Vol.4, No.9B, 33-39 (2013) Agricultural Sciences
http://dx.doi.org/10.4236/as.2013.49B006
Engineering agro-food development: The cluster
model in China
M. Yu1*, J. Calzadilla2, J. L. Lopez2*, A. Villa2
1Urban Agriculture Research Center, Shanghai Academy of Agricultural Sciences , Shanghai, China;
*Corresponding Author:
2Econ omy and Social Sciences, Agriculture Faculty UPM, Madrid, Spain ;
Received Ju l y 2013
AB STRACT
The concept of industrial clusters has been
around for some time. For many national and
regional authorities, particularly in the United
States and Europe, cluster development polici es
became the core for the new development para-
digm based on the agglomeration economy. The
potential of clusters for the development of a
new model for the agro-food industry was rec-
ognized at an ear ly stage. Both the Uni ted S tate s
and Europe have developed a strong base of
agro-food clusters. Also in developing countries,
where agriculture is the main economical source,
a strong ally to chan ge their economy has been
found in clusters. Latin America has many good
examples of agro-based clusters. The Asian re-
gion is now starting to include the agro-food
clusters into the mainstream of changes in agri-
culture, farming and food industry. The case in
China is very relevant, as the potential it holds
for agro-food development is enormous. In this
communication, the state of agro-based clusters
in China is described together with two exam-
ples of clusters, one specialized in vegetables
and other in flowers.
Keywords: Agriculture; Development; Clusters;
China
1. INTRODUCTION
Economic agglomeration is the base of the 20th Cen-
tury major developments. Either are the urban agglome-
rations or the industrial districts and clusters, they all
provided a new ground for the development of comple-
mentarities, substitution effects, and cooperative links be-
tween the different industrial and institutional economic
actors.
This great competitive advantage has resulted in a
ree nginee rin g of t he wa y ind u str y, ac ade mia, i nsti tuti ons ,
and policy makers cooperate and work to foster competi-
tiveness in a global economy for the different sectors of
the economy. The cluster paradigm has been at the center
of the process. National and regional governmental au-
thorities provided sustained support to create, develop
and grow clusters in the competitive sectors of their econ-
omy, from the earlier cluster initiatives from the United
States and Europe, to the world, with important devel-
opments in Latin America and Asia.
New tools have been produced to quantify, analyze
and study the impact of clusters in employment, compe-
titi veness , kno wledge shar ing and utiliza tio n, R&D, prod-
uct output and exports, regional GDP, and others, result-
ing int o the Cluster Observatories in EU and U S .
Agriculture, farming and husbandry, and food produc-
tion are key economic sectors in many economies, and
still play an important role in developed ones. It is then
natural to extend the cluster model to these sectors, the
deve lop ment of the agro-based cl usters.
In this paper, we want to focus in the way the agro-
based clusters are taking shape in China, and the results
and c hal l en ge s fac i ng them. Two exa mples o f a gr o -based
clusters in China are considered: one is vegetables pro-
duction cluster and the other is flowers cluster.
2. ECONOMIE S OF A GGLOMERATION
Industrial clusters have been around for some time [1],
and their influence in the way of engineering a new in-
dustrial para digm is paramount. T here is no sector of the
economy that has not been influenced by them, and their
capability to mobilize knowledge, people, production re-
sources and markets is their characteristic appeal. Agro-
food industr y is by no way a stranger to this, and cluster s
are now playing a very significant role in reengineering
their horizon.
The cluster model and the industrial district [2] are
two forms of effective competitive development for re-
gional industrial economies that implements the benefits

M. Yu et al. / Agricultural Sciences 4 (2013) 33-39
34
of economic agglomeration and the Marshallian exter-
nalities. The industrial district is a form of economic ag-
glomeration where companies are engaged and linked by
similar business activities resulting in a more adaptable
production systems better adapted to changing markets
[3], which within a geographic area are able to streng-
then interactions between local suppliers and customers,
shared knowledge and capacities, and build upon existent
externalities. The cluster is also as an economic agglo-
meration model that builds upon knowledge creation,
innovation and increasing returns [4] linked to a particu-
lar region, where beyond the flow of products there is an
exchange of business information and technological ex-
pertise.
