After two waves of entrepreneurial development—industrialization in the 1980s and internationalization in the 1990s—the millennium-old town of Luzhi has embarked on its third phase of entrepreneurship: achieving extraordinary, leapfrog growth in the service sector. The goal is to reach 5 billion yuan in service-sector revenue by 2010, thereby forging a new Luzhi characterized by more comprehensive functions, a dramatically revitalized urban landscape, a markedly improved standard of living for residents, and harmonious social development.

Data show that in 2004, Luzhi Town’s service sector generated 2 billion yuan in operating revenue. How can the town expand the size of its service‑sector pie within five years? According to Zhou Peigen, Party Secretary of the town, Luzhi’s profound cultural heritage—spanning 2,500 years—represents a unique advantage; the outward‑oriented economy of the previous decade laid a solid material foundation; and the series of supportive policies introduced by our city present an unprecedented opportunity. With all the necessary conditions now in place, Luzhi’s service sector is poised to take off, awaiting only the right impetus.

This “east wind” refers to innovation in both mindset and institutional mechanisms.

Innovation Strategy One:

In mapping out the service sector, the first step begins with “protection.”

Luzhi is one of the first ten nationally recognized towns of historical and cultural significance. The people of Luzhi believe that its profound historical and cultural heritage is an irreplaceable asset and resource, as well as a solid foundation for developing the service sector. To advance its service industry, Luzhi must first safeguard its ancient town.

To this end, they commissioned Tongji University to undertake a comprehensive master plan for the ancient town, producing the “Luzhi Town Master Plan” and the “Luzhi Town Ancient Town Conservation Plan,” which systematically delineate the town’s industrial, commercial, and residential zones. The one-square-kilometer historic district is divided into a core area and a scenic‑character zone; key buildings within the ancient town are permitted only minor repairs, not full reconstruction, thereby ensuring that their original architectural features are preserved.

The sauce factory, located at the entrance to the ancient town, was founded during the Daoguang period of the Qing Dynasty. Its signature products—“Luzhi” brand dried radish and “Chengfeng” brand soy sauce—boast a long history and were once recognized as renowned specialty items of Suzhou. However, the factory’s 30-meter-tall chimney starkly clashes with the quaint charm of the ancient town’s small bridges, flowing streams, and traditional residences, detracting from the area’s scenic appeal. Moreover, the dust emitted by the chimney has become a persistent concern for the town. In 2003, the factory invested over 1.7 million yuan to relocate its operations entirely outside the historic district, while transforming the original site into a charming, heritage‑inspired community park that combines leisure and fitness amenities.

Over the past few years, all eight factories formerly located in the ancient town have been relocated to the development zone, leaving no industrial enterprises within the town today.

Over the years, they have rigorously implemented the “master plan” for the preservation of the ancient town. Centered on the ancient town itself, along with its historic bridges, lanes, and waterways, they have restored traditional residences, reconstructed ancient watercourses and revetments, and completed the undergrounding of utility lines. They have also renovated cultural and historical sites such as the Ye Shengtao Memorial Hall, the Wansheng Rice Mill, the Wang Tao Memorial Hall, the Xiao Fangfang Memorial Hall honoring a renowned artist, the Exhibition Hall of Artifacts Unearthed from Cheng Lake, the Water‑Town Costume Museum, and the Water‑Town Agricultural Tools Museum.

Water is the soul of Luzhi. To recreate the quintessential scene of “small bridges, flowing streams, and quaint homes,” they invested over 5 million yuan in a water‑ecosystem restoration project, employing eco‑friendly pollution‑remediation technologies to restore the water body’s natural self‑purification capacity. This has fostered a healthy, cyclical aquatic ecosystem throughout the ancient town, further enhancing its timeless charm as a waterside village.

