Information about Asia and the Pacific Asia y el Pacífico
Chapter

Chapter 11 Promoting Township and Village Enterprises as a Growth Strategy in China

Editor(s):
Manuel Guitián, and Robert Mundell
Published Date:
June 1996
Share
  • ShareShare
Information about Asia and the Pacific Asia y el Pacífico
Show Summary Details
Author(s)
Harrison Cheng

Over the past 15 years, China’s rural industries have grown at a rate of well over 20 percent a year, their share in industrial production having risen from 3 percent in 1971 to 30 percent in 1990 (see Perkins and Yusuf, 1984; and Byrd and Lin, 1990). China’s township and village enterprises (TVEs) are widely regarded as one of the major successes of the economic reform. Weitzman and Xu (1993) wrote that “the Chinese model, with a central role being played by TVEs as the dominant form of the non-state enterprise, is … enormously successful.” Jefferson (1993) wrote that “the rapid growth of China’s TVE sector has been critical to the success of that country’s transition to a market economy.” The success of China’s economic reforms after 1978 has also been attributed to the creation of a “third” sector, besides the state and staple agriculture, with TVEs constituting a major part of that sector (Putterman, 1992, 1994a). At a time when there are numerous problems in reforming the rigid and inefficient state enterprises, the success of the mostly collectively owned rural enterprises seems to offer a promising direction of reform and points to a sustainable model of economic development. Furthermore, although TVEs, with their collective form of ownership, were often suppressed in the past and criticized as a form of “collective capitalism,” they have been enthusiastically promoted in recent state policies. Hence, they are more easily accepted politically and ideologically than private enterprises and constitute an important part of Chinese socialist economic development.

Rural enterprises have been described by Ji Cai, an official of the Township Enterprise Bureau of the Ministry of Agriculture, in the China Daily (April 21, 1995) as important sources of income for Chinese farmers. According to Ji, in 1994, they generated a total of Y 3,918 billion ($466 billion) in gross value of output, constituting 30 percent of total domestic gross output. They also produced about half of national industrial output and employed 120 million workers in the countryside by the end of 1994. During the first quarter of 1995, the gross value of output produced by rural enterprises increased by 29 percent, compared with 47 percent in the same period of 1994, as the Chinese Government tightened credit and stressed efficiency instead of growth. Business income of the rural enterprises increased by 32 percent, while taxes remitted to the state increased by 20 percent. Marketed output rose from 89 percent to 91 percent over the same period. Exports by rural enterprises increased by 34 percent, and more than 260 rural enterprises have been granted the right to handle imports and exports. Township enterprises have opened over 400 firms in foreign countries, with investment totaling $47.6 million. However, many problems are plaguing Chinese rural firms, such as a serious lack of capital, rising loan interest rates, higher taxes and levies, and increasing costs of raw materials, energy, and transportation. These firms have been urged to continue their reform of property rights and management, to improve quality, and to reduce environmental pollution. To date, more than 200,000 collectively run rural enterprises have become share-holding firms.

Why were the collectively owned rural enterprises so remarkably successful? What type of growth did they represent? Can they be expected to exhibit similar growth rates in the future? Can they continue to absorb rural surplus labor at such a large and unprecedented scale and thereby provide a solution to the unemployment problem in rural areas? After a discussion of the reasons for the success of the TVEs, we will look at the changing ownership structure and the rapid rise of the private sector in the rural enterprises. We will argue in this paper that the TVEs may continue to decline in importance and that the private enterprises in the rural sector will become the dominant force in the future. The role of TVEs in the reform process indicates that their development is closely related to the changes in the structure of property rights between farmers and the state and between local governments and the state. There is a continuing trend toward local control and private initiatives. The local government, in fact, has asserted too much influence over the TVEs in a way that will impede their further growth. Some evidence is offered in the appendix to show that the collective ownership structure is a negative factor in the efficiency of the rural enterprises. We will also point out many disadvantages in the TVEs resulting from the collective ownership structure.

Reasons for Success

In explaining the success of the rural enterprises, it is commonly agreed that they operate in a more competitive environment than state-owned enterprises (SOEs) and that the market structure is better developed than in other sectors. These enterprises purchase most of their raw materials from the marketplace and sell their output to the market at prices determined by the market. They must also secure electricity and other energy sources in the open market. Workers can be hired or fired more easily in rural enterprises than in the state-owned firms. One tremendous advantage rural enterprises have over the state-owned enterprises is the low wage payments, fringe benefits, and other employment-related costs.

There is a tendency to conclude that the success of the rural enterprises is a consequence of policies adopted in the post-1978 reform. One should, however, note that township and village enterprises are direct “descendants” of the commune and brigade enterprises (CBEs) of the 1960s and 1970s. A survey of ten provinces shows that 55 percent of those who pioneered the development of rural enterprises are brigade and production team cadres, and 21 percent are able farmers (Li, Shi, and Zhu 1990). The gross output value of those enterprises reached Y 9.25 billion in 1970 and Y 27.2 billion in 1976, for an average annual growth rate of 25.7 percent (Byrd and Lin, 1990). By 1979, 30 percent of the total gross output value of China’s communes, brigades, and production teams was generated by roughly a million and a half commune and brigade enterprises employing 29 million workers (Perkins and Yusuf, 1984), and industries run by communes and brigades were producing about 15 percent of the value of national industrial output (Saith, 1986, p. 63). At the initial stages of the reform in 1978, Chinese leaders were still wary of rural industrialization and anxious to close down plants that they argued were too small to be economical. The growth rate of output from these enterprises slowed from 26.9 percent a year during 1971–78 to 15 percent a year during 1978–83. According to Wong (1988a), the slower growth rate is due to the transfer of many brigade-level enterprises to smaller units in conjunction with the decollectivization of agriculture. In response to accusations that rural enterprises were taking unfair advantage of certain tax arrangements to “squeeze out” urban industries and were disrupting plan fulfillment by competing for raw materials, energy, and so on, the authorities clamped down in 1981–82. Therefore, one can argue that the success of these enterprises was not mainly due to the policies implemented after the 1978 reform, although further growth after 1984 was indeed facilitated by the development of a more market-oriented environment. Nor was the growth of the rural enterprises an intended consequence of the pre- or post-Mao industrialization policy. In fact, when referring to the rapid growth of the rural enterprises, Deng Xiaoping characterized it as “an army suddenly coming to the fore.”

