and departments at different Industry Clusters in Shanghai both in terms of the levels of government formulate follow up plans in numbers and the economic contributions of these clusters. relation to specific industries and issues. This is not a The Shanghai Creative Industry Center proved to be simple matter because one issue involves discussion invaluable in making this happen. Nevertheless, the CICs among a number of governing bodies as one plan has had limited impacts on stimulating local creative impacts on another. For example, in Shanghai, the businesses within the clusters as well as in terms of Municipal Office for Promoting Cultural and Creative creating positive externalities of innovation spill-over to Industries formulated ‘the 12th FYP on Cultural and the industries outside the clusters to boost the innovation Creative Industries’ in September 2011, then the capabilities of China. Municipal Commission of Economy and Information These problems are to be addressed in the 12th FYP Technology published ‘the 12th FYP on Industrial for creative industries in Shanghai. Policy directions are Development’ in March 2012 which also has some already set to improve management and specialization of implications on creative industries. [30] At national level, clusters to benefit participating businesses (including there are also other plans that affect the creative industries SMEs) and the industries outside the clusters through such as ‘the 12th FYP on National Emerging Industries of forward linkages with other industries. Broader issues Strategic Importance’ (June 2012) [31] and ‘the National such as stricter IPR protections and the education of the Development Plan for the Animation Industry under the businesses and the public are also addressed. 12th FYP’(July 2012). [32] The jury is still out, however, whether these changes This process necessitates much discussion among in principle will result in the actual transformation of various bodies of the government which could delay the Shanghai as a truly international city of design, process as in the case of the ‘Plan for the Development of spearheading the nation’s industrial transformation. The Domestic Trade’, which has not materialized at the end of over-commercialization can still continue if further 2012. [33] In addition, the expected changes in the promulgation and implantation of the principle is affected

8 58 B U L L E T I N O F JSSD Vol. 60 No. 1 2013 THE SCIENCE OF DESIGN th provides much room for consumption to overshadow leadership of Chinese communist party after the 18 by short-term profit motives and competition among Canadian Social Science. 2007 June;3(3):11-19. creation. National Congress in December is slowing the matter different government offices. Similarly, the measures for 8 Liu X. Supporting the SMEs: China Will Boost further as changes in leaders could also result in local improving performance of businesses in the clusters as Assistance to Its Small and Medium-Sized Table 2. Classification of Cultural and Creative level changes in the policy direction or departmental well as for ensuring SME participation may not actualize Industries in Shanghai Enterprises. Beijing Review. 2010 January 14:30-31. structures. under misplaced incentive structure for governing bodies. (Source: Creative City Shanghai Website) 9 Wen J. Report on the Work of Government, Delivered no. of Nevertheless, some figments of information suggest More empirical studies are needed to properly measure at the Fourth Session of the Eleventh National Main category sub-industries that SCIC’s role as the developer of CICs may no longer the impacts of clusters on broader economy and to guide People's Congress. [Internet]. Beijing: NPC & 1 Media 17 be as significant in Shanghai since the focus seems to government’s policies. 2 Art 16 CPPCC; 2011 [cited 2012 August 30]. Available have shifted from the development of new clusters to To address these issues effectively, more transparent 3 Industrial Design 3 from: 4 Architectural Design 5 improving the quality of management of the clusters. In governance, based on clear rules and procedures, is http://www.china.org.cn/china/NPC_CPPCC_2011/20 5 Internet and Information 5 August 2012, the deputy director of the Municipal Office needed on the management of the clusters as well as the Software and Computer 4 11-03/15/content_22143099.htm. 6 for Promoting Cultural and Creative Industries, Shao changes in the society to value innovation and design. Services Zhiqing revealed that Shanghai government has plans to 10 Fu X, Xu H. The origin of explosive development of 7 Consulting Services 9 gradually merge CICs and place them under uniform Creative industry in China. In: Regional Studies 8 Advertising and Exhibitions 2 5. References 9 Leisure and Entertainment 14 management and standards, in order to improve Association Annual Conference; 2009; Leuven. Cultural and Creative Related 27 1 Department of Culture, Media and Sports. Creative 10 management of the clusters. [34] This does not, of course, 11 Steinfeld ES. Innovation, integration, and technology Industries Industries Mapping Document 2001. [Internet]. rule out the role SCIC may play in the management of the upgrading in contemporary Chinese industry. In: Total 102 London: DCMS; 2001 [cited 2012 August]. Available clusters or in the establishments of more clusters in Polenske KR, editor. In The Economic Geography of from: outlying regions of Shanghai, but it is too early to make Innovation. New York: Cambridge University Press; These changes are likely to affect the role of the SCIC http://webarchive.nationalarchives.gov.uk/+/http://ww th any informed guess on this topic as of now. 2007. p. 289-309. under the 12 FYP; however, details on this issue have w.culture.gov.uk/reference_library/publications/4632. 