How Do Local Governments Promote Regional Economic Development: The Case of Zhejiang

There have long been diverging views regarding the role of government in economic development. One perspective argues that the government should play as minimal a role as possible, while the other maintains that the government can play a significant role in economic development. Government and Economics suggests that the government can play a positive and proactive role in promoting economic development, provided that it establishes a comprehensive set of incentives aimed at fostering economic growth. Zhejiang's rapid development since the Reform and Opening-up serves as a classic example of this approach. This paper explores the role of local government in regional economic development. Utilizing a theoretical analytical framework wherein “privatization and marketization drive industrialization and urbanization”, and combining case studies of cities such as Wenzhou, Yiwu, and Hangzhou since the Reform and Opening-up, it reveals the role of local governments in promoting industrial clusters, specialized markets, and the strategic transformation of development space. Furthermore, it analyzes the challenges faced by local governments in the new development stage amidst the conflict between new technologies and old systems, emphasizing that governments must fully understand corporate innovation to drive high-quality regional economic development through innovation.