A series of conservation measures have not stifled the vigorous development of the service sector; on the contrary, they have enriched Luzhi’s historical and cultural heritage, elevated the town’s aesthetic appeal, and expanded the scope for tourism growth. As a result, Luzhi has earned its place among China’s Top Ten Historic and Cultural Towns, been designated a National 4A‑level scenic area, and recognized as a nationally renowned town with a beautiful environment. Since the beginning of this year, Luzhi has welcomed nearly 700,000 domestic and international visitors, marking a year-on-year increase of 70 percent.

Strategy Two for Innovation:

Pooling resources through strategic alliances, we first invite the “chairman” of the modern corporate system.

In the past, the biggest challenge facing Luzhi Town in expanding its service sector was that the town’s diverse resources were scattered across numerous entities with different property rights, making it difficult to consolidate them into a cohesive whole. Recently, local officials told reporters with enthusiasm that this obstacle will be overcome by introducing a modern corporate governance system.

Luzhi Water Town Tourism Development Co., Ltd. is currently being established in full swing. Through market‑driven strategies such as acquisitions, restructuring, and mergers, the company will integrate the town’s tourism resources, addressing challenges like the diversification of tourism assets and funding shortages in the preservation and development of the ancient town. The goal is to expand, strengthen, and enhance the ancient town’s tourism industry, with the aim of going public within three years.

Zhao Jianming, head of the leading group of Luzhi Water Town Tourism Development Co., Ltd., stated that the company is a wholly owned enterprise of the town. To date, it has acquired over 3,000 square meters of historic buildings, constructed 250,000 square meters of affordable rental housing to replace state‑owned housing within the ancient town’s core area, and restructured public facilities and cultural industries, including the wastewater treatment plant, Zhangling Park, and the Ye Shengtao Memorial Hall.

Establishing the Shuixiang Tourism Development Joint-Stock Company represents a groundbreaking institutional and systemic initiative by Luzhi Town. To expand the services sector, the town has drawn on the same vigor it once applied to developing an export-oriented economy—liberating minds and embracing bold innovation—and introduced a series of pioneering measures: the services industry is open to all investors without restrictive entry barriers; within the coordinated historic‑townscape zone, investment in service‑sector enterprises of all ownership types is fully encouraged; and within the ancient‑town area, land parcels vacated by relocated businesses are prioritized for service‑industry projects that support tourism.

Innovation in institutional mechanisms has injected a powerful boost into Luzhi’s service sector, with policy support, social momentum, motivated officials, and active participation from the public all contributing to an unprecedented surge. As a renowned ancient town in the Jiangnan water region, Luzhi enjoys nationwide recognition, yet its tourism‑related services have long been a weak link. According to Wu Qiurong, general manager of the town’s tourism company, prior to 2004, the only upscale accommodation in the entire town was the local guesthouse, which offered rudimentary facilities and fewer than 100 beds. During peak tourist seasons, out‑of‑town visitors found it difficult even to secure a meal; during the “Golden Week” holiday, many went without food until two or three in the afternoon. Following reforms to the investment system for the service sector, upgrading and expanding tourism infrastructure became a major priority. Starting in the second half of last year, the town took the lead by renovating the Qingfeng Mingyue Grand Hotel. Soon after, both foreign and private capital flocked to the ancient town, leading to the construction or renovation of numerous restaurants and leisure‑entertainment venues, such as Hai Shang Wang Chao and Dongfang Paris. As a result, the town’s tertiary‑sector service capacity and its ability to accommodate tourists have been significantly strengthened. In the first half of this year, the town’s service industry generated 76.56 million yuan in revenue, a year‑on‑year increase of 165 percent.

Strategy Three for Innovation:

By transforming various “potentialities” into “kinetic energy,” development can achieve a major leap forward.

A profound cultural heritage and robust economic strength constitute Luzhi’s comparative advantages, while its location along the “Golden Corridor” provides a distinct locational edge. The people of Luzhi have seized these strengths and transformed them into new drivers of service-sector development.

