Around two decades ago, when some German experts traveled to Dingxiang, Shanxi for fieldwork, they witnessed a messy scene where coal ash covered the ground, and bare-chested workers toiled. They immediately concluded that "this kind of place cannot produce what we need". Rural traditions translate to grassroots methods. At that time, the global high-end flange market had been monopolized by German and Japanese enterprises for nearly half a century, leaving Chinese companies to struggle in the low-end market. No one could have anticipated that this group of traditional blacksmiths from northern Shanxi, relying on a Chinese-style "Cluster Economy" model characterized by collaborative synergy and regional clustering, would decisively break the overseas technological blockade and pricing hegemony to rewrite the landscape of the global flange industry.
By the end of 2025, the total output value of Dingxiang's flange forging industry exceeded RMB 20 billion. The region's flange production accounted for 48% of the national total, with wind power tower flanges exceeding 60% and forged steel flange exports comprising over 30% nationwide. Its products are exported to more than 70 countries and regions, securing long-term, designated procurement contracts from international giants such as Siemens, General Electric, and Vestas. Furthermore, Dingxiang now publishes the Xinhua-Dingxiang Flange Price Index and has led or participated in the formulation of 11 national standards, 3 industry standards, and 18 local standards, successfully achieving an industrial leap toward Chinese smart manufacturing, Chinese standards, and Chinese pricing.
The main reason Dingxiang flanges were able to stage a counterattack against established international enterprises and reshape the global industrial landscape does not lie in the isolated technological breakthroughs of a single company, but rather in the comprehensive industrial cluster ecosystem nurtured by China's localized "Cluster Economy". This unique industrial model serves as the very core competitiveness that German and Japanese enterprises cannot replicate and find difficult to surpass.
In contrast, while the German and Japanese flange industries possess first-mover technological advantages and precision production equipment, their industrial layouts are fragmented, and their upstream and downstream supply chains remain disconnected. Cutthroat competition among enterprises far outweighs collaborative synergy, directly leading to inflated comprehensive costs in areas such as equipment maintenance, material logistics, and raw material procurement, alongside sluggish order response efficiencies. Consequently, they struggle to generate any meaningful industrial synergy.
With a total area of just 865 square kilometers, Dingxiang County has nevertheless nurtured the world's densest and most complete flange forging industrial cluster. It has formed an ultimate agglomeration pattern characterized by "zero geographical distance, comprehensive supporting coverage, and highly refined division of labor", creating a scale effect where the whole county practically operates as a single mega-factory. This setup infinitely reduces transaction costs between enterprises while maximizing production efficiency.
The concept of "Cluster Economy" was first proposed around 1998 by ANBOUND's founder Mr. Kung Chan. At the time, Mr. Chan led a team of journalists from the China Business Journal on a field study of Jinting Town and Changle Town in Shengzhou, Zhejiang Province. Shengzhou was renowned as China's premier necktie hub, with its annual necktie production peaking at over 300 million units. During its heyday, the region accounted for over 90% of the domestic market and more than 60% of the global market. Whether it was the high-end ties worn by Wall Street elites or the merchandise on the shelves of European luxury brands, a vast majority originated from factories in Shengzhou, such as the Babei Group and Maidilang, which handled original equipment manufacturing (OEM), original design manufacturing (ODM), and fabric supply.
After analyzing Shengzhou's necktie manufacturing model, Mr. Chan formulated the concept of the "Cluster Economy". Although this model was later officially designated as a "Characteristic Cluster Economy" or "Block Economy", these subsequent terms evolved later as high-level policy directives aimed at guiding and accelerating development, whereas the original "Cluster Economy" concept dates back to 1998. What truly merits attention is that following the introduction of this concept, the "Cluster Economy" model swept across China and flourished everywhere, cementing itself as a genuinely unique and defining economic model for the country.
The city of Shaodong in Hunan accounts for 70% of the world's disposable plastic lighters. Manufacturers here maintain absolute control over production costs. A single lighter retails for just RMB 1, and despite prices remaining unchanged for over a decade, the industry remains profitable. Similarly, Huangqiao Town in Taizhou, Jiangsu, which is an ancient town in northern Jiangsu Province, produces over 30% of the world's violins and 70% of China's domestic supply. Many local farmers there can put down their hoes and seamlessly assemble premium violins destined for export to Europe and the United States. In Ningjin County, Dezhou at Shandong, more than 70% of the high-end weight training equipment and treadmills used in commercial gyms across the country are manufactured locally, with products exported to over 100 countries, earning it the well-deserved reputation of a "hardcore steel town". Meanwhile, Shanxiahu Town in Zhuji, Shaoxing at Zhejiang Province, produces 73% of the world's and 80% of China's freshwater pearls. Driven by the recent boom in livestreaming commerce, this small town now generates an astronomical volume of pearl transactions every single day.