The economy of agglomeration [5] considers the out-
come of an economical system cooperation under a spa-
tial framework suc h as region al, national o r multinatio nal
level.
The economic agents in this common space either farms
or industries and services prosper developing comple-
mentarity and substitution effects. Being, increasing re-
sults in production the sign of the exchange between pro-
duction and t ransportation co sts within the geography.
Marshall [6] considers externalities as a key factor for
economic agglomeration providing an encircling effect.
The three externalities that more influenced cluster for-
mation are as follows:
1) Distribution in the region of specialize inputs with
scale economies linked to the demand.
2) Local availability of specialize labor force, large
enough to allow for good matching between jobs and
workers.
3) Good flow of ideas and exchange of knowledge,
fostering tec hnological spillover and growth.
The analysis of the agglomerations within a region,
eithe r i n the for m of industrial district or cluster, requires
the use of different spatial concentration and sector spe-
cialization indices that are used to identify the industrial
sectors and their economical and employment develop-
ment.
The more used indices are the Location Quotie nt (LQ)
[7], as a tool for comparing industrial compositions, and
the Krugman Index [8], to compare specialization be-
twee n regions.
The general expression for the Location Quotient of
industry a in the region r, is given by Eq.1.
/
/
ar r
aa
XX
LQ EE
=
(1)
Where the elements of the equation are the following:
• Xar is the local employment of sector a in the region r.
• Xr is the total local employment in the region r.
• Ea is the total reference employment for the industry
a in the territory.
• E is the total refere nce employment in the territory.
The general expression for the measurement of re-
gional specialization using Krugman index is given by
Eq.2 co mparing two regions A and B.
1/2(/)(/)
ABiA AiB B
i
KIX XXX= −
∑
(2)
where the elements of the equation are as before.
Figure 1 displays the agriculture cluster for US, and
use the quantitative indexes to analyze the spatial distri-
bution. Top employment specialization represents those
that the LQ of cluster employment is greater than 75th
percentile across all economic areas in the cluster. Top
employment share represents national cluster employ-
ment that is greater than 90th percentile across all eco-
nomic areas in the cluster. Top employment specializa-
tion and share represent those that meet both criteria.
3. CLUSTERS RE ENGINIERING
3.1. Cluster Concept
As mentioned before, clusters emerged as one of the
industry realizations of the economy of agglomeration.
The term cluster and its inherent characteristics were
defined by Porter [1]:
“A geographically proximate group of interconnected
companies and associates inst itutions in a particular field
linked by commonalit ie s and complementarities”.
Porter used the diamond model [10] of competitive
advantage to analyze how the concentration of ec onomic
activities in the cluster industries can result in new and
better ways to compete and to bring innovation faster to
the market [11].
It can be noticed that a cluster is defined by relations
not by membership, and the spatial boundaries are as
flexible as needed. Another important property of clus-
ters is that they are d ynamic and not static o ver time, but
chan ging continuously.
The OECD [12] has produced a different definition,
focused o n t he knowledge dimens ion:
“Clusters are characterized as networks of production
of strongly interdependent firms, knowledge-producing
agents and customers linked to each other in a value
adding production chai n”.
There is an important difference between the empirical
model of clusters and the cluster policies and initiatives
oriented to their creation and development.
Cluster policies [11] are specific governmental efforts
to support clusters. Those policies include industrial and
SME policy, or research and innovation policy. Cluster
policies are frequently supported by specific govern-
mental programmes or iniatives. One important actor to
this develop ment is cluster organization s. These are legal
entiti es en gineer ing, ste ering and managin g the clusters.

M. Yu et al. / Agricultural Sciences 4 (2013) 33-39
35
Figure 1. Agriculture Clusters US 2010. Source: Defining Clusters of Related Industries. Delgado, Porter, Stern 2013.
To support these policies, quantit ative analysis of growth,
decline and emergence of clusters within a territory is
needed. T his statistical analysis is called c luster mapping.
Both EU and US have comprehensive cluster mapping.