12 China Today. From Factory Floor to Design not been publicized yet. This is in part due to the way 4. Concluding Remarks aspx/. plans are made in China. Once broad blue print of FYP is Headquarters. 2011 February:21-22. The 11th FYP period saw the rapid growth of Creative 2 Flew T. The Creative Industries: Culture and Policy. approved, various ministries and departments at different 13 Mai K. The 11th Five-Year Plan: Targets, Paths and Industry Clusters in Shanghai both in terms of the London: Sage; 2012. levels of government formulate follow up plans in Policy Orientation (a speech by the Minister of numbers and the economic contributions of these clusters. 3 Fingleton B, Igliori DC, Moore B, Odedra R. relation to specific industries and issues. This is not a National Development and Reform Commission). The Shanghai Creative Industry Center proved to be Employment growth and clusters dynamic of creative simple matter because one issue involves discussion [Internet]. 2006 [cited 2012 August 31]. Available invaluable in making this happen. Nevertheless, the CICs industries in Great Britain. In: Polenske KR. The among a number of governing bodies as one plan has from: had limited impacts on stimulating local creative Economic Geography of Innovation. New York: impacts on another. For example, in Shanghai, the http://www.gov.cn/english/2006-03/23/content_23483 businesses within the clusters as well as in terms of Cambridge University Press; 2007. p. 60-84. Municipal Office for Promoting Cultural and Creative 2.htm. creating positive externalities of innovation spill-over to Industries formulated ‘the 12th FYP on Cultural and 4 Sonobe T, Hu D, Keijiro O. 'Process of Cluster the industries outside the clusters to boost the innovation 14 Li Z. An Emerging Pillar Industry: China's cultural Creative Industries’ in September 2011, then the Formation in China: A Case Study of a Garment capabilities of China. industry is geared to grow from a new engine into a Municipal Commission of Economy and Information Town'. Journal of Development Studies. 2002 These problems are to be addressed in the 12th FYP pillar of the national economy. Beijing Review. 2010 Technology published ‘the 12th FYP on Industrial October;39(1):118-139. for creative industries in Shanghai. Policy directions are Decmber 16. Development’ in March 2012 which also has some 5 Brachert M, Titze M, Kubis A. Indentifying industrial already set to improve management and specialization of 15 Ye Z. China's Creative Industries: Clusters and implications on creative industries. [30] At national level, clusters from a multidimensional perspective: clusters to benefit participating businesses (including Performances. In: A working paper submitted to the there are also other plans that affect the creative industries Methodological aspects with an application to SMEs) and the industries outside the clusters through Annual Conference of the Chinese Economist; 2008; such as ‘the 12th FYP on National Emerging Industries of Germany. Papers in Regional Science. 2011 forward linkages with other industries. Broader issues Cambridge. Strategic Importance’ (June 2012) [31] and ‘the National June;90(2):419-439. such as stricter IPR protections and the education of the 16 Kong L. Making Sustainable Creative / Cultural Development Plan for the Animation Industry under the 6 Chapain C, Cooke P, De Propris L, MacNeil S, th businesses and the public are also addressed. Space in Shanghai and Singapore. The Geographical 12 FYP’(July 2012). [32] Mateos-Garcia J. Creative Clusters and Innovation: The jury is still out, however, whether these changes Review. 2009 January;99(1):1-22. This process necessitates much discussion among in principle will result in the actual transformation of Putting creativity on the map. Research Report. various bodies of the government which could delay the 17 Zheng J. The 'Entrepreneurial State' in 'Creative Shanghai as a truly international city of design, London: NESTA; 2010. process as in the case of the ‘Plan for the Development of Industry Cluster' Development in Shanghai. Journal spearheading the nation’s industrial transformation. The 7 Liu P, Gu Q. Present Position of China's Local Domestic Trade’, which has not materialized at the end of of Urban Affairs. 2010;32(2):143-170. over-commercialization can still continue if further Industrial Clusters (LICs) in the Global Value Chain 2012. [33] In addition, the expected changes in the 18 SCIC. Gathering Area of Creative Industries in promulgation and implantation of the principle is affected (GVC): Apparel and Textile industry Case Study.

