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Notices 1 Effective January 2007, the Discussion Paper series within each division and the Director General's Office of IFPRI were merged into one IFPRI-wide Discussion Paper series. The new series begins with number 00689, reflecting the prior publication of 688 discussion papers within the dispersed series. The earlier series are available on IFPRI's website at www.ifpri.org/pubs/otherpubs.htm#dp. 2 IFPRI Discussion Papers contain preliminary material and research results. They have not been subject to formal external reviews managed by IFPRI's Publications Review Committee but have been reviewed by at least one internal and/or external reviewer. They are circulated in order to stimulate discussion and critical comment.

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The purpose of this study is to discuss the effectiveness of local industrial policies and show that effective industrial policies contribute to both the evolution and development of the cluster in the Chinese context, based on comparative advantages and market failures. We adopted a single case study method and conducted interviews with 30 stakeholders in the tea clusters; a documentary investigation was also used as a supplement. This case study finds that local industrial policies have played an important role when market failures occur in the development of agricultural clusters. The local government implemented a series of industrial policies to promote the progress of the tea industry at various stages of development. The case study further demonstrates what can be considered as an effective industrial policy in the dynamic process of agricultural development. This case also provides empirical evidence for local governments to remain sensitive to challenges and to develop timely industrial policies when an industrial cluster is faced with either opportunities or crises. Therefore, it has implications for local governments that need to improve agriculture in undeveloped regions.