Since the late 1970s, a number of small towns with commercial characteristics have emerged in east China's Zhejiang Province. These small towns are each focused on a certain industry such as the wholesale of small commodities, leather, timber and textiles. These industrial clusters created huge wealth in the past decades. The Central Government frequently mentions such small towns and has instructed local governments around the country to nurture some 1,000 characteristic towns in total by 2020. It is hoped these small towns will attract people, provide jobs for local peasants so that they need not migrate elsewhere for work, and relieve big cities of various urban problems.

So far, however, this strategy has not brought forth the expected results. In some places, local governments and property developers are even taking advantage of the concept of characteristic towns. Once real estate construction and speculation grows in these towns, the costs of housing and other commodities will rise significantly. Finally, other industries will be edged out by the real estate sector. In Zhejiang, every characteristic town is based on a certain industry. If a town has no real industry, its development plans will be rejected, regardless of how much property companies promise to invest. In some other cases, small towns are used by local governments to reach a certain GDP target, regardless of market rules. Gradually, a lot of towns that don't possess any special features have been labeled as characteristic towns in order to claim special subsidies from the Central Government.

Characteristic small towns are supposed to result from market competition, rather than policy design. We must respect the rule of small town development, instead of imposing a mandatory order on any province. The Central Government should transfer more power to local governments so that they can work out schemes suitable to local conditions. There should be more supportive services, instead of requirements on the development of characteristic towns.

(This is an edited excerpt of an article published in China Newsweek on July 24)