Meanwhile, Luoshe Town in Deqing County, again at Zhejiang Province, successfully transitioned from a hub of 18 quarries into a premier "piano town" that now produces one-seventh of all pianos in China. Today, Luoshe boasts nearly 120 piano manufacturers and component suppliers, employing thousands of local residents. Within a radius of just a few kilometers, buyers can source all 8,000 components required to build a piano, from the outer casing, soundboard, and action mechanism to the hammers and keyboard, without even stepping outside the town. Yueyun Piano, a leading local enterprise, even acquired the century-old Austrian brand Klavier in 2011. Later in 2019, Luoshe enterprises successfully partnered with Shanghai Strauss Piano, relocating its entire manufacturing base directly to Luoshe. Today, a wide array of sophisticated, foreign-sounding piano brands like Waycomm, Wagner, and Luodelaisi actually trace their lineage back to the "farmer-carpenters" of this northern Zhejiang town, with finished products exported across Europe and Southeast Asia.
Zhenping County in Henan Province is not only China's largest carpet production base, but it also serves as the world's premier manufacturing and export hub for handmade Persian carpets. Zhenping's share of the global handmade silk carpet market, commonly referred to in the trade as "Persian carpets", is remarkably substantial, accounting for approximately 80% of the global market and over 90% of China's total exports. Out of every ten high-end, newly produced handmade silk Persian carpets in the world, eight originate from Nanyang, Henan. It is an open secret in the international carpet trade that over 80% of the top-tier silk Persian carpets sold in Dubai, Turkey, Western markets, and even the Grand Bazaar in Tehran, which regularly command price tags ranging from tens to hundreds of thousands of dollars, are meticulously woven thread by thread by the rural women of Nanyang's Zhenping County. The intricacy of a Persian carpet is typically measured in "lines" or knots per unit. The higher the line count, the more detailed the pattern. While traditional wool carpets native to Persia generally range from 100 to 200 lines, Zhenping weavers utilize natural silk to achieve counts of 300, 400, and even up to an extraordinary 1,000 lines for premium, museum-grade masterpieces.
Similar "Cluster Economy" models are actually widespread throughout China. Examples include wedding dresses from Dingji Town in Lu'an at Anhui, canned yellow peaches from Pingyi County at Shandong, fishing floats from Linxiang City in Yueyang at Hunan, inner garments from Guanyun Town in Lianyungang at Jiangsu, toothbrushes from Hangji Town in Yangzhou at Jiangsu as well, and socks from Datang Town in Zhuji, Shaoxing at Zhejiang. There are even the coffins from Cao County in Heze at Shandong, which command an absolute market share of 90% in Japan. Even if in Tibet, one will find Lhatse Town in Shigatse producing traditional Tibetan knives and the authentic birthplace of the famous Lhatse Tibetan knife.
The true strength of Chinese manufacturing and the underlying secret code of "Made in China" actually lie in such an economy model, characterized by "one town, one product", "one county, one industry", "small yet massive", and "benefiting the people, local industries, and the world". It is precisely this model that allows Chinese manufacturing to successfully secure a crucial position in global production, establishing a monopoly over key nodes of the global manufacturing sector. To this day, this remains a fundamentally unmovable and universally significant "Made in China" paradigm that defies any threat of offshoring.
First, the industry is highly clustered, characterized by a mature and well-structured enterprise ecosystem. Dingxiang serves as a prime example. The county has integrated 319 core forging enterprises alongside more than a thousand supporting micro- and small businesses. This includes 115 large-scale enterprises, 8 national-level "Little Giant" hidden champions, 62 provincial-level specialized and sophisticated firms, 41 high-tech enterprises, and 7 national-level green factories. Backed by 15,383 sets of production and testing equipment, the region's annual production capacity exceeds 1.9 million tons. Its portfolio spans more than 2,000 product categories and specifications across high-end sectors such as petrochemicals, wind power, shipbuilding, and aerospace. Ultimately, this has forged a robust industrial hierarchy driven by industry leaders, anchored by a strong backbone of mid-sized firms, and completed by micro- and small businesses.