In explaining the success of the CBEs and later TVEs, Putterman (1994b) argued that it was due as much to inefficiencies in the structure of the economy as it was to the relative efficiency of those enterprises. Industrial returns were rendered comparatively high, and thus attractive, by the fact that extractive agricultural policies (through controlled low prices for outputs) caused returns from farming to be low (Lardy, 1983; and Putterman, 1993). Returns from horticulture and animal husbandry were similarly kept down by tight constraints on rural markets and by the state monopoly on procurement for the cities. Industrial profits also increased as a result of state pricing policy designed to ensure that profits would be high enough to support the investment rates of the period (Naughton, 1991). Rural enterprises could benefit from this high price structure. They could also produce products neglected by state industry because of its emphasis on heavy industry and fill in the gaps in China’s decentralized and somewhat haphazard planning system. The success story of these enterprises therefore seems to be the result of imbalances in the economy, and economic growth seems to fit the type described in Schumpeter (1934) and Hirschman (1958).

Jefferson and Rawski (1994) express the opinion that it is premature to conclude that China’s collectives represent a lasting organizational innovation. They maintain that the dependence of nonstate enterprises on state resources, the tendency of these enterprises to bunch at the low end of the technology spectrum, and the artificiality of the domestic cost benefits enjoyed by nonstate firms suggest that their rapid gains owe much to China’s economic circumstances in the 1980s. Some authors predict that, as underlying economic conditions change, rural industry will lose ground to large domestic firms, enterprise groups, and joint-venture companies during the course of the 1990s (Jiang and others, 1993; and Pan, 1993).

Another structural factor contributing to the high growth rate of the Chinese economy is its relatively low rate of industrialization and the large surplus rural labor (Sachs and Woo, 1994). By putting idle resources into production, growth has been achieved without closing down the state firms.

Several studies have looked at the relative performance of state and rural enterprises. According to a study by Jefferson (1993), based on an econometric analysis of panel data sets on 204 SOEs and 132 TVEs covering the years 1984, 1988, and 1990 collected by the World Bank and Chinese research institutes, total factor productivity is greater in the TVEs than in the SOEs at both the beginning and the end of this period, with the gap growing over time. Statistics reviewed by Harrold (1992) for the World Bank show that the industrial output of the TVEs grew at an average annual rate of 38.2 percent during 1982–88, compared with a 9.8 percent rate for China’s SOEs.

Jefferson and Rawski (1994) estimate the annual growth of total factor productivity at 6.6 percent for TVEs, compared with 3 percent for state industry during 1984–88. They conclude that efforts to measure productivity growth in the collective sector are hindered by inadequate output deflators and inconsistencies between statistical measures of output and employment. Nonetheless, the growth of output per worker, output per unit of capital, and total factor productivity in the collective sector, and especially among township and village enterprises, seem to have exceeded comparable measures for the state sector. Evidence of declining productivity for the state enterprises and increasing productivity for the rural enterprises can be found in Fan and Woo (1995) and Huang and Meng (1995). Using data covering both urban and township collectives during 1980–88, Jefferson, Rawski, and Zheng (1992) show that increases in total factor productivity accounted for only 27 percent of output growth, with expansions in material inputs, at 57 percent, accounting for the largest share.

In a study of Jiangsu Province, Prime (1992) uses both gross and net output to estimate total factor productivity for 1981–88. Using gross output, she finds that productivity growth was higher in collective than in state industry, with increases of 6.2 percent and 4.1 percent, respectively. However, using net output, she finds higher productivity growth in state industry, with an increase of 2.3 percent compared with only 1.7 percent for the collective industry. She suggests that one explanation for this difference may be that inputs of both capital and labor increased substantially faster in collective industry than in state industry. Thus, she concludes that although comparisons of productivity change between state and collective industry in Jiangsu are inconclusive, they suggest caution should be exercised in interpreting the fast growth in collective industrial output as evidence that reforms have made China’s economy more efficient.

Some evidence suggests that profitability and efficiency may be declining over the years. According to a survey of 200 large-scale rural industrial enterprises, from 1975 to 1985, the output value produced by each investment of Y 10,000 decreased 6.6 percent on average. Income from sales decreased 5.6 percent on average; gross profits decreased 8.3 percent and net profits decreased 8.8 percent; and profits retained by enterprises decreased 9.4 percent (Zhou and Hu, 1987). The declining profitability of rural enterprises may result from the dissipation, through increasing entry and competition, of the monopoly rents available to earlier entrants (Naughton, 1991; Byrd and Zhu, 1990).

In assessing the growth pattern of the past and designing the growth strategy for the coming Ninth Five-Year Plan, officials of the State Planning Commission offer the following viewpoint, as reported in China Daily (April 28, 1995): “The key to fulfilling the tasks of the Ninth Five-Year Plan lies in the transformation from an extensive type into an intensive one. China’s economy suffers from irregular industrial structure, backward technical and management skills and high production costs. China has a low per capita share of natural resources. Holding onto the current high-input and high-resources-consumption pattern of economic growth for long would surely result in difficult situations.”