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Shanghai Style. [Internet]. [cited 2012 August 31]. 27 Creative City Shanghai. Task for Shanghai as Available from: UNESCO Creative City of Design. [Internet]. [cited http://www.021ci.com/creative_industry_cluster/inde 2012 August 31]. Available from: x.htm. http://www.creativecity.sh.cn/en/shejizhidu1-2.aspx. 19 Keane M. Creative industries in China: four 28 National Business Daily (每日经济新闻). Shanghai perspectives on social transformation. International to build the cultural and creative industry as a pillar Journal of Cultural Policy. 2009 industry (上海欲打造文化创意产业为战略性支柱 November;15(4):431-443. 产业). 2012 Sep 23. 20 Zhang C, Huang C, Duanmu Y. Significance of Policy 29 Shanghai Cultural Industries Demonstation and to the Development of Shanghai's Creative Industries. Service Platform. Classification of Cultural and In: Ye X, Kuai D, editors. Bluebook of Shanghai's Creative Industries. [Internet]. 2011 [cited 2012 Cultural Development (2006). Beijing: Social August 30]. Available from: Sciences Academic Press; 2006. p. 37-48. http://www.creativecity.sh.cn/chanyezhenci/detail.asp 21 SCIC. about us. [Internet]. [cited 2012 August 31]. x?id=93. Available from: 30 Information Office of Shanghai Municipal http://www.021ci.com/about/aboutus.htm. Government. Press Release. [Internet]. 2011-2012 22 Shanghai Creative Industries Demonstration and [cited 2012]. Available from: Service Platform. 12th Fiver Year Shanghai Cultural http://en.shio.gov.cn/presscon/. and Creative Industries Development Plan. [Internet]. 31 China News Briefing. China Releases Blueprint to [cited 2012 August 30]. Available from: Promote Seven Emerging Industries. 2012 June 1. www.creativecity.sh.cn/chanyezhenci/detail.aspx?id= 32 China News Briefing. China Releases 12th Five-Year 54. Plan for Animation Industry. 2012 July 16. 23 Creative City Shanghai. Shanghai's Creative 33 China Business Focus. Domestic Trade Gets More Industries Display Clear Trends for Specialization and Weighty for China. 2012 November. Clusterization. [Internet]. 2011 [cited 2012 August 34 Information Office of Shanghai Municipal 30]. Available from: Government. Press Conference: Shanghai’s http://www.creativecity.sh.cn/news_detail.aspx?id=13 development of the cultural and creative industries in 68. 2011. [Internet]. 2012 [cited 2012 December]. 24 Government of Shanghai. Report on the Development Available from: of Cultural and Creative Industry in Shanghai in 2012 http://en.shio.gov.cn/presscon/2012/08/31/1152004.ht and Statistical Data. [Internet]. 2012 [cited 2012 ml. August 30]. Available from: http://www.shanghai.gov.cn/shanghai/node2314/node 9819/node9822/u21ai651597.html. 6. Notes 25 Montgomery L, Fitzgerald BF. Copyright and the 1 In China, creative industry parks (创意产业园) and creative industries in China. International Journal of creative industry clusters (创意产业集聚区) and other Cultural Studies. 2006;9(3):407-418. similar terms are used interchangeably and we adopted 26 Information Office of Shanghai Municipal ‘Creative Industry Clusters’ as a blanket term. Similarly, Government. Press Conference: Government Briefing ‘cultural industry’(文化产业) ‘creative industry’(创意产 on Shanghai’s Intellectual Property Rights Strategy 业) and ‘cultural creative industry’ (文化创意产业) are from 2011 to 2020. [Internet]. 2012 [cited 2012 also used virtually synonymously in China and the term December]. Available from: ‘creative industry’ is used in the wide sense to include all http://en.shio.gov.cn/presscon/2012/07/24/1151948.ht these terms. ml.

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