The Role of Local Government in Industrial Upgrading: A Case of the Textile Industry in Shaoxing

This article examines China’s largest textile industrial cluster in Shaoxing county as a case study of how developing countries could carry out industrial upgrading in the face of globalisation’s challenges. The authors argue that the local government could play a crucial role in transforming comparative advantages of the local economy into competitive advantages using various policy tools. The Shaoxing county government rewarded and subsidised local textile enterprises to carry out independent innovation and research and development (R&D), facilitated foreign investments and technology transfer, guided local enterprises to build up their own brands, introduced preferential policies to encourage local enterprises to participate in international competition and motivated local enterprises to expand export. This demonstrates that the county government’s guiding hand and policy measures are instrumental in leading textile enterprises to reshape their competitive advantage, integrate into the global market and upgrade the industry.