Changing Ownership Structure

In discussions of the future course of rural enterprise developments, it has become clear that two types of rural enterprises should be distinguished: the township and village enterprises, which are collectively owned, and the joint-run and individual enterprises, which are referred to as private enterprises. Before 1985, almost all of the outputs were produced by TVEs. However, this is changing rapidly (see Tables 1 and 2). During 1985–93, the growth rates of the private enterprises were much larger than for the TVEs. As a consequence, more than one-third of the total output of rural enterprises was produced by private enterprises at the end of 1993. In terms of the number of enterprises, the share of rural enterprises accounted for by TVEs declined from 100 percent in 1978 to about 17 percent in 1985 and to only 12 percent in 1991 (China Township and Village Enterprise Statistical Abstract, 1992). The total share of the gross value of output accounted for by TVEs among the rural enterprises is also declining fast, although not as dramatically as the number of enterprises.

Table 1.Growth and Performance of Township and Village Enterprises
198519861987198819891990199119921993
Number of firms (millions)1.81.71.61.61.51.51.41.51.7
Employment (millions)43.345.447.248.947.245.947.751.857.7
Gross value of output (billion current yuan)
Total275.5358.3494.6701.8840.2958.11162.21766.03177.7
Township-run116.1144.7189.7266.7309.3343.2427.5646.71084.7
Village-run91.3111.0146.0206.8249.0282.2344.5531.0957.4
Joint-run24.531.444.659.168.272.775.5111.4212.0
Individual43.671.3114.2169.2213.8260.1314.6477.0923.5
Gross value of output (billion constant yuan)
Total272.8354.1476.5649.6742.8846.21047.81594.22785.5
Township-run113.9141.4182.6243.9267.3298.7385.2584.1939.1
Village-run91.1110.3141.2192.4218.3244.2305.0472.8828.2
Joint-run24.531.042.556.161.465.468.0100.3188.7
Individual43.471.4110.2157.2195.9237.9288.9435.6830.7
Gross value of industrial
output (billion current yuan)147.8189.2261.0343.8461.5524.1651.8985.31696.2
Sources: China Township and Village Enterprise Yearbook (various issues); China Township and Village Enterprise Statistical Abstract (1992). Whenever constant prices are used, the base year is 1980.
Sources: China Township and Village Enterprise Yearbook (various issues); China Township and Village Enterprise Statistical Abstract (1992). Whenever constant prices are used, the base year is 1980.
Table 2.Growth and Performance in Percentage Increase
19861987198819891990199119921993
Number of firms−6.6−8.40.5−3.4−5.3−0.86.011.0
Employment5.03.93.7−3.6−2.73.88.611.4
Gross value of output
(current prices)
Total30.138.041.919.714.021.352.080.0
Township-run24.631.140.615.911.024.651.367.8
Village-run21.531.741.620.413.322.154.180.3
Joint-run28.242.032.515.46.63.947.590.3
Individual63.560.148.226.421.721.051.693.6
Gross value of output
(constant prices)
Total29.834.636.314.313.923.852.174.7
Township-run24.129.133.610.011.729.051.660.8
Village-run21.128.036.313.511.924.955.075.2
Joint-run26.537.132.09.46.54.047.588.1
Individual64.554.342.624.621.421.450.890.7
Gross value of industrial output
(constant prices)28.037.931.734.213.624.451.272.2
Sources: China Township and Village Enterprise Yearbook (various issues); China Township and Village Enterprise Statistical Abstract (1992). Whenever constant prices are used, the base year is 1980.
Sources: China Township and Village Enterprise Yearbook (various issues); China Township and Village Enterprise Statistical Abstract (1992). Whenever constant prices are used, the base year is 1980.

This new phenomenon in the ownership structure of rural enterprises deserves attention. Some authors (for example, Weitzman and Xu, 1993) have argued that the vaguely defined property rights of the TVEs are not a hindrance to their success. They explained the performance of the TVEs in terms of a “cooperative culture,” in which farmer-workers, enterprise managers, and township officials found a way to develop the rural enterprises and share the generated revenues. However, the TVEs are encountering problems similar to those of the SOEs and they may be losing out to private enterprises. Rural enterprises in their many ownership forms will continue to play a key role in the economic reform of China.

Dynamics of Reform and Role of TVEs

We have argued in the above that the success of the TVEs is not entirely driven by the post-1978 economic reforms. One can in fact argue that the development and growth of the CBE/TVE enterprises are the causes of reform and the driving force behind the policy changes rather than the other way around.

Development of the Collective Rural Economy, 1949–57

The ownership of land by individual farmers has been regarded as the major economic motive behind farmers’ support for the communist revolution. When the People’s Republic of China was founded, the property rights system set up by the land reform was based on private ownership of land. The land owned by fanners was obtained through the mass political campaigns organized by the state to deprive landlords of their property rights. Families were granted shares of land according to family size. Disputes over the issue of whether to preserve private landownership or to move toward collectivization broke out at the top decision-making level three times between 1950 and 1955 (Bo, 1993, vol. 1, pp. 184–203). Under the influence of the Soviet model, the state intensified the mobilization of economic resources to develop heavy industries. Capital accumulation for state-promoted industrialization came mainly from agricultural surpluses (Song, 1982). The state first tried to turn more agricultural surpluses into industrial accumulation by imposing higher taxes in the 1950s. These attempts were met with collective protests by peasants, and, in addition, the high costs of tax collection made this strategy ineffective (Cui, 1988). The state began to take more direct control. Quotas were set for the grain and cotton output of each household; the marketing of almost all agricultural products was regulated; labor hiring, land leasing or renting, and money lending or borrowing were forbidden; and the links between farmers and businessmen were broken. By the end of 1957, the collective rural economy was essentially complete, with a system of state mandatory product plans, state monopoly of purchase and distribution, prohibition of long-distance transport of goods, restriction of commerce and trade, absence of factor markets, and prevention of the movement of rural and urban populations. The highest level of the collectivized economy was attained with the establishment of People’s Communes.

