LUSI currently has more than 340 power tool factories, which contributed an output value of 25 billion yuan (US$4 billion) last year, up 25 percent from 2011. About US$120 million worth of power tools were exported last year.

Lusi Town, on the northwestern tip of Qidong City, Jiangsu Province, is bordered by the sea on three sides. Nearly 30 years it was an economic backwater. Today it has emerged as a front-runner in power tools manufacturing, which accounts for more than 20 percent of China's total output value.

More than 50,000 former Lusi residents are selling power tools, made in their hometown, around the country. They sell 60 percent of the country's power tools, armatures, stators and gears.

"It is said that in China one out of every four power tools salesmen is from Lusi Town, Qidong," said the town's director, Lu Huihui.

As one of the three biggest power tool bases in the country, Lusi currently has more than 340 power tool factories, which contributed an output value of 25 billion yuan (US$4 billion) last year, up 25 percent from 2011. About US$120 million worth of power tools were exported last year.

"Poverty forced us to change," said Zhang Jufang, general manager of Jiangsu Guoqiang Tools. She and her brother, Zhang Guoqiang, built the company from a 5-square-meter shabby family workshop 28 years ago to one of the country's top 10 power tool giants. Their factory covers 47,000 square meters and has more than 680 employees, including 109 technicians.

Rags to riches

Earlier last month, Stanley Black & Decker, a global provider of hand tools, power tools and related accessories, invested in Guoqiang Tools. It became the town's first power tool company to work with a multinational firm.

"They found us many years ago. We had been considering the investment proposal for quite a long time," Zhang Jufang said. "But the Guoqiang brand is like our child and we are really protective about it, to some extent. But my brother and I are also aware it's time to go one step further and learn something new."

Zhang Jufang's rag-to-riches story depicts the growth history of most local power tool companies.

During the late 1970s, Lusi farmers dropped their hoes due to poverty and picked up simple maintenance tools to repair locks, make keys and mend small hardware. They soon earned lucrative profits in repairing hand tools.

"At that time, a power tool was quite expensive. Once it broke down, people preferred to have it repaired," Zhang Jufang recalled.

No one knew how to fix a power tool, but the Lusi farmers found a way. They disassembled the tools and studied the inside wire by wire, nail by nail.

"After all they were electronic items and not so hard to figure out," she said.

They taught themselves repair techniques. Some then sensed a business opportunity and scraped the money together to open workshops to manufacture and repair power tools.

From the early 1990s to 2003, the town's power tool industry mushroomed. Big bosses built factories to manufacture and assemble machine parts, while small businessmen opened workshops to repair and sell assembled tools.

Fake trademark

Fake products were also coming in floods into the town. Some farmers even simply stuck a fake trademark on tools they just purchased from nearby factories.

"Law enforcement officers came to the town almost every other day to crack down on fake products," Lu said. "The value of the fake tools seized could reach 10 million yuan each year."

Zhang's factory also faked a popular brand in the frenzy. Their products were detained and the company was sued, losing millions at that time.

It was a deadly blow to the industry. "The fake products, frankly speaking, were good quality.

The key problem was to help our companies build up their own brands and create a healthy business environment," Lu said.

The industrial reshuffling soon started. The small workshops were eliminated and technical innovation was encouraged.

In 1997, Tianfen Power Tool Science and Industrial Park was established, covering an area of almost 8.5 square kilometers.

In 2005, more than 180 Lusi-grown trademarks were registered in China and over 60 trademarks were registered in foreign countries.

Guoqiang developed its own tools and now exports them to more than 20 countries, creating an annual sales volume of almost 100 million yuan.

Its hand tools own dozens of patents and the Guoqiang Tool brand is one of China's Famous Brands.

"Now people are faking our products," Zhang said. "But I don't care. We only focus on what we are doing."

Dongcheng Hard Tool has established its own innovation center.

In order to better protect the brand, Dongcheng has registered 16 trademarks, which helps to prevent being registered illegally by others. Last year, Dongcheng grabbed the biggest share of the domestic hard tool market.

In 2005, an international hard tool trading center, which attracted Shanghai Hard Tools Research Center and China Hard Tools Production (Jiangsu) Center, was established.

"It's no exaggeration that to some extent, Lusi people can dominate the country's hard tool market," Lu said.

Each February after the Spring Festival, Lusi is crowded with hard tool salesmen and delegations, who are flocking to attend the Lusi Hard Tool Trade Fair, an annual event sponsored and held by the town's businessmen.

"You can see numerous car plates from all parts of the country. Trucks are lining up from this end of town to the other," Lu said.

However Lu also said the industry still has a series of problems to solve.

The pyramid-shaped industrial structure needs to change. Guoqiang and Dongcheng are the largest two enterprises in Lusi. Guoqiang had sales of 350 million yuan last year, while Dongcheng had 1.6 billion yuan in sales.

Overseas giants

"Even at the top of the pyramid, the gap is big," town director Lu said.

"A bit lower down, there are only three to four enterprises that can sell 100 million yuan annually.

"A large number are small companies that cannot compete with the foreign brands."

In recent years, many overseas hard tool producing giants from Germany and Japan entered the China market.

"They are all international brands with more than 100 years of history. It's a very hard battle for us," Lu said.

Even for Dongcheng and Guoqiang, most of their products are exported to Southeast and West Asia or East Europe. "They know in the US and European markets, they might not be as strong as companies from Germany or Japan.

"Almost all the foreign brands have come into China and they are gradually lowering their prices to cater to the domestic market," Lu said. "Just imagine, if the prices are pretty much the same as our products, there is not much of an advantage left for us," the director said.

Meanwhile, production bases in Zhejiang and Guangdong provinces are catching up. "The only advantage we have now is the sales channel, but it's the thing that we cannot always rely on," Lu said.

"Innovation is the only way out."