Anding County was once one of the poorest, hungriest areas in China. Limited rainfall and infertile soil led to extremely low and volatile yields of wheat, the main crop. Seventy-eight percent of farmers lived in poverty.
But now Anding has become China’s “potato capital.” This improbable transformation led IFPRI Senior Research Fellow Xiaobo Zhang, along with Dinghuan Hu from the China Academy of Agricultural Science, to explore just how it happened and record the findings in an IFPRI discussion paper, Overcoming Successive Bottlenecks: The Evolution of a Potato Cluster in China.
What Zhang saw was a well-functioning “potato cluster” that employs about 30 percent of the population. To understand what a cluster is, think of Silicon Valley, California, or Bangalore, India—a geographic area where related businesses are concentrated. This concentration makes it easy to achieve a division of labor. In Anding different people are responsible for each small step in production—everything from growing the potatoes to producing French fries to making the bike deliveries that move supplies from one step to the next.
Starting in the 1950s, the Anding County government undertook a massive effort to improve agricultural land by building terraces. But better land only went so far. Yields were still lackluster, and people were still poor. The county government realized that wheat, which farmers had grown there for many years, was not well suited to Anding. Potatoes were a better fit for the local climate and soil, but farmers did not take them seriously as a cash crop. Recognizing this, the local government convinced a core group of farmers to plant potatoes in the 1980s and early 1990s. Their success led other farmers to forget their prejudices and start growing potatoes as well.
This success, of course, was not the end. The local people and their government used their knowledge of the area to overcome new challenges. When the market demanded higher-quality potatoes, the local government focused on developing new and better varieties. When farmers needed a place to store their potatoes while they waited for better prices, the county government implemented a new policy to encourage farmers to build more storage facilities.
Zhang and Hu found several reasons that clusters work in China, and specifically in Anding County. First, the concentration of production attracts wholesalers to Anding, saving farmers travel time and money. This concentration also gives the farmers political power. When Anding producers wanted to expand the potato trade to large cities on the coast, transporting the potatoes was a problem—the Ministry of Railway had allocated only a small number of freight railcars to Anding. The potato producers had enough clout, however, to get the quota of freight cars more than doubled from 2003 to 2004.
In addition, clusters can make it easier for entrepreneurs to get started, according to a related study by Zhang and his colleagues. Access to credit in developing countries is limited, especially for the poorest citizens. Clusters can overcome the credit bottleneck by both reducing the amount of money needed to start a business and creating partnerships through which bigger players to lend money to smaller ones.
Finally, while avoiding the credit problem is a significant advantage, Zhang points to the reliance on the knowledge of local people and governments, rather than regional or national decisionmakers, as the Chinese clusters’ greatest reason for success. “You need to trust people on the ground,” Zhang said. “The local people know best what their issues are.”
Anding’s potato cluster is just one example of a growing trend in China—a nearby county specializes in medicinal herbs, while another focuses on the Chinese art of paper cutting. The success of clusters in China leads one to wonder why this system is not flourishing in other developing countries. According to Zhang, these countries often do not share two of China’s main advantages: infrastructure and empowerment of local governments.
In Ethiopia, for instance, handloom clusters exist, but they have failed to thrive because the country lacks electricity and other basic infrastructure.
But the bigger problem, as Zhang sees it, is that NGOs and other development partners are not making use of the clusters’ greatest strength: local knowledge and initiative. The key difference between China and other developing countries, according to Zhang, is that “local governments in China are very involved.”
The development community usually talks with national leaders to come up with prescriptions that are duplicated around a country. But the agenda imposed on a community may not fit that place at that time. Clusters are effective because they are location and population specific.
“The development community wants one-size-fits-all, simple solutions,” Zhang said, “but development is a continual process. Local governments know best how to adapt when needs evolve.”