Crisis and Policy Retreat, 1958–61

According to Zhou (1995), the distinction between the collectivized economy and the state-owned enterprises lies in the fact that, although the state controls the former, it does not have direct financial responsibility as it does for the latter. The potential for irresponsible decision making is great, with the most absurd decisions being made between 1958 and 1959 (Bo, 1993, vol. 2). The large decline in agricultural output between 1959 and 1961 and the intensified extraction of the agricultural “deficit” in the face of an absolute food shortage led to a famine in which 30 million people died (Ashton and Hill, 1984; and Lin, 1990). The state had to adjust its policy by cutting the sizes of People’s Communes, establishing three levels of ownership based on production teams as the basic units. The state also recognized household production from private plots and other sideline production within the collectivized economy, and free markets were allowed in rural and urban areas.

TVEs and Private Plots, 1962–76

Household sideline production and private plots allowed farmers to control certain resources, so that they no longer had to rely totally upon the state for survival. Farmers could also express their discontent and strengthen their bargaining position by shifting from collectivized production to private production. The yield of a family plot was five to seven times that of public fields (Fazhan yanjiu suo, 1988), allowing the small-scale household economy to compete against the large-scale but ill-managed collectivized economy. To motivate the grassroots cadres to manage and monitor collectivized agriculture more effectively, the system was decentralized. Managers and supervisors were given control rights and shares of agricultural surpluses. These supervisors and managers formed a privileged class, with their access to material, nonmaterial, and monetary gains. They became uncontrolled in their pursuit of personal gain, which took the form of corruption and encroachment upon rural households, collective welfare, and the interests of the state. Political campaigns launched in the rural areas from 1960 to 1978 were targeted at the corruption of grassroots cadres (Bo, 1993).

Another development in the rural area was the promotion of brigade and production team enterprises by the local cadres to expand their control of economic resources. The industrial sideline production became a form of “private plot” of the local governments. Surpluses from collectivized land went to the state, while the surpluses from industrial sideline production stayed in the communities. The struggle of the communities to gain control over their own resources and surpluses provides an explanation for the rapid growth of brigade and production team enterprises.

The industrial sideline production allowed local governments to have resources under their control, which meant they no longer had to rely totally on the state for revenues. These predecessors of TVEs strengthened the bargaining position of the local governments against the state and cemented the mechanism of the locally initiated reform in the post-Mao period. An example of this bargaining power can be seen in the consequences of the Cultural Revolution, which focused on criticizing capitalism in the rural areas. Wen (1993) shows that the total factor productivity of agriculture dropped continuously during the mid- and late 1960s and plunged to a record low in 1972. The state was punished, and ultra-leftist policies were criticized.

Emergence of the Household Responsibility System, 1977–78

The poorer rural areas in which the development of the industrial sideline production was not a viable alternative began to expand their private plots. They intended to take control of all land under household management in exchange for handing over a contracted amount of the output to the state. The provinces of Anhui, Sichuan, Guizhou, Inner Mongolia, and Guangxi introduced the practice of fixing farm output quotas for each household, that is, the contract responsibility system, between 1977 and 1978 (Zhongguo nongcun fazhan wenti yanjiuzu, 1981), before the famous Third Plenary Session of the Eleventh Central Committee of the Communist Party of China. These rather radical actions were not well received by the authorities, but the poor and desperate conditions in these areas provided political protection for the practice. The resolution on agriculture adopted at the Third Plenary Session banned, by formal decree, the practice of fixing farm output quotas for each household. This ban was maintained in the Congress’s Fourth Plenary Session held one year later. (Both resolutions are found in China Agriculture Yearbook, 1980). But a year later in 1980, the ban was lifted. Document No. 75 of the Central Party Committee issued in 1980 allowed various kinds of arrangements under a responsibility system, including fixing farm output quotas for each household (Du, 1985; Wu, 1980). The document is the result of attempts by all local governments to write their own experiences into the policy document of the Central Party Committee to legitimize their own models at the national level. The success of this document is a reflection of the growing bargaining power of the local governments, which would not have been possible if they did not control the brigade and production team enterprises.

Mutual Enforcement of Household Responsibility System and TVEs, 1979–Present

The household responsibility system and the industrial sideline production form a kind of symbiosis and re-enforce each other. Together, they prevent the state from retracting reform policies and encroaching on farmers’ contractual rights. Farmers can exit from agricultural production and move into industrial activities. They derive substantial income from TVEs, which increases their bargaining power and enables them to resist unfavorable agricultural policies. Land contracts, for instance, have been changed from short-term into long-term management. The variety and amount of farm products purchased under state plans were cut; mandatory purchases were changed into contractual ones; sales of products by farmers in the free markets were allowed; private long-distance trade was permitted; and urban labor markets were opened to farm laborers (Yang, Wang, and Willis, 1992). TVEs provided the bulk of agricultural investment at a time when state resources were shrinking. TVEs also benefited from the household responsibility system. The system allowed farmers to accumulate savings, which provided the capital needed for these enterprises to expand into a significant and dynamic sector. The surplus labor resulting from the household responsibility system also provided low-cost manpower for the TVEs, and its increasing income created the markets for the products of TVEs.

Disadvantages of Collective Ownership

Township officials are de facto owners of the TVEs because the township government has control over the use of assets, the appointment and remuneration of managers, the type of investment, and the size of the workforce. The township government has “effective” claim on all enterprise profits, and the authority to approve dissolutions, mergers, and sales of enterprises. Township officials are appointed by county-level officials and exercise their rights only as long as they hold political office.

Short-Term Appointment of Township Officials

Township leaders are often appointed for three-year terms and they tend to focus on short-term objectives. For instance, they prefer to build highly visible community projects as their contribution to the community before their term expires rather than to reinvest in enterprises.

