 So the topic of this particular session is on spatial and industrial policy, and nowhere I think these policies are reflected more in terms of the local government support to industrial development in China. Today I will first talk a little bit about the background of the study. As John said, this arises from the series of work on manufacturing in low-income countries. I will also talk about the nature of the government support, which you will see that varies from locality to locality. The role of central versus local government, in particular the telling of government support to the business life cycle. Because each of the firms has a different, goes through a different life cycle. So in the beginning stage, the needs are different from the development stage and different from the maturity stage. I will give some examples if I have time. And at the same time, before you walk out here with all of the great ideas about China industrial development, I think there's some China exceptionalism, meaning some areas that may not be easy to replicate in other countries. And finally I will make some concluding remarks. The background, as I mentioned before, is the series of books. But in particular for this book, for the tale from the development frontier, is based on analytical surveys. It's based on a lot of interviews. We actually went over 15 cities and locality in China. We interviewed over 200 enterprises and firms over a period of two years, from 2010 to 2012. The sector that we cover include apparel, leather products, wood products, metal products, and agri-business. While we talk today about structural transformation, in this conference we focus on structural transformation. And the role of the government is very critical to structural transformation. But if you look back in the past 40, 50 years in development economics, economists tend to have different views, tend to hold different views on what that role is. In the 60s and 70s, we tended to use the so-called big push, where development was assumed to come from large investment by the public sector. But that led to the whole development paradigm and that led to a lot of failure, a lot of indebtedness for developing countries in the 60s and 70s. Then in the 80s and 90s, the pendulum swung to the other side. Meaning we follow the Washington consensus, leaving the market forces to determine, to guide development of the economy. In practice, what you will see today is the Chinese approach tend to have mixed elements of both less affair and dirigisme. And you will see how the mixture will take place later on. On the nature of government support in China, the government support for enterprises in manufacturing covered a whole wide range of activities, policy measures from fiscal incentives to hard and soft infrastructure. Now the soft infrastructure refers to things like advisory support on upgrading, knowledge spilled over through the establishment of enterprise association of other entities, improving managerial and worker skills, providing quality control and assisting in building brand name. These policies vary by sub-national level, by region and by locality. And they do not always involve government spending. For example, when the local government tried to introduce a specific enterprises to the R&D activities of the local government, that does not involve government spending at all, but still the work of the local government. And the nature of the support varied. So in general, it increases with the agglomeration of economic activities. That is, the bigger the cluster of activities, the greater the support. National policies usually establish the general direction and the pace of reforms, why most of the direct support for enterprises and for clusters is provided by the provincial and municipal government. And the government support also varies according to phases of the business life cycle. The role of central and local government. The central government play a key role in reassuring the first generation of private firms about the market directions of reforms. But it also play a very important role in the 1994 fiscal reforms, whereby 60% of the income tax on enterprise profit shifted to central government, and 40% are allocated to the local government. In addition, the central government gradually implemented a performance system, whereby the promotion of local officials do not just depending on the membership of the party, but also GDP, a local GDP growth. And the promotion doesn't just depend on how well the region is doing. It also depends on how well the region is doing in relation to the other region. And that unleashes the whole fierce competition among local government in nurturing entrepreneurship and in attracting investment. By the early 1990s, the local governments behaved as if they were professional corporations. That's in the work of some Chinese experts. The negative side of this is of course in the course of competition, the local governments try to raise GDP to the extent that it caused some damage to the environment, and I'll come back to this point later on. Compared with the central government, the provincial government played a more active and specific role in the cluster development. They affect the formation and upgrading of clusters through two main instruments. The first one is through land allocation, and the second one is through cluster development planning. I will come back to that at the end of the discussion and show you some very specific example of how provincial government involved the clusters. Municipal governments are directly connected to clusters, which generally account for most of the economic activities in the village of Hao. Now in this presentation, since this is a Western audience, I use the term municipal government in a very loose way, in a Western way, meaning it covers the local government below the provincial government. That's a typical way we understand public finance, for example, in Canada or in the US. But the term in China means a different thing, because municipal government in China usually refer to the local government at the level of large cities like Beijing or Shanghai. So in China, what I call municipal government covers the prefecture, the county, and the township. And below the township, there's also villages. These are what we call municipal government in the context of our presentation today. What are the measures taken by local governments? The measures taken include three. The first one are the nurturing of clusters from the existing industrial base. So entrepreneurs build clusters, the government, the local government in this case, nurture them, supporting the most profitable local industries. They also build industrial parks. But local government target a specific industry. They build industrial parks with good infrastructure and concentrate firms within the parks. So firms in these parks benefit from favorable policies on land acquisition, taxes, and duty drawbacks. Clusters usually expand very rapidly after the construction of industrial parks. The third way that local government can promote clusters is through the creation of special platforms for specific industries. Here, this is because as firms develop from family workshops to model factories, they need soft infrastructure, such as new system of organization management, technological R&D, and market exploration. So local government often set up special platforms for specific industries. And toward the end of the discussion, I will also show some specific platforms. But then the question arises, why local government? Why not the central government? This is because in some countries, the central government does everything from planning and developing strategic industries by mobilizing and allocating resources. And these efforts often fail. That's the term picking the cherry come from. Local government, in contrast, have fewer options. They cannot change the macroeconomic environment. They cannot build national monopolies. And they lack the financial resources for building industries that are available for the central government. So as a result, local government has generally supported