With the goal of surpassing RMB 5 billion in service-sector output within five years, they have formulated a service-industry development strategy that seeks to advance both an export-oriented economy and the service sector in tandem. By focusing on four key sectors—tourism and sightseeing, leisure and resort travel, commerce and finance, and real estate and logistics—their plan aims to establish six major functional zones: the Haicang Road Cultural Pedestrian Street, the Mingshi East Road Commercial and Entertainment District, the Lusheng Road Specialty Dining Hub, the Xiaoshi Road Financial and Business Corridor, a lakeside leisure‑resort and residential area along the Chenghu Lake shoreline, and modern warehousing and logistics hubs along four major transportation corridors.

Tourism is the cornerstone of Luzhi’s service sector. Leveraging its signature asset—the ancient water town—Luzhi capitalizes on elements such as historic streets, scenic vistas, ancient bridges, narrow alleys, and time‑honored waterways to deepen the exploration of its cultural heritage, thereby expanding the tourism pie while ensuring preservation. The “Eight Scenic Spots of Fuli,” including Xihui Dawn Market, Changhong Reflecting the Moon, Wusong Snow Waves, and Haicang Bell Chimes, were already renowned during the Ming and Qing dynasties. Last year, the town partnered with Japan’s Tatsuno Corporation, planning to invest 30 million U.S. dollars to restore these celebrated landscapes. At present, the project’s master plan has been preliminarily finalized.

The tourism‑related food, beverage, and leisure‑resort sector is a key pillar of Luzhi’s service industry. In recent years, the area has attracted renowned dining establishments such as Hai Shang Wang Chao, Shui Yun Xiang, Da Jiang Nan Bei, and Xin Yuan; leisure and entertainment hubs like Dongfang Paris and Hai Jiang Nan; and integrated resort complexes—including Hongyun Garden, Jun’an Country Club, and Sanyang Golf Course—that combine lodging and recreation. Additionally, high‑end, high‑standard, and upscale star‑rated hotels have been introduced; the Yangmingshan Grand Hotel, built to four‑star standards, is slated for completion by year’s end, featuring 260 VIP suites, five state‑guest suites, and one presidential suite, with capacity to accommodate 1,000 diners simultaneously. Meanwhile, the Jiuyuan Resort Hotel, constructed to five‑star specifications, is set to open in Luzhi in the near future.

The commerce and financial services sectors are key drivers of economic growth and a major source of increased household income. At present, Luzhi Town boasts more than ten large-scale supermarkets, including Shanghai Hualian, Beijing Hualian, and the Luzhi Shopping Center, as well as over a dozen sizable chain stores and specialty boutiques—such as Xtep, Yipure, Lidi Shao, and Phil—alongside numerous local residents engaged in the sale of tourism‑related products. The soon-to-open Haizang Road Pedestrian Street, stretching 800 meters with a total investment of 250 million yuan, will be entirely dedicated to commercial development. The town’s well‑established business environment has fostered widespread optimism among developers regarding Luzhi’s land parcels; currently, plots along Mingshi Road, Xiaoshi Road, and Lusheng Road have all been acquired through public auctions by real estate firms.

Luzhi’s real estate sector got off to an early start, with nearly a dozen companies already in operation, including Huaqiao, Jiufeng, Huacheng, Dingfeng, Qingfeng, and Dushi Zhiye. Resort villas around Chenghu Lake are particularly well-received by the market, and the district expects its real estate turnover to reach RMB 3 billion within the next five years. Moreover, leveraging its strategic location along four major expressways—the Suzhou–Shanghai Expressway, the Ring City Expressway, Airport Road, and Dongfang Avenue—Luzhi is developing a new‑type building‑materials logistics park spanning nearly 1,000 mu alongside Airport Road. The project has already attracted Hangshi Logistics Co., Ltd., Tianyuan Logistics Co., Ltd., and Hehai (Suzhou) New‑Type Building Materials Co., Ltd., with a total investment of US$140 million and registered capital of US$50 million. The complex includes a distribution center, a product exhibition area, a trading hub, manufacturer offices, and warehousing and service facilities.