Soft Budget Constraint for Township Government

The township government has a relatively hard budget constraint and cannot legally engage in deficit financing, but the dual roles of the township government as de facto owners and tax collectors create the potential for township officials to collude with TVEs in tax evasion. Township officials may employ discretion in implementing central government tax policy in order to shift revenues from a shared tax base to profit channels that the township controls. This potential for tax evasion implies a softening of the township government budget constraint.

Tax Revenue Maximization

The Central Government maintains the exclusive right to determine the scope and rate of taxation. The township must collect the minimum quota amount set by the county government and then share with higher levels of government the tax revenue that exceeds quota. The township government also receives an array of legally mandated fees as well as illegal fees from the TVEs. It may tend to maximize net revenues to the Government rather than maximize the profits of enterprises. Managers of TVEs often complain that local government leaders take money from enterprises as they please and treat enterprises like “money trees,” undermining their financial health (Cai, 1990). The township industrial corporation also engages in a practice whereby enterprises hand over all profits to the local government and look to the government for all major expenditures (Whiting, 1993).

Because indirect taxes, such as the product tax and the value-added tax, comprise a large and increasing share of tax receipts from TVEs and because they are based on output, the township officials may focus on output maximization in their criteria for evaluating enterprise directors. They thus ensure adequate tax revenues while leaving themselves room to maneuver through the selective tax breaks after the quota tax receipt is met. The disproportionate emphasis on output value has caused a number of undesirable consequences, which have begun to prompt a move from output value toward sales and profits as the most important indicators of performance (Whiting, forthcoming). According to studies conducted in Jiangsu, the focus on output value has led townships to expand production capacity without attention to the efficiency of production or the salability of products (He and others, 1991; Shao and others, 1991).

Performance Criteria for Township Officials

According to Shirk (1993), under the post-1980 criteria, the political ambitions of individual local officials became closely identified with the economic accomplishments of their domains. Whether officials aimed to climb the ladder of success to Beijing or to become leading figures on the local scene, their reputation was enhanced by industrial growth and local building projects. It is common practice for the township to assign quotas to TVEs indicating the number of jobs each must provide for local residents. The promulgation of Document No. 2 of the Central Party Committee in 1992 ushered in the most recent fast-growth campaign and led to the ratcheting up of economic targets. The tremendous pressure to meet and surpass high targets has undesirable consequences as well. In some cases, township leaders have refused to make investments across township borders because the profits, taxes, and employment benefits generated would contribute to another township (Whiting, forthcoming).

Selection of Managers

The township government selects enterprise managers from a small pool within the township. A survey of 200 rural industrial enterprises shows that over 50 percent of managers had previously served as local government cadres (Qiu, 1988). The reason for the large number of former cadres among TVE managers may be as much for their political reliability as for their managerial experience (Du, 1992; Qiu, 1988). Over 60 percent of the enterprises surveyed had undergone a change of leadership since founding—with more than two leadership changes on average, while the average tenure for an enterprise manager was approximately 4.5 years (Qiu, 1988). Unsuccessful managers are usually transferred to smaller firms or administrative units rather than being fired or demoted.

Protection of Markets

There have been reports of protectionism by local government. According to Wong (1988b), in the early 1980s, protectionist measures ranged from excluding outside products from local markets to threatening local enterprises with cutoffs of funds and bank loans and fuel supplies if they bought competitors’ products. In the 1990s, township cadres in Shanghai and Wuxi, where collective ownership predominates, seek to protect their collective enterprises by prohibiting the establishment of private firms—at least in sectors in which collective ones already exist (Whiting, 1993). Such protectionist behavior has been made worse by the budget problem of the Central Government and its fiscal decentralization reform. Provincial governments were told to seek their own sources of revenue and they often do so by protecting their own markets.

Credit Market Intervention

Although more lenders are available for the TVEs in recent years, the majority of bank loans in the rural sector are extended by the Agriculture Bank or the rural credit cooperatives. The amount of total outstanding loans is controlled by mandatory binding targets sent down by the county bank branch. Setting target levels is a major tool of macroeconomic control by the state (Naughton, 1991). For instance, the economic rectification campaign of late 1988–91 froze total loans to rural enterprises, throwing rural residents out of work (Ma, 1990). The severe impact on rural enterprises and rural unemployment heightened concerns about political instability in the countryside. Target control may serve its purpose during periods of economic rectification, but its effectiveness in the longer run is in doubt, because it only delays the insatiable thirst for investment. After the economic rectification campaign, local officials have taken advantage of the relaxed policies since early 1992 by waging a campaign of rapid increases in the target for output value to make up for lost time (Whiting, forthcoming). The campaign also encouraged officials to build new enterprises rather than to improve the performance of existing ones. Bank officials at the county level by the end of 1992 were already anticipating the need for yet another economic rectification campaign to counterbalance the fast-growth campaign initiated in February 1992.

The criteria bank officials use to evaluate enterprises and projects for loan purposes include economic performance of the enterprises, development potential, and sales potential of the products (Shen, 1990). In rating enterprises, banks are often unable to avoid inappropriate local administrative interference. Some local governments and bureaus, to ensure that the enterprises under their jurisdiction receive a high rating, have no qualms about intervening personally, particularly when new projects are involved. Interference is even more common in banks’ decision making regarding new projects. According to a township government official in Dongtan, Wuxi, the government interferes in the allocation of bank loans. Successful enterprises can get loans directly. But for new enterprises, in particular, if the bank doesn’t want to support them, the Party secretary will go in person with the enterprise manager and accountant to the bank. In less-developed townships, government interference is even greater. However, the bank is gradually beginning to be governed by economic laws (Whiting, forthcoming). Similar behavior for the state enterprises has been well documented (Huang, 1990; Walder, 1992; and White and Bowles, 1987).