In the US the Institute for Stra tegy and Co mpeti veness of
the Harvard Business School [13] developed the metho-
dology for the US cluster mapping. In the EU the Euro-
pean Cluster Observatory [11] was established in Sep-
tember 2006 under Europe INNOVA, customized that
methodology according to the European codification sys-
tem and EUROSTAT (European Statistical Services) re-
gional data model.
3.2. Cluster Components
The possibilit y of creation of cluster s [14 ] relies on the
geographic proximity of the related economic activities
and the presence of co-located end-producers, suppliers,
service providers, research laboratories, educational in-
stitutions and o ther specialized institutions.
In the Cluster Initiative Greenbook [15] the organized
efforts to develop clusters are grouped as cluster initia-
tives. These efforts can be organic or planned depending
on the process of initiation. The organic clusters are pro-
moted by public bodies, either national or regional gov-
ernments, while the planed ones are initiated by private
firms that link together in the region to improve their
own c ompeti veness by commercial collaboration.
The cluster initiatives involve several objectives in
parallel [ 2]:
1) Human resources upgrading, enhancing the pool of
available skills.
2) Cluster expansion, to increase the number of par-
ticipants.
3) Busi ness development.
4) Commercial cooperation.
5) Inno vation.
6) Business environment, to enhance the condition for
busine ss.
3.3. Agro-Based Clusters
Agro -based clusters [16] are concentrations of produc-
ers, agribusiness and institutions engaged in the same
agricultural or a gro-industry subsector and build value
networks a ddres s ing common challenges.
These clusters are becoming a competitive factor for
the agr icultur e in the 2 1st c entury to add ress glob alizatio n,
high-value production, distribution and packaging inno-
vation, and more efficient production. New tools are

M. Yu et al. / Agricultural Sciences 4 (2013) 33-39
36
needed to reengineer the new agriculture demands. Cen-
tral and local governments have realized that agro-based
clusters are valuable tools to foster growth in the agri-
cultural sector in their territory, linking them to global
value chai ns [16] .
Ho wever b uild ing a gro -food clusters in less developed
regions is more challenging, because the sector there is
dominated by small-scale producers and organized in a
more informal manner, lacking the links to research and
innovation, whic h is di fficult for the critical mass needed
for growth.
Agro-based clusters in general require focused policies
and programmes for their implementation. The roles of
multilateral institutions, national governments and over-
arching institutions are much needed to provide focus
and support in the development process.
Some cluster of similar initiatives for the agglomera-
tion of agriculture-based business have been developed,
which can be lacking some or part of the cluster charac-
teristics at some point o f the agglomeratio n development.
Such initiatives a re the follo wing [16]:
1) A gribusiness complexes.
2) A gro-industrial par ks.
3) A gri-export zones.
4) Export consortia of food and agricultural products.
5) One-village-one-product.
6) Sub-national Innovation System.
4. AGRO-FOOD CLU STERS IN CHINA
Chinese agricultural sector is at the transitional stage
shifting from traditional agriculture towards modern a gri-
culture. Agricultural industrialization has been regarded
as one of the most important development strategies to
realize the long term goal for agricultural modernization
in Chi na. Sinc e the begi nning of the 21st Century, p artic-
ularly after 2003, many scholars started to study agro-
food clusters in China [17]. Some scholars believe that
agricultural cl uster is a de velo pment mode o f agricultural
industrialization, and the development of agricultural
cluster is a n intrinsic de mand for the develo pment of the
agricultural sector, also an important approach to the
growth of the agricultural sector. In China, the agricul-
tural clusters emerge along with the progress of agricul-
tural industrialization, and agricultural clusters can be
regarded as the advanced stage of agricultural industria-
lization [18 ].
4.1. Research on Agricultural Clusters in
China
Compared with the research on agricultural clusters in
western countries, the research in China is still at the
initial period, and most researches touch upon the defini-
tion, formation mechanism, classification of agricultural
clusters, and challenges, as well as the role of govern-
ment in agricultura l c lusters.
