Global Change and ’s Clusters: The Restructuring of ’s Textile Friederike Schröder / Michael Waibel / Uwe Altrock

Construction activities at the periphery of Guangzhou’s Textile District

Economic globalization has increasingly exposed nations, regions, and cities to strong local competition and inter-city rivalry. This is also the case in the Delta (PRD) of South China. As a highly dynamic gro- wing mega-urban region, it has a longstanding reputation as China’s economic powerhouse and as the “fac- tory of the world”. Once a pioneering area of market economy reforms, the PRD nowadays faces fierce com- petition with other major metropolitan areas such as Beijing-Hebei-Metropolis and the Yangtze Delta Region, ­including Shanghai. This calls for constant adaptation of urban development strategies, which ­nowadays progressively aim at economic restructuring from labor-intensive manufacturing towards knowledge-intensive and service-oriented industries. The ascent along the value chain is particularly apparent within economic clusters, which are a long-established feature of China’s local economy. However, despite the restructuring of the economy, there is still scope for an “upgrading” of existing clusters even when they seem to represent low value-added economic sectors. The Zhongda textile cluster in Guangz- hou is a fascinating showcase example for this phenomenon. Not only is the textile manufacturing and trading sector re-establishing its role in the city, but it has even proven possible to conduct the restructuring process in All Photosexcept on p. 7 bottom: Michael Waibel situ in a densely-populated and completely built-up area. This paper will focus on the restructuring process as it took place over time in both economic and spatial terms. In the process, it will also reveal how global and local forces interplay in shaping the physical as well as the economic re-development of this cluster.

Economic Clusters in China by buyer-supplier links and shared tech- for example, is the world’s largest ma- China has a long history of cluster deve- nologies, channels, and customers. This nufacturer of ­microwave ovens. Guang- lopment – some clusters have emerged reduces transaction costs for producers dong also dominates the textile indus- relatively recently, while the origins of and consumers. Moreover, township try – China is by far the leading source others date back hundreds of years (En- economies in the PRD are organized country for textiles with a world export right et al. 2005). Various jurisdictions all as clusters, too (see fig. Industrial Clus- share of 23.8 percent in 2006 (Global over the country have specific industrial ters). The region has established a wide Production.com, 2008), and profiles, some of which have been deve- variety of clusters, mostly in light indus- together with Zhejiang province is the loped into vibrant local or regional clus- try and consumer products. It is famous leader in China’s textile industry. ters of companies and industries (e.g., as a manufacturing base for garments As in other countries, the spatial agglo- the Beijing biotech cluster). Neither na- and textiles, footwear, toys, plastic pro- meration of companies and related asso- tional nor regional economies are emer- ducts, electrical goods, electronics, au- ciations eases linkages with suppliers and ging as pockets isolated from each other, tomobiles, and ­logistics. Some of these buyers and encompasses a combination but they rather tend to develop in a spa- clusters have a leading role in the global of cooperation and competition that can tially concentrated manner characterized markets. The municipality of , give rise to successful local economies as

444 Pacific News #33 • January/February 2010 comprehensive, ranging from the pro- duction of fabrics and accessories to processing, coloring, storage, and the spot sale of garments. The district aims to serve as a one-stop fabric and accesso- ries center that provides integrated func- tions of international purchasing and trading, logistics, exhibition, informa- tion, consultation, technology exchange, and staff training. In particular, the areas next to important roads connecting the district to other parts of the city are home to various types of garment mar- kets. The surrounding areas have also profited from the boom in textile trading and have seen the development of ho- tels, catering, banking, and information industries. The Zhongda textile district currently constitutes the second-largest textile trading area in China and includes over 40 textile industry-related centres, both on a large and a small scale, with an agglomeration of over 10,000 shops (Haizhu District CCPC, 2009). With the completion of the ­Guangzhou Tex-

