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China has become the most important manufacturing economy in the world because it is a continent-sized Silicon Valley. worksinprogress.co/issue/chi… Every Chinese city govt acts as a VC firm trying to create clusters in its region, because it has both the means and incentive to do so. Local govts generate their revenues, nearly all of which they keep, from selling leases on land and from stakes they have taken in local companies, which together allow them to capture economic spillovers. Chinese officials have their entire careers graded and determined by how much growth they have been able to create in the areas they run. Career progression is determined according to a great tournament that pits official against official and gives promotions to whoever has grown their region the most. If they don’t reach a certain stage by a certain age they are blocked from promotion forever. This is why so many economic clusters have centred on Chinese cities, for high- and low-tech products alike. Shaodong makes 70% of the entire world's cigarette lighters; Danyang makes half of the world's spectacle lenses; Zheng'an makes 1/7 of the world's guitars; Datang a third of its socks. Whereas many of the West’s most important city governments capture only a small amount of the spillovers from successful clusters, and thus have very little reason to foster them, in China, they get a huge amount of the upside and can re-invest it in further growth. This also gives them a great incentive to solve problems for companies, like when Shanghai's govt got Tesla's factory there built even faster than Elon himself had expected (and twice as fast as his Fremont, CA factory). But this is not some exotic 'oriental' innovation – this is how America used to do things when it grew fastest, in the 1950s, 1960s, and early 1970s. Catching up with China on advanced manufacturing does not require a wise and strategic approach, let alone authoritarianism or the end of democracy. It may just mean fixing city government. This is why I care so much about local in Britain and America: if we give our own local governments the same incentives and means to grow, the crazily dysfunctional entities we have become used to may be transformed into corporation-like bodies that are ruthlessly focused on making their cities rich, safe and prosperous. Read more in Works in Progress worksinprogress.co/issue/chi…