4.1.1. Formalization Mechanism of Agricultural
Clusters
Some Chinese scholars analyzed the realistic basis and
incentives conducive to the formation of agricultural
clusters in China. Scaling up of agricultural production,
progress in agricultural industrialization, and enhanced
entrepreneurship of farmers contributed to the formation
of agr ic ul t ura l c l uste r s [1 9 ] . Z hen g et al. (2006) [20] also
found entrepreneurship in rural area played certain role
in formation and development of agricultural clusters in
China when analyzing the flower cluster in Dounan of
Yunnan [2 0]. In other st udies, it was found that agro-food
consumption demand is the decisive factor in the forma-
tion of agricultural clusters, and market competition is
the internal driving force in the formation of agricultural
clusters, while difference in agricultural resource en-
dowment lay the basic conditions in the formation of
agricultural clusters [21].
4.1.2. Classification of Agricu ltural Clusters
Because of the difference in dominant actor, structure
and development environment of cluster, scholars classi-
fied agricultural clusters into different development mod-
es/types from different angles. From the angle of organi-
zation mode, there are “company + farmer” type, far-
mer’s cooperative coordinated type, dragon head enter-
prise1 leading type, and vertical integration type [22,23].
From the angle of driving force mechanism, agricultural
clusters can be classified into agricultural hi-tech park
dominant type, market d riven type, i nvestment driven type,
and specialized small town type [24-26]. From the angle
of specific sectors, agricultural cluster can be classified
into crop farming cluster, livestock farming cluster, agri-
cultural product processing cluster, agricultural product
distribution cluster, and agricultural sci-tech cluster [27].
4.1.3. Challenges to Agricultural Clusters
The development of agricultural clusters in China is
still at the initial stage, according to some scholars [18,28,
29], main challenges to agricultural clusters are summa-
rized below:
1) The agricultural cluster does not have its distinct
regional characteristics, often with the same or similar
pillar industry which results in over competition within
the cluster due to the same industrial structure;
2) There is still a lack of agricultural dragon head en-
1Agricultural dragon-
head enterprise is defined as a company which is
mainly specialized in processing or dist
ribution of agricultural product s
and can organize and lead farmers access to market. The company is
entitled as a dragon-head enterprise only after being certified by go-
vernment al authori ties under th e quali fications of production sca le and
business performance.

M. Yu et al. / Agricultural Sciences 4 (2013) 33-39
37
terprises which have strong market competitiveness and
strong capacity to organize a larger number of small-
scaled farmers for a market-oriented production;
3) The capability for technological innovation in the
agricultural cluster is still weak, and the level of tech-
nology is still at low level;
4) The internal organization c apabilit y of the cluster is
weak, difficult to create an internal beneficial business
environment. There is a lack of cooperation among ac-
tors in the agricultural cluster. The inter-connection rela-
tion is not well established, decreasing the synergistic
effect of the cluster;
5) Agricultural enterprises often have difficulties of
financing from financial institutions. The supporting in-
stitutions and communal service system are not well es-
tablished.
4.2. Cases of Agricultural Clusters
Along with the development of agricultural economy
and the change of agricultural development mode, the
phenomenon of clustering of agricultural industry has
emerged in many places in China, notably, vegetable
cluster in Shouguang of Shandong Province, tea cluster
in Anx i of Fuj ian Pro vince, fl ower cl uster i n Chenggo ng
of Yunnan Pr ovince, sugar c luste r in Gui xian of Gua ngxi
Province, garlic cluster in Jinxiang of Shandong Prov-
ince. These agri-food based clusters are all based on one
type of agricultural product, with concentration of spe-
cialized producers, processors, input suppliers, transpor-
tation provider, intermediary agents, research organiza-
tions, service institutions and other supporting institu-
tions [30].
Two cases ar e pr ovided below with special atte ntion to
the role of local government (provincial, municipal, and
county level) and the role of market system in fostering
agricultural clusters, because the governments at various
levels and the establishme nt of marke t system have played
indeed important roles in the development of agricultural
clusters.
4.2.1. Vegetable Cluster in Shouguang
Shouguang, located in the middle of the Shandong Pe-
ninsular, now is the most famous vegetable production
area in China. It is well-known as the “Hometown of
Chinese vegetable”, and also defined by the Shandong
Provincial Government as the pilot city for agriculture
modernization. In 2012, the vegetable production area is
around 56,000 ha and the annual vegetable output is
about 7 b illion kg.