profitable firms that are already in business in local communities. So China experience at the local government level illustrates the case of backing the winners and not just picking the winners. But a specific case of support is the telling of government support according to the business life cycle. Precisely because of intimate knowledge between the provincial, between the local government and the enterprise conditions, their support varies by the business cycle. In the start of phase, the government support is not much significant. It's not any different than most of the support that one sees in Africa and other Asian countries, for example. But in the growth phase and the maturity phase, the government support is substantial and provides clear evidence that the government industrial policy is to help promote the clusters. This is a crucial difference with the traditional industrial policies in other countries. During the growth phase, the government support can be, and here I talk about local government support, can be divided into three types. The first one is the policies to facilitate production factors such as subsidies on land, credit, training programs. Second one is policy to create externality through industrial park or cluster developments. And the third one are policies to help set up the upstream and downstream activities to complete the value chain. There's other areas of intervention throughout the growth phase, including some of the ones I mentioned here. And I don't think I have enough time to cover every one of them, but they're so extensive. And again, they vary from locality to locality. So sometimes it makes me wonder if there is areas that the local government do not support. It's as simple as that. There's just so many different ways and there's so many different modes of support. The support during the maturity phase includes helping the enterprise to get in touch with the research and development of the local university, networking, marketing, assisting through the trading companies, and completing the value chains through the upstream and downstream activities investment. So Chinese officials acting as a mesh maker connect firms with research agencies and consultants and thereby reducing the cost of access to information. I think there's a numerous example and the book that, in fact, at the end of the discussion, I will give you the website for the book, which you could get online for free. We give a lot of examples. We had something like 18 different cases of study where we go into very details of this support. So I'm not going to go over each and every one of them. Just to mention quickly that at the provincial level, policies are to give the preferential tax treatment to key and high-tech firms. So they identify design and implement cluster upgrading strategy. The Guangdong province, for example, has a special list and this is what you have. You have hardware industry in Shaoxian. You have lighting industry in Guzhen. You have wood and textile industry in Dailang, ceramic in Nang Zhuang, and shoe industry in Hongbo. So these are different upgrading strategies done by the provincial government. Example of municipal support. In Eagle Meat product case, the local administration offered entrepreneurs low-priced land in Industrial Park, subsidized interest on loans, and tax breaks. The local authorities also did upstream work with the farm workers by offering training in agricultural best practice. To boost agricultural activities in rural areas, the government offers subsidies to local farmers who agree to dedicate their land to supply and agribusiness. So this enabled the scatter plots to be joined together into a larger unit so that it's suitable for the large-scale production of hogs and other agro-products. In the case of the Wu Hu, the government developed Chengdu into an industrial park with a complete supply chain that spans backwork and forward links from upstream shoemaking machinery and spare parts, leather and fabric, heels, sole, accessories, and other auxiliary materials to the downstream manufacturing and distribution of shoes such as design, R&D, logistics, and other services. So as I mentioned at the beginning, these activities are extensive and they cover many, many different needs of the enterprise. I could give you another example of the cluster support in which the Wu Hu District launched the brand enterprise base, it's called BEBE, of the Western Shoes Center of China Industrial Park to establish industrial platform for shoe material selection, for shoe buying and trade, for R&D, and international logistics for women's shoes. It actually uses 11 hectares of land inside the park to build facilities including international trade center, shoe material center, a logistic supermarket, a shoe technique and services center. At 4,200 square feet, square meters, sorry, the international trade center is one of the largest in China for shoe product. To expand business further, the Wu Hu government sent delegation to the leading footwear producing areas of Guangzhou, Guangzhou, and Guangzhou to learn from their experience. And it set out a guideline to encourage private firms to engage in R&D, brand naming production, and export. And they provide different kind of rewards for famous brands. So these are some specific examples of the cluster support that we would find in the book. So the question arises, how do local government finance on these activities? In the beginning I mentioned about 40% share of the income tax on enterprise profit, but there's also another source of financing for local government, and that is through the land deal. So for example, in the case of Guangzhou, the municipal government financed these activities through land deal. Through the intervention of the municipal government, the state enterprises located in the city center on the street saw their downtown land parcels and moved their operations to suburban industrial park. The municipal government then resale these valuable plots to commercial developers. The relocated companies use a process from the land sale to repay debt and upgrade technology. So the land deals are actually one very major source of financing for the local. Okay, so I think I'm going to have to finish. But before we walk away, I think we need to talk about what I call China exceptionalism. Okay, one should remember that China has a very large domestic size, 1.4 billion people, and no other country in the world has that size. That size allows for huge economies of scale and fierce competition and facilitate the rapid completion of the value chain. Financing of local governments is done through coercive large scale land sale and liaises, as I mentioned. So this is another example that few other countries can do. And China began with a labor force that was not only large but also literate and well-educated. And China large diaspora was an indispensable source of knowledge about commerce, technology and trade. And they have a lot of Chinese coming from Hong Kong, from Taiwan, and from all of these areas in Southeast Asia bringing all the technology and trade and knowledge to mainland China. China also has benefited from an unusual depth of entrepreneurial resources among the domestic citizens and overseas immigrants. So finally, let me conclude the presentation. Much of China's recent industrial success can be attributed to the facilitating growth of the local and provincial government. China's successful industrial policy combines elements of both deregis and less affair. But these policies have not been particular for any area. In fact, they varies from locality to locality. And various policy approaches have been adopted depending on the local context and the particular stage of the firm development. So the goal is to guide the firm and the industry to become nationally competitive. Hence, the government plays a critical role in facilitating the creation of input and output markets around which industrial value chains and clusters have evolved. Thank you very much. And here you could see the website. You could see the website where you could obtain the book for free online. Thank you.