Lock-in and New Path Development of China Commodity City: The Role of Policies

China Commodity City (Yiwu) has evolved from a poor, isolated region into one of the world largest mass-producers of low-tech products. This study applies the concept of path dependence in order to trace Yiwu’s industrial development trajectory. It zooms in on factors leading towards lock in, path extension and path creation. The study identifies multiple factors leading towards a lock-in and possible path decay. At the same time, related diversification and industrial policies such as the China Belt and Road Initiative enable path extension. New path creation is however less likely in the nearby future. While China moves towards a knowledge economy, innovation policies in Yiwu have not yet been successful, as they don’t specifically target low-tech family firms, implementation capacity is limited, instruments are not well targeted and institutional incentives are diffuse. To create an alternative innovation-driven industrial pathway, the study recommends landscape pressure and multilevel experimentation.

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