Formation and development of cluster
Shouguang area has a very long history of vegetable
production. Before 1989, vegetable production was mostly
in open field, with very few very simple plastic tunnels.
The total ve getable production area was only about 3000
ha.
In 1989, a vegetable famer in Shouguang invented a
structure of plastic tunnel in which vegetables can be
grown without heating during winter season. From 1989
to 1995, the plastic tunnels have mushroomed in Shou-
guang and protected cultivation became very popular.
The vegetable varieties used in crops, scale and volume
of production and economic return increased greatly, and
Shouguang vegetables became very famous i n China.
Since 1995 until now, the growth of vegetable sector
has been shifted from production expansion to quality
improvement, because of change in demand from both
foreign and domestic markets. Moreover, the increasing-
ly concern on food safety and environmental issues from
the government and the public certainly impacted the
deve lo p ment o f the ve ge ta bl e c lust er in S ho u gua n g int o a
more environmental-friendly and sustainable way.
The spatial distribution of agricultural companies and
the inter-connected companies and supporting institu-
tions shows that vegetable producers, processors, trading
center, distribution center, quality inspection center and
so on, in general, are geographically concentrated along
the main roads in Shouguang City center and its subur-
ban area [31]. Along with the growth of the vegetable
industry in Shouguang area for over two decades, the
clustering effect was created, and now Shouguang has
the most famous vegetable cluster in China. The Shou-
guang Vegetable Wholesale Market is the most famous
vegetable wholesale market in China, the most important
vegetable distribution center in term of its distributing
volume, and also the vegetable price formation center
and information center.
Role of the government in agriculture cluster
The government’s cornerstone role in guiding the de-
velopment of the vegetable sector greatly contributes to
the development o f Shouguan g vegetable cluster.
In 1990s, the Shouguang Municipal government’s strat-
egy was to fully utilize its favorable natural resources
and advantage of long history of vegetable production,
and to prioritize and support vegetable production in the
process of restructuring its agricultural sector. In the past
two decades, several key works have been implemented
with the support from government to accelerate the for-
mation and development of the vegetable cluster, includ-
ing readjusting crop farming structure and expanding
vegetable production scale; improving infrastructure for
agricultural production; introducing new technology and
new variety, improving output efficiency; implementing
standardized production, improving vegetable quality;
attracting investment, establishing agricultural “silicon
valley”; establishing market system, improving distribu-
tion efficiency.
In S hougua ng area, a numb e r o f compan i es f r om h ome
and abroad specializing in vegetable breeding, produc-

M. Yu et al. / Agricultural Sciences 4 (2013) 33-39
38
tion, processing, and marketing are concentrated in the
agricultural hi-tech corridor established by the govern-
ment, and also a number of Chinese research institutions,
field stations, and research centers specializing in vege-
table research are established in Shouguang.
With the financial and institutional support from the
gove rn men ts, t hro ug h p ublic -priva te collabo ratio n, a well-
established market system has been set up in the past two
decades, which greatl y pulls the gro wth of the vegetable
cluster. In addition, the governments also support the
development of dragon-head enterprises, marketing as-
soci atio n, marketing co nsort ium, agent comp any and other
intermediary organizations which play a very important
role in organizing farmers accessing to market.
4.2.2. Flower Cluster i n Chenggong
The Dian Lake area in the Yunnan-Guizhou Plateau,
together with Columbia, Ecuador, and Kenya, are regarded
as the best places for cut flower production. Chenggong
County, neighboring to the Dian Lake, has become a
flower production and distribution center in China, the
birthplace of a flower cluster emerging in the past three
decades.
Formation and development of cluster
Growing vegetable is a way of making a living for
most villagers living in Dounan Village of Chenggong
County, 12 KM from Kunming, the capital city of Yun-
nan Province. In 1983, a villager planted about 200 m2 of
gladiolus in his vegetable field and amazingly he made
RMB 3 000 yuan b y sel lin g t he flo wer s wh ich was a ver y
big amount of money at that time. Then in the next two
decades, the floriculture sector in Chennggong County
has boosted a tremendous growth in terms of its produc-
tion scale, trading volume, upgrade of production facili-
ties, improve ment of technologies and quality.
