Speaking of economies of scale, the New York Times recently ran an article that says China has dominated the textile market in part by developing cities that specialize in particular articles of clothing and forming "'lump' economies, where clusters or networks of businesses feed off each other, building technologies and enjoying the benefits of concentrated support centers."
<blockquote>Datang produces 9 billion pairs of socks each year -- more than one set for every person on the planet. People here fondly call it "Socks City," and its annual Sock Festival attracts 100,000 buyers from around the world.
Southeast from here is Shenzhou, which is the world's "Necktie Capital." To the west is "Sweater City" and "Kid's Clothing City." To the south, in the low-rent district, is "Underwear City."
This remarkable specialization, one city for each drawer in your bureau, reflects the economies of scale and intense concentration that have helped turn China into a garment behemoth. On Jan. 1, a new trade regime will end the decades-old system of country-by-country quotas that split up the world's exports among roughly 150 countries. Now, China is banking on its immense size and efficient operators to grab an even larger share of the world's clothing orders.
Neither Adam Smith nor Karl Marx could possibly have imagined that this kind of capitalism would evolve from a communist system in quite this way, with an obscure town in the middle of nowhere becoming the world's sock capital. But these days, buyers from New York to Tokyo want to be able to buy 500,000 pairs of socks all at once, or 300,000 neckties, 100,000 children's jackets or 50,000 size 36B bras. And increasingly, the places that best accommodate those kinds of orders are China's giant new specialty cities.
The abolition of quotas is expected to accelerate this trend over the next decade or so, particularly under the guidance of China's government. The niche cities reflect China's ability to form "lump" economies, where clusters or networks of businesses feed off each other, building technologies and enjoying the benefits of concentrated support centers -- like the "Button Capital" nearby, which furnishes most of the buttons on the world's shirts, pants and jackets.
China's fast-paced economy is developing into more than just a beehive of individual private enterprises scattered hither and yon. The textile business is a prime example of how the Chinese government's attempt to guide development more indirectly through local planning, instead of outright state ownership, is starting to pay off. (David Barboza/New York Times, "China Finds a Capacity for Capitalism," <em>The Wichita Eagle</em>, <a href="http://www.kansas.com/mld/eagle/2004/12/25/news/nation/10495009.htm">December 25, 2004</a>)</blockquote> -- Yoshie
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