The Formation of Wenzhou Footwear Clusters: How were the
Entry Barriers Overcome?
Zuhui Huang Xiaobo Zhang Yunwei Zhu
Wenzhou used to be one of the poorest regions in eastern China. With limited arable land, poor
road access to major cities, and little support from the government, it seemed to lack all the
necessary conditions for economic growth according to the standard textbook. However, over the
past several decades, Wenzhou has achieved one of the fastest growing rates and owned the most
dynamic private sector in China. The footwearindustry in particular has grown from a negligible
place to the largest market share and has formed one of the largest industry clusters in China.
Therefore, the footwear industry provides us with a good example to unde rstand the driving forces
behind the dramatic rural industrial growth. For this study, we undertake a survey on about 140
enterprises at different scales in Wenzhou. The survey enables us to examine how the start-up
capital, credit, technology, and institutional barriers have been overcome in the formation process.
1. Introduction
Wenzhou is located in the south-eastern part of Zhejiang Province and was predisposed for
economic development. In 1978, Wenzhou City had a population of 5,612,600. Its arable land
area was a meager 2,900,000 mu (equivalent to 0.52 m per capita; 1/3 of the national average)
(Zhang Renshou, Li Hong, 1990). Additionally, Wenzhou’s proximity to Taiwan made it a likely
war frontline. Hence, neither the central nor the provincial (Zhejiang) governments were inclined
to spare limited resources for Wenzhou’s infrastructural and industrial development (Tsai, 2002).
From 1949 to 1981, only 655 million yuan, or approximately 20 million yuan annually on average,
were invested on the region (Zhang Renshou, Li Hong, 1990). Wenzhou suffered from poor
transportation, relying upon a single narrow mountain road for transportation of people and goods1,
and consequently did not provide potential for industrialization.
Prior to reform, Wenzhou was one of the poorest regions in eastern China. With limited
arable land, poor road access to major cities, and little support from the government, it seemed to
lack all the necessary conditions for textbook economic growth, Nevertheless, since the economic
reform in the late 1970s, several industries thrived in the region. The footwear industry in
particular has grown from a negligible size to the largest share in the market and has formed one
of the largest industry clusters in China.
With such unfavorable initial conditions, how did the new entrants succeed in overcoming
the obstacles and constraints such as technology, start-up capital, etc. and begin the clustering
process? What are the major factors that contributed to its formation? What lessons can be drawn
from this success story? The footwear industry provides us with a good example to understand the
1 Wenzhou Airport and Jin-Wen Railway were respectively completed in 1990 and 1998.