Second, spatial and temporal costs have been minimized to the absolute limit, resulting in world-leading response efficiency. Within Dingxiang's flange industrial cluster, the average distance between manufacturing enterprises is under three kilometers, creating a comprehensive 15-minute regional supply ecosystem. This geographic proximity drives peak operational efficiency, enabling a rapid-response cycle where equipment is repaired on-site within 18 minutes, specialty steel is allocated within two hours, precision machining is coordinated within five minutes, and finished products are ready for export within 48 hours. In the event of a sudden machinery failure, enterprises leverage local networks to instantly mobilize resources, bringing maintenance personnel on-site immediately to minimize downtime. Similarly, critical raw materials like specialized stainless steel and high-strength alloy steel can be swiftly dispatched from nearby supplier warehouses to guarantee uninterrupted assembly line operations. Furthermore, specialized processes including blank forging, precision polishing, non-destructive testing, and anti-corrosion treatments are seamlessly integrated across neighboring industrial parks, achieving uninterrupted manufacturing continuity.
Third, the scale effect dilutes costs, constructing an absolute price advantage. High-density industrial clustering has given rise to large-scale procurement, mass production, and specialized logistics systems. This allows Dingxiang enterprises to reduce their overall costs, including raw materials, logistics, labor, and R&D, by 30% to 50% compared to German and Japanese competitors. Data from 2025 indicates that the overall production cost of Dingxiang's flange industry was 42% lower than that of similar German and Japanese enterprises, with logistics costs slashed by 58% and raw material procurement costs reduced by 26%. The cost advantage brought about by this large-scale clustering is a structural gap that overseas enterprises cannot bridge through technological upgrades alone.
Building upon an ultimate level of spatial clustering, the Dingxiang flange industry has established a fully closed-loop industrial chain encompassing raw material supply, forging, precision heat treatment, machining, testing and certification, logistics and sales, technological R&D, and standard formulation. With a clear division of labor and mutually beneficial symbiosis among enterprises, a highly efficient industrial ecosystem runs continuously around the clock.
Ultimately, as a whole, "Cluster Economy" has evolved from rural handicraft workshops to its success today, even becoming global industry standard-setters and dominant players in pricing, and is by no means the result of the hard work of isolated companies. Instead, it stands as a triumphant paradigm of China's county- and town-level group economies and industrial cluster models. This success is an indication of the fundamental conceptual core of the "Cluster Economy" model proposed by ANBOUND years ago, while successfully putting the high-end strategic vision of Chinese manufacturing into practice.
The essence of this Chinese-style Cluster Economy lies in spatial aggregation, division of labor, resource sharing, and collaborative symbiosis. Taking Dingxiang as an example, an entire county operates effectively as one "mega-enterprise", where 319 core companies, thousands of supporting businesses, and 40,000 industrial workers break free from the limitations of isolated operations to forge an orderly industrial ecosystem driven by leading enterprises targeting the high end, small and medium firms specializing in niches, and region-wide intense collaboration. This model flawlessly addresses the traditional vulnerabilities of small and medium enterprises like limited scale, scarce capital, and weak risk resilience by pooling R&D expenses, sharing equipment, co-managing logistics, and collectively expanding markets. By consolidating small funds into massive capital and integrating minor factories into a major industrial force, they generate a highly competitive edge that is scaled, high-end, and globalized.
Therefore, the case of Dingxiang flanges proves one point, and that is the Chinese-style "Cluster Economy" deeply rooted in local conditions has thrived on collaborative symbiosis and advancing through mutual coordination. Indeed, this is the secret for Chinese manufacturing to break through overseas technological blockades and ascend to the high end of global value chains. It is also one of the optimal pathways for China's county-level industries to achieve high-quality transformation and upgrading.
Final analysis conclusion:
The essence of the Chinese-style "Cluster Economy" model lies in the formation of high-density, full-chain industrial clusters. By leveraging ecosystemic and systemic advantages such as precise division of labor, resource sharing, and collective risk management, it drastically compresses both production and time costs, leaving overseas competitors behind in efficiency, profit margins, and high-end production capacity. This type of cluster manufacturing is, in reality, the underlying secret of Chinese manufacturing, serving as the true foundation for efficient production and national competitiveness.
