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Jici Wang and Lixia Mei 1. Introduction The concept of industrial district (ID) was revised to describe the thriving local development witnessed in the Third Italy (Becattini 1978, 1990). It is defined as essentially a territorial system characterized by a clustering of small and mediumsized enterprises (SMEs) with spatially concentrated networks, often using flexible production technology and extensive local inter-firm linkages (Harrison 1992; Asheim 1994). Rich literature in the 1990s concerning IDs has focused on their local embeddedness in the context of changes in technological-institutional systems in the post-Fordist era (Piore and Sabel 1984; Storper and Scott 1992; Staber 2001). It is noted in particular that not all spatial agglomerations of small firms in the same or related sectors necessarily correspond to IDs. In a local context where there are extensive local inter-firm linkages, untraded-interdependence, as well as a flourishing of tacit knowledge and local buzz, processes of learning and innovation emerge (Piore and Sabel 1984; Harrison 1992; Asheim 1994; Storper 1995; Gertler 2003). Here this key area is considered from the angle of Chinese experiences. Drawing on its vast population and mix of free-market and central-command economic policy, China has seen the development of a large number of industrial clusters, some of them embedded in territories which can be assimilated to IDs.1 These cases, in particular, have become new sources of growth for nonmetropolitan areas,2 enabling them to attract both foreign and domestic investments and resources that would otherwise be concentrated in major cities. The localities characterized by...