Although township bank officials are appointed by their superiors at the county branch of the Agriculture Bank, the leaders of the local branch of the Communist Party must approve the appointments. Moreover, the Party affairs of the township bank officials are governed at the township level. Thus, township leaders have authority over township bank officials through Party channels. Interviews conducted by Whiting (forthcoming) confirm not only the institutional potential for, but also the actual exercise of, local Party authority over banks. Institutional control goes beyond Party channels in some cases. For example, in Dongtan, Wuxi, the vice-general manager of the town government’s industrial corporation is also the manager of the credit cooperative; the interests of the industrial corporation are therefore seen to, and borrowing money is convenient (Whiting, forthcoming).

The requirement of matching funds from the enterprise’s own resources is often undermined. In principle, matching funds derive from an enterprise’s retained profits as well as from mandated funds set aside from pretax profit (Yu and Huang, 1991). Township bank officials may simply waive the requirement in light of political pressure. Enterprises can also evade the requirement through the practice of multiple accounts: using an undisclosed loan at one bank for matching funds at another (Shu, Wei, and Wang, 1990; Cai, 1990; Bi and Yan, 1991; Luo, Deng, and Liu, 1991; and Mao, 1991). In other cases, the township bank officials may collude in this practice as a result of political pressure, shared local interests, or personal connections (Whiting, forthcoming). In response, Mao (1991) called for a return, at least temporarily, to the prereform banking structure in which the Agriculture Bank (including credit cooperatives) had sole responsibility for loans in the rural industrial sector.

Another requirement for borrowers is to have guarantors or loan collateral. According to regulations, the guarantor must be an economic entity with its own independent source of income, it must be recognized as a legal entity, and must not be a government organ (Xu, 1992). Although the township industrial corporation is a government office with official functions, it is simultaneously an economic and legal entity. It often serves as a guarantor for township enterprises but is referred to as an “empty” guarantor because it seldom uses funds from its own economic resources to fulfill its obligations (Xu, 1992). For cases in which the township industrial corporation or village company is unable or unwilling to serve as guarantor, the township public office frequently serves as guarantor, although it is a violation of the regulations, but uses its funds to pay off the delinquent loan as a last resort (Whiting, forthcoming).

Soft Budget Constraints for the Enterprises

Bargaining over output quotas between township officials and enterprise managers is common, limiting somewhat managers’ work incentive. Negative incentives, such as salary deductions for managers when performance falls below certain target levels, often go unenforced, partly because township leaders and the managers they supervise are lifelong members of the same rural community. The situation has produced the saying “contracting for profits, but not for losses.” Thus, managers bear less risk than intended by the contract designers, undermining the incentives for the weakest managers. The key financial roles of the industrial corporations include pooling enterprises’ aftertax profits for investment and directing other resources (from local banks and credit cooperatives) to particular investment projects; cushioning such subordinate enterprises from short-term financial problems by transferring funds from enterprises with surpluses to those with deficits; and facilitating the issuance of short-term bonds to local residents (World Bank, 1990; Wong, 1988b; and Byrd and Zhu, 1990). Wong (1988b) also argued that local governments try to manage set revenues, which consist of profits and fees paid by the firm. They would be willing to allow the survival of loss-making firms as long as sufficient tax revenues and fees were generated to offset the losses.

Often the TVEs that were losing money were granted loans by the Agriculture Bank to pay wages at the end of the year (Li, Shi, and Zhu, 1990; and Whiting, forthcoming). Continuing loans to poorly rated enterprises seems to be motivated by concerns over employment levels and employee welfare. The industrial corporation also engages in the practice of placing levies on the retained profits of the successful enterprises under its jurisdiction in order to repay delinquent loans of enterprises that are performing poorly. When the public finance office is a guarantor for the delinquent loan, it may encourage the bank to roll over the account, or it may borrow money from other cash-flush government bureaus to pay off the loan. The bank is often willing to roll over the loan as long as the enterprise is still paying interest. In some cases, the public finance office assists enterprises by making the interest payments for them (Whiting, forthcoming). Loans backed up by collateral are most difficult to collect once they go into default, because the practice of repossessing and auctioning property is not well developed, either socially or legally (Zhou and Hu, 1987). The record of banks in pursuing delinquent loans is mixed, hindered by the absence of legal recourse. The enterprises are becoming more highly leveraged, but with reinvestment from the township government not forthcoming and with bank loans for fixed-asset investment tightly restricted, existing enterprises commonly use working capital funds (whether bank loans or matching funds) for such investment (Whiting, forthcoming; and Li, Shi, and Zhu, 1990). The increasing debt and the interest payments are becoming a burden for the enterprises (Whiting, forthcoming). The enterprises in trouble can receive government assistance in various ways. Public finance bureaus at both the township and county levels make loans from their circulating funds directly to enterprises in the form of financial credits. Government bureaus with funds at their disposal use them to make loans to enterprises, either directly or through the public finance office. Enterprises can also receive tax breaks at the discretion of local government officials even when conditions do not accord with central government tax policies (Whiting, 1993; World Bank, 1990). The township government can also collect funds from local community residents to be loaned to enterprises. Government cadres were assigned quotas to collect from various target groups in the township. These loans circumvent the discipline in the loan criteria employed by the Agriculture Bank. A growing number of enterprises also use the accounts payable as a way to soften their budget constraints. Enterprises have little recourse when clients fail to pay. Localism is so pervasive that when one county or township government sends court, police, or enterprise representatives to another locality to collect payment, the resident court and police personnel are often unwilling to act against the interests of the offending local enterprises (Zhang, 1993). According to a survey of the large-scale rural industrial enterprises, as of 1985, accounts payable were second only to bank loans in their share of total enterprise liabilities. In 1985, bank loans (including both working capital and fixed-asset loans) accounted for 43 percent of total liabilities, while accounts payable made up 32 percent (Zhou and Hu, 1987).