From Dounan village a clustering effect and a com-
plete chain have been formed, not only cut flower grow-
ers, but also a large number of companies specializing in
seedling, bulb, irrigation facilities, greenhouse, and hor-
ticultural products are concentrated in Dounan area. Along
with the formation and solidification of its central posi-
tion for cut flower production and distribution in China,
Chenggong has also attracted traders from other prov-
inces come to sell pot plants, bonsais, and nursery trees.
A number of agriculture associated, supporting and ser-
vice companies flooding into Chengong market area,
such as agric ultural input sup pliers, logistic s service pro-
viders, businesse s providing c old storage, packaging and
so on.
Role of market system in agriculture cluster
At earlier stage, farmers sold flowers at the roadside
market. In 1995, the first flower market with an area of
0.8 ha wa s s et up by the C he n ggo ng County G o ver n me nt,
whi ch was the first village level flower market in China.
Then in 1999, the Chenonggong County Government
invested to build Dounan Flower Market with 6 ha, be-
cause of the fast growth of trading volume. In 2002, an
international flower auction market with 12 ha was set up
in Douna n. In 20 10 , with the pub lic-private c ollabor ation
and co-investment, the construction of Dounan Flower
Industry Park with 70 ha was started, and this park will
further boost the development of the flower cluster. The
construction and expansion of market system greatly ac-
celerated the gro wth of flo wer cluster in Chenggo ng and
also the floric ulture sector in whole province.
After 20 years’ de velopment, Dounan Flower Market
has become the largest flower trading market and distri-
butio n center in China in ter m of trad ing volu me, tra ding
value, export value and flow of traders, and the market
also plays determinant role in price setting in Chinese
flower market. In 2011, the flower trading value in Dou-
nan Flo wer Market was RMB 3.6 billion yuan, and 70%
percent of cut flower in Chinese market was from Dou-
nan. T he flower trade d in the mar ket not only fro m Yun-
nan Province, but also from other areas in China as well
as from neighboring foreign countries. The brand “Dou-
nan Flower” is valued at RMB 3.2 billio n yuan.
5. RESUME: CHINESE PERSPECTIVE
At present, the agricultural development in China is
under a new scenario, with resources constraints, rigid
demand growth of agricultural products, and fiercer mar-
ket competition, which will bring greater challenges to
guarantee stable supply of agricultural products and to
improve the qualit y of agricultural pro ducts, as well as to
improve the competitiveness of the agricultural sector
and the capability for sustainable development.
The governments at various levels have continuously
supported the development of agricultural industrializa-
tion and modernization which have created an enabling
environment and sound foundation for the development
of agricultural clusters. In the past decade, China imple-
mented the “Regional Distrib ution Pla nning of Advanta-
geous Agricultural Products2 (2003-2007)” throughout
the country and has obtained remarkable preliminary
achievements in the regional distribution of agricultural
production and the construction of industrial belts of ad-
vantageous agricultural products. The concentration de-
gree of production of crops and livestock in the planned
regions become higher and higher. In 2008, China an-
nounced the “Regional Distribution Planning of Advan-
tageous Agricultural Products (2008-2015)”, which will
further concentrate the agricultural production factors
and resources into the planned regions.
2Advantageous agricultural product is defined as the agricultural pro
d-
uct which China has favorable production conditions, with large vo-
lume of commodity, good market potential and competitiveness in
domestic and int er n ational market.

M. Yu et al. / Agricultural Sciences 4 (2013) 33-39
39
In Chi na, it is a con sens us tha t deve lopi ng agric ultur al
cluster has been an important approach and inevitable
choice to enhance the comprehensive agricultural pro-
duction capacity and the competitiveness in the agricul-
tural sector, and the strategy of further developing agri-
cultural clusters can make important contribution to the
prosper ity of rural economy and regiona l economy. It ca n
be foreseen that in the future the agricultural clusters in
China will be optimized in scale and structure, operation
mechanism, technology enhancement, and resource mo-
bilization.
Regarding the research on agricultural clusters, until
now, most of the researches conducted are qualitative
studies but very few quantitative studies. Further field
investigation on agricultural clusters is needed, in order
to give appropriate and practical advice and suggestions
to policy makers and the practitioners in agricultural
sector.
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