CONTENTS Acknowledgments xi About the Authors xiii Abbreviations xv 1. Introduction and Overview 1 Strategies for Beijing and Shanghai 6 Rethinking Urban Development 8 2. China's Development and Its Megacities 11 Seven Factors Contributing to Chinese Success 13 Outlook for the Future 20 3. Manufacturing Industry: Locomotive for Innovation and Growth 25 Why a Broad Manufacturing Base Matters 28 The Case for Complex Capital Goods 29 Industrial Productivity and Innovation 36 4. Pitfalls of Early Deindustrialization 49 Expansion of Services 51 Five Stylized Tendencies and Their Implications 61 5 Economic Composition, Resources, and the Emerging Innovation Potentials in Beijing and Shanghai 69 The Industrial Economy 69 The Financial Sector 89 Labor and Skills 94 Tertiary Education and the Innovation System 96 Innovation Outcomes 119 Venture Capital 129 Megacities: Moving to a More Innovative Economy 134 6. Making Industries Innovative 137 Urban Strategy and Policy Directions 143 Concluding Observations 182 References 185 Index 213