Appendix: Empirical Test of the Efficiency of Collective Ownership

The following preliminary test of the effects of collective ownership on the efficiency of production operations of rural enterprises was implemented by Qiu Jicheng, a graduate student at the University of Southern California. The dependent variable of the regression analysis is ln Y, where Y is the total output value per employee in Y 10,000. The independent variables are

In K=the total fixed asset value per employee, in Y 10,000;
In M=the total value of raw materials inputs per employee, in Y 10,000;
In L=the percentage of skilled labor in the enterprise;
BONUS=the fraction of bonus in the total wage bill;
WDIFF=the wage difference between managers and ordinary workers;
RPTV=the retained profit that the enterprise can dispose of at the director’s discretion. It is the retained profit multiplied by a decision dummy variable. It is an interactive variable;
TIME=years of the enterprise’s existence;
COMP=a dummy competition variable. If the survey indicated that the enterprise faced severe or normal competition, the value is 1; otherwise the value is 0;
DIST=dummy variable for a district enterprise;
TOWN=dummy variable for a township enterprise;
XIAN=dummy variable for a xian (the lowest government unit) enterprise; and
VILL=dummy variable for a village enterprise.

The two variables BONUS and RPTV are intended as contractual variables, and the COMP variable is an environment variable related to the location of the enterprise.

The result of the regression is as follows:

Multiple R0.79210
R20.62742
Adjusted R20.59999
VariablesCoefficientsT-Value
In K0.18210.0004
ln L0.13540.0959
In M0.2356
BONUS0.9765
RPTV3.1788
WDIFF0.000050.1083
TIME0.09320.1626
COMP0.10450.2892
DISTR−0.47290.0442
TOWN−0.23410.1997
XIAN−0.35100.0644
VILL−0.52220.0201

The coefficients for the first five variables have the expected signs and are statistically significant. Interestingly, all the signs for the dummy variables for ownership are significantly negative, suggesting that these collective enterprises may not be as well managed as the other private or quasi-private enterprises. Svejnar (1990) analyzes the panel data from 122 rural enterprises in the four-county survey featured in the World Bank-Chinese study edited by Byrd and Lin (1990). None of the ownership dummies has a statistically significant coefficient. Pitt and Putterman (forthcoming) use the same data as ours (but on earlier years) and find no discernible difference in efficiency owing to ownership types. One possible explanation is the profit incentive accounted for in our study. The difference may also be due to the more recent data used in this regression.

References

    Ashton,Basil, andKennethHill,1984, “Famine in China, 1958–61,”Population and Development Review, Vol. 10 (December), pp. 613–45.

    • Search Google Scholar
    • Export Citation

    Bi,Honglin, andXiuYan1991, “Doutou kaifu duotou daikuan de biduan ji duiche” (The harmful practice of multiple accounts and multiple loans and counter measures), Zhongguo nongcun jinrong (China’s Rural Finance), No. 8, p. 56.

    • Search Google Scholar
    • Export Citation

    Bo,Yibo,1993, Jianguo yilai ruogan zhongda jueche wenti de huigu (Review on selected issues of state policy-making in the People’s Republic of China) (Beijing: People’s Press), Vols. 1 and 2.

    • Search Google Scholar
    • Export Citation

    Byrd,William, andQingsongLin,eds., 1990, China’s Rural Industry: Structure, Development, and Reform (New York: Oxford University Press).

    • Search Google Scholar
    • Export Citation

    Byrd,William, andN.Zhu,1990, “Market Interactions and Industrial Structure,”in China’s Rural Industry: Structure, Development, and Reform, ed. by W.Byrd andQ.Lin (New York: Oxford University Press).

    • Search Google Scholar
    • Export Citation

    Cai,Xiongwei,1990, “Xiangzhen qiye de ‘Zhaiwulian’ weihe nanyi jiekai” (Why the township and village enterprise ‘debt chain’ is hard to break), Shanghai jirong (Shanghai finance), No. 12, pp. 35–37.

    • Search Google Scholar
    • Export Citation

    China Agriculture Yearbook 1980, 1980 (Beijing: Beijing Agricultural Publishing House), pp. 56–62.

    China Township and Village Enterprise Statistical Abstract, 1992 (Beijing: Beijing Agriculture Publishing House).

    China Township and Village Enterprise Yearbook, various years (Beijing: Beijing Agriculture Publishing House).

    Cui,Xiaoli,1988, “Tongguo tongxiao yu zhongguo gongye hua” (The regulated grain system and China’s industrialization), Development Report No. 5 (Beijing: Development Institute).

    • Search Google Scholar
    • Export Citation

    Du,Haiyan,1992, Zhongguo nongcun gongyehua yanjiu (Research on rural industrialization in China) (Hubei: China Commodity Price Press).

    Du,Rensheng,1985, Zhongguo nongcun jingji gaige (Rural reform in China) (Beijing: China Social Science Press).

    Fan,Gang, andWing ThyeWoo,1996, “Decentralized Socialism and Macroeconomic Stability: Lessons from China in the 1980s,”Chapter 10 in this volume.

    • Search Google Scholar
    • Export Citation

    Fazhanyanjiu suo (Development Institute), 1988, Gaige mianlin zhidu chuangxin (Reform faces institutional innovation) (Shanghai: Shanghai Sanlian Press).

    • Search Google Scholar
    • Export Citation

    Harrold,Peter,>1992, China’s Reform Experience to Date, World Bank Discussion Paper No. 180 (Washington: World Bank).

    He,Baoshan, and others, eds., 1991, Jiangsu nongcun feinonghua fazhan yanjiu (Research on the nonagricultural development of rural Jiangsu) (Shanghai: Shanghai People’s Press).

    • Search Google Scholar
    • Export Citation

    Hirschman,Albert,1958, The Strategy of Economic Development (New Haven, Connecticut: Yale University Press).