Source: Enright et al. (2005); modified by Michael Waibel 2009 tile Expo ­Center, currently the largest Industrial clusters in the region ­construction project in the area in terms of ­investment and space, the Zhongda long as the mixture is adequately balan- a wide variety of specialized traders are textile district will become the largest ced (ibid.). concentrated in the areas adjacent to textile commercial area in China, repla- the streets and alleys, a great number of cing the Keqiao market area in Zhejiang The Zhongda Textile District four- to five-storey factory buildings line province (Invest Guangzhou,­ 2007). One remarkable example of an econo- the streets south of the residential areas. The whole area has recently exhibited mic cluster that was established in the Alongside the emergence of ­various the typical signs of economic and physi- more distant past is the Zhongda tex- textile-related industries within the cal restructuring that follow in the wake tile district (Zhongda Bu Pi Shi) south Zhongda textile district, other manufac- of increasing global and domestic com- of the campus of Sun Yat-Sen-Univer- turing sites have been developed mostly petition, as well as a general increase of sity in Guangzhou’s Haizhu district. This in the outskirts of the area. Thus, the living standards in the region. Countries quarter accommodates about 300,000 ­value chain has become increasingly such as Cambodia or Bangladesh are inhabitants, many of whom are migrants employed in one of the manifold busi- nesses related to the textile sector. Since the late 1980s, the area has grown from four villages into a vibrant center for tex- tile and other related industries. The area is presently characterized by a densely built-up agglomeration of “kissing buildings” (see also 3D-view and photo p. 7 right) that is typical of the “Urbanized Villages” in the heart of the cities in the PRD, where many of the mi- grant workers live – some of them even working for the textile sector from their apartments. However, these buildings, though mostly used for residential pur- poses, also house a great number of dif- ferent retail shops, storage facilities, and manufacturing workshops related to the Source: http://gz.o.cn/?action=yp¶m1=guangzhou textile industry in their ground floors. 3D-view of parts of Zhongda Textile District with its fragmented building structures While the production of accessories and from wholesale centres, high-rise condominium to dense kissing-buildings typologies.

Pacific News #33 • January/February 2010 5 ment at the beginning, purchase volumes have increased substantially since 1990, with customers coming from as far away as Northern China to buy their knitting wool. With the introduction of corruga- ted iron sheds equipped with shelves to store goods, the business became more professional, and consequently, mobile street trading was successively replaced.

Initial Upgrading: 1996 to 2001 The successful business activities led to a rather spontaneous densification of the built environment. A chaotic assem- bling of market sheds coincided with a massive influx of population. Combined with a lack of enforcement of statutory planning due to weak local administrative Female sewer within a small workshop capacity, this led to a highly fragmented able to produce more cheaply, which has people to a neighborhood that was for- pattern, with trading facilities scattered placed serious pressure on China’s textile merly dominated by migrant workers. all over the area. Serious urban problems sector. In order to facilitate an upgrading In physical terms, they complement the resulted due to the inability to prevent of the district, a smaller street cutting wholesale centers: both surround the pollution and fight fires effectively. Also, through the district was redeveloped into “Urbanized Villages” shielding them the area suffered from increasing secu- a major thoroughfare. As a consequence from the main traffic arteries and add a rity problems as theft and other crimes of the restructuring process, several completely new scale to it as they form became rampant. The largely unplanned huge seven-storey wholesale centers (see high-rise complexes that are inaccessible development of the Zhongda textile dis- also 3D-view) have been erected close to to the general public and therefore also trict in its early years with its mainly tem- this new main traffic artery linking the block easy access to a newly developed porary buildings thus impeded its further district to the highway system, whereas park. development. some of the former two-storey bazaar- Looking at the development of the Finally, the Haizhu District Govern- like markets were torn down (Guangz- Zhongda textile district over time, four ment initiated and implemented the first hou News, 2008). Older factories and re- development phases can be identified: upgrading program for the Zhongda sidential buildings are being demolished (1) incubation from 1988 to 1996, (2) Textile district in 1996. Businesses had and replaced by bigger and more mo- initial upgrading from 1996 to 2001, (3) to move indoors as the original corruga- dern ones, presumably with noticeable expansion from 2001 to 2004, and (4) ted iron sheds were replaced by simple effects for smaller workshops and the super-structure development since 2004. brick shops. Nevertheless, problems re- dependent manufacturers. Derelict ma- In the development over time, the Ha- mained, as passageways between shops nufacturing buildings are being tempora- izhu District Communist Party Commit- were still narrow, with cars and people rily used as warehouses. Evidently, the tee and the Haizhu District Government occupying public spaces. textile district is currently experiencing have apparently played the leading role, restructuring processes from a predomi- as shown in the following. nantly manufacturing area to a wholesale district on the one hand, as well as con- Incubation: 1988 to 1996 centration and specialization processes The origin of the Zhongda textile on the other. All of the latter processes ­district can be dated at least back to the aim at keeping the area competitive in late 1980s (for following: see particu- the global market. This can also be seen larly: Haizhou District CCPC, 2009). As in the erection of high-rise complexes part of an inner-city upgrading program, organized into gated communities oc- informal mobile vendors selling knitting cupying the southern edge of the area. wool and other textile fabrics were relo- While the wholesale centers attract tra- cated from the central banks of the Pearl ders and factory managers from all over River to the then southern periphery of China who sell and buy fabric for the re- the urban fabric in central Haizhu river gional and national markets, the newly- island. At that time, the area south of the built high-rise condominiums have not campus of Sun Yat-sen University con- only changed the general appearance of sisted of just four villages and was only the entire area but also transformed its sparsely populated. Inside one of the biggest wholesale social structure, as they attract affluent Following a rather stagnant develop- centres

6 Pacific News #33 • January/February 2010 At the same time, the Zhongda tex- tile district faced increasing strong intra- and inter-city competition. On the one hand, the establishment of a new im- portant textile district located in the city center of Guangzhou led to a relocation of other major businesses to that area. On the other hand, cities in other pro- vinces such as Zhejiang (with its close proximity to Shanghai) increased their export volume of textiles and clothing, challenging not only the Zhongda textile district, but the entire province of Gu- angdong to compete vigorously for its leading status in the national and global textile industries.

