“With a Little Help from the State”: Endogenous and Exogenous Dynamics in China’s Cluster Economy

District economics has only recently become an established field of research in China. This chapter aims to help define more precisely the nature of Chinese districts, discover what role they have played in China’s dramatic economic growth, and interpret interactions between the Chinese and more mature economies in light of the developments in and interplay between districts. It will do so by analyzing the nature and structure of the Wenzhou district economy, concentrating on the role played by endogenous and exogenous factors in the process of globalization. The chapter will first of all address the role of trade – per se exogenous factor – but an element so closely tied with the structure of the Wenzhou economy to be regarded as endogenous. Secondly, the study will focus on the role of informal finance, and on its recent impact during the global crisis. In both cases, the analysis will highlight the interplay of local institutions and central government, pointing out how Wenzhou’s features as an industrial district do not fit neatly into an already established model. Rather, it can be described as a blend of Asian and Western features, where endogenous and exogenous factors were both responsible for its development.