Expansion: 2001-2004 Starting from 2001, the Zhongda textile district entered a boom period. During Demolition activities and upgrading along a canal this time, upgrading and modernization ness environment received a regulatory It can be safely assumed that the Ha- efforts within the area achieved tangible framework, and the economic activities izhu District Government, along with results. The cluster became one of the within the area took off. This formali- the Management Committee of the priority development areas of the local zation process came at a price, however, Zhongda Textile District, has been more authorities (Yao, 2008). The Guangzhou because it coincided with increasing ta- than eager to take this opportunity. municipal government issued the “De- xes on traders. Around the same time, drastic measures velopment Plan for a Commodity Net- were undertaken to solve the remaining work in Guangzhou (2003-2010) [Guang Super-Structure Development: problems in the area, such as transporta- Zhou Shi Shang Ye Wang Dian Fa Zhan After 2004 tion, firefighting, and security, especially Gui Hua (2003—2010)]”. Additionally With the termination of the ten-year through additional planning, upgrading, the Haizhu district government publis- transition period of the “Agreement on management, and infrastructure facili- hed the “Upgrading Plan for Zhongda Textiles and Clothing (ATC)” on 1 Janu- ties. In this context, a first super-struc- Textile Area [Zhong Da Bu Pi Shi Chang ary 2005, the trade in textile and clothing ture, the gigantic Guangzhou Interna- Zheng Zhi Gui Hua Fang An]”. products was no longer subject to quotas tional Textile and Accessories Center, As a consequence, a special-pur- under a special regime outside normal was built. Its floor area covers 300,000 pose association to govern this econo- WTO/GATT rules. Today, worldwide square meters with room for more than mic cluster was founded in 2004 – the trade is governed by the general rules 4,000 shops. According to officials, the so-called Management Committee of and ordinances embodied in the multi- trading center is to serve as a spearhead Zhongda Textile Area. From the begin- lateral trading system. Enterprises, irres- and role model for the future develop- ning, it comprised various departments pective of whether they are state-owned ment of the whole area, ultimately brin- such as the police, representatives of in- or private, large-scale or small, are en- ging to an end the “chaotic” structures dustry and commerce, taxation authori- titled to engage in export and trade. This of the incubation phase. The mega-mall ties, and operators of communications was a significant globalization boost for represents a one-stop center for fabrics infrastructures. Subsequently, the busi- the Chinese textile sector in general. and accessories, providing integrated functions for international purchasing and trading, modern logistics, transpor- tation, exhibition, information consul- tation, technology exchange, and staff training. It is explicitly linked to the glo- bal market. Fashion shows and other events are organized there regularly, too. In this way, the mall is developing into an urban entertainment center. Though currently the biggest in the Zhongda textile district, the mall is only part of a whole set of huge, super-structure who- lesale centers currently under construc- tion. The most recent malls will explici-

Source: Altrock, 2009 tly also target retail consumers from the Rendering of an Urban Entertainment Centre related to textile trade rapidly growing urban middle and upper

Pacific News #33 • January/February 2010 7 classes. The massive concentration and tion of huge market facilities for trade. inner city neighborhood(s)? Who are key modernization processes will have pro- However, they are still organized as trade decision-makers in planning and imple- found impacts on the overall economic centers with a great number of indivi- mentation? What are their political objec- and physical structures of the surround- dual shops and company offices. Thus, tives? In which way are decisions taken? ing areas. It still remains to be seen, for economic concentration processes have The investigation of these ­questions will example, whether manufacturing will presumably only taken place to a limi- result in a broader picture of the orga- eventually become a relic of the past in ted extent – namely, as far as the deve- nizational logic driving the ongoing eco- an area totally dominated by the service lopment and operation of the wholesale nomic restructuring processes and their sector. centers is concerned. governance in urban China. This brief case study shows, rather Conclusions surprisingly, that restructuring of the References The integration of China into the global textile sector can take place in the inner Cartier, C. (2002). Transnational Urbanism in the Re- economy in the course of transition was city. Manufacturing has not completely form-era Chinese City: Landscapes from . Urban Studies, 39(9), 1513-1532. substantially driven by the textile sector, disappeared so far, but constitutes an Enright, M. J., Scott, E. E., & Chang, K.-m. (2005). in which the country now holds the lea- important complement to the trading Regional Powerhouse: The Greater Pearl River Delta ding position worldwide. Globalization markets due to its specialized structure. and the Rise of China. Singapore: John Wiley & Sons has made China’s textile industry one Although one would expect a relocation (Asia). of the most important economic engi- of the textile-related cluster to the peri- Global Production.com (2008). Textiles - Trends in nes, especially during the early transition phery, it can apparently survive in situ. Globl Production and Trade. URL: http://www.global- production.com/textiles/trendstudy/index.htm [Access: phase. Due to fierce worldwide compe- This is the result of both densification 27.11.2009]. tition, there is a constant need for adap- and expansion of the built-up area into Guangzhou News (2008). Zhongda Cloth Mar- tation, modernization, and restructuring the former wetland area directly south of ket. URL: http://www.gznews.gov.cn/node_6/ (see also Kiese, 2009). If those restructu- the cluster. Where higher profits can be node_12/2008/08/29 [Access: 23.10.2009]. ring processes are not successful locally, generated by displacing the existing land Haizhu District CCPC (2009). The Forming and relocation processes can be expected to uses, as in the case of the northern edge Development of Zhongda Textile District. Guangzhou History Web, URL:http://www.gzzxws.gov.cn/gzws/ set in. This is especially true for China’s of the district next to the university, tex- gzws/ml/69/200902/t20090206_11348.htm [Access: coastal areas, where increasing salaries tile markets are demolished and replaced 20.10.2009]. and rising environmental standards are by high-rise apartment buildings. Thus, Invest Guanghzou (2007). Zhongda Becomes China's threatening the important economic role the land-use pattern of the area is gra- Largest Textile Commercial Area. Retrieved Oktober of this industry. dually reorganized. In the center of the 2009: http://www.investguangzhou.gov.cn/web/eng/jsp/ With its economic restructuring, up- area, however, the chaotic physical fabric content/content_detail [Access: 23.10.2009]. grading along the value chain, and the ra- of the “Urbanized Villages” survives in Kiese, M. (2009). National Styles of Cluster Promotion. Cluster Policies between Variety and Convergence. In L. pid physical implementation of shifting wide areas and is even upgraded in some Hagbarth (Ed.), Innovative City and Business Regions. development strategies, the Zhongda places, e.g., along highly polluted canals (=Structural Change in Europe, 6) (pp. 38-46). Boll- textile district proves to be an interesting (see photo). There, it can be assumed, lo- schweil: Hagbarth Publications. showcase in terms of governance over cal owners of kissing buildings, who rent Porter, M. E. (1998). Clusters and Competition: New time. An analysis of its physical and eco- out living space to low-skilled workers or Agendas for Companies, Governments, and Institutions. In M. E. Porter (Ed.), On Competition (pp. 197-287). nomic transformation has shown that operate specialized small workshops, are Boston: The Harvard Business School Publishing. the reorganization of the wholesale trade still resisting the large-scale redevelop- Yao, Y. (2008). Convention and Exhibition Power, is accompanied by an enormous jump in ment efforts of the district government. Ecologic Haizhu (Speech by the Head of the People’s scale physically. Restructuring has, in this The findings described above only of- Government of Haizhu District). URL: http://www. context, meant the upgrading of key inf- fer a first insight into the complexities haizhu.gov.cn/site/main/2008pazhou_en/ [Access: 23.10.2009]. rastructures, the demolition of outdated of the ongoing restructuring process of markets that only existed for a few years, Guangzhou’s textile district. They open an extreme densification of the urban the door to a variety of further ­questions, fabric, an upgrading of important parts such as: How is this spatial cluster being of the district, a widespread improve- redeveloped? What future will the manu- ment of public spaces, and the construc- facturing sector have in this (and other)

Friederike Schröder [[email protected]] is a Research Associate and PhD student at the Department of Economic Geography, University of Hamburg. She is currently working within the research project “Governance over Time”, funded by the German Research Foundation (DFG) as part of the Priority Program 1233 "Megacities-Megachallenge - Informal Dynamics of Global Change".

Dr. Michael Waibel [[email protected]] is the project leader of the research project “Governance over Time” based at the Department of Economic Geography of the University of Hamburg.

Prof. Dr. Uwe Altrock [[email protected]] is the project leader of the research project “Governability, Borders and Citizenship”, which is also part of the Priority Program 1233. He is the chair of the Department of Urban Regeneration at the University of Kassel.

8 Pacific News #33 • January/February 2010