    Huang,Yasheng,1990, “Web of Interests and Patterns of Behavior of Chinese Local Economic Bureaucracies and Enterprises During Reforms,”China Quarterly, No. 123 (September), pp. 431–58.

    • Search Google Scholar
    • Export Citation

    Huang,Yiping, andXinMeng,1995, “China’s Industrial Growth and Efficiency: A Comparison Between the State and the TVE Sectors,”Discussion Paper, Department of Economics (Canberra: Australian National University).

    • Search Google Scholar
    • Export Citation

    Jefferson,Gary,1993, Are China’s Rural Enterprises Outperforming State-Owned Enterprises? Research Paper No. CH-RPS#24 (Washington: World Bank).

    • Search Google Scholar
    • Export Citation

    Jefferson,Gary, andThomasRawski,1994, “Enterprise Reform in Chinese Industry,”Journal of Economic Perspectives, Vol. 8 (Spring), pp. 47–70.

    • Search Google Scholar
    • Export Citation

    Jefferson,Gary, andZhengYuxin,1992, “Growth, Efficiency, and Convergence in China’s State and Collective Industry,”Economic Development and Cultural Change, Vol. 40 (January), pp. 239–66.

    • Search Google Scholar
    • Export Citation

    Jiang,Xianjuan, and others, 1993, “New Features of China’s Industrial Growth and Structural Change,”Zhongguo gongye jinji yanjiu (Research on China’s industrial economics), No. 8, pp. 32–40.

    • Search Google Scholar
    • Export Citation

    Lardy,Nicholas,1983, Agriculture in China’s Modern Economic Development (New York: Cambridge University Press).

    Li,Chue’n,ShoujiangShi, andLifangZhu,1990, “Xiangzhen qiye yuqi daizhi daikuan xintan” (A new discussion of township and village enterprises’ delinquent and unrecoverable loans), Zhongguo nongcun jinrong (China’s rural finance), No. 5, p. 57.

    • Search Google Scholar
    • Export Citation

    Lin,Justin,1990, “Collectivization and China’s Agricultural Crisis in 1959–1961,”Journal of Political Economy, Vol. 98 (December), pp. 1228–52.

    • Search Google Scholar
    • Export Citation

    Luo,Xianfu,HerenDeng, andZhonglongLiu,1991, “Qingli zhengdun qiye duotou kaifu” (Sort out and rectify multiple enterprise accounts), Zhongguo Jirong (China’s finance), No. 4, pp. 28–29.

    • Search Google Scholar
    • Export Citation

    Ma,Yongwei,1990, “Jianchi guanche zhili zhengdun shenhua gaige de fangzhen, zhichi nongcun jingji chixu wending xietiao de fazhan” (Persist in implementing the principles of rectification and deepening reform, support the continued stable and coordinated development of the rural economy), Zhongguo nongcun jinrong (China’s rural finance), No. 3, pp. 9–15.

    • Search Google Scholar
    • Export Citation

    Mao,Rongfang,1991, “Qiye duotou kaifu de biduan yu guanli duice” (The harmful practice of multiple enterprise accounts and managerial counter-measures), Shanghai jinrong (Shanghai finance), No. 5, pp. 21–22.

    • Search Google Scholar
    • Export Citation

    Naughton,Barry,1991, “Macro-Economic Management and System Reform in China,”in The Chinese State in the Era of Economic Reform: The Road to Crisis, >ed. by G.White (Armonk, New York: M.E. Sharpe).

    • Search Google Scholar
    • Export Citation

    Pan,Xining,1993, “Development of Rural Industry Confronts Nine Big Issues,”Shengchanli zhisheng (Voice of productive forces), No. 7, pp. 33–34.

    • Search Google Scholar
    • Export Citation

    Perkins,Dwight, andShahidYusuf,1984, Rural Development in China (Baltimore: Johns Hopkins University Press).

    Pitt,Mark, andLouisPutterman,forthcoming, “Employment and Wages in Township, Village, and Other Rural Enterprises,”in Reform, Ownership and Performance in Chinese Industry, ed. by G.H.Jefferson andI.J.Singh.

    • Search Google Scholar
    • Export Citation

    Prime,Penelope,1992, “Industry’s Response to Market Liberalization in China: Evidence from Jiangsu Province,”Economic Development and Cultural Change, Vol. 41 (October), pp. 27–50.

    • Search Google Scholar
    • Export Citation

    Putterman,Louis,1992, “Dualism and Reform in China,”Economic Development and Cultural Change, Vol. 40 (April), pp. 467–93.

    Putterman,Louis,1993, Continuity and Change in China’s Rural Development: Collective and Reform Eras in Perspective (New York: Oxford University Press).

    • Search Google Scholar
    • Export Citation

    Putterman,Louis,1994a, “Contradictions and Progress: The State, Agriculture, and Third’ Sectors in China’s Economic Reforms,”in China: A Reformable Socialism?ed. by YangGan andZhiyuanCui (Hong Kong: Oxford University Press).

    • Search Google Scholar
    • Export Citation

    Putterman,Louis,1994b, “On the Past and Future of China’s Township and Village Owned Enterprises,”paper presented at the International Conference on the Property Rights of Township-Village Enterprises in China, Hangzhou, China, August 7–9.

    • Search Google Scholar
    • Export Citation

    Qiu,Jicheng,1988, “Xiangzhen qiye—Shequ (Zhengfu) guanli moshi de jiben xiansuo” (Township and village enterprises—the basic threads of the community (government) management model), Fazhan yanjiu tongxun (Development research), No. 104 (December), pp. 748and 759.

    • Search Google Scholar
    • Export Citation

    Sachs,Jeffrey, andWing ThyeWoo,1994, “Structural Factors in the Economic Reforms of China, Eastern Europe and the Former Soviet Union,”Economic Policy: A European Forum, Vol. 9 (April), pp. 101–45.

    • Search Google Scholar
    • Export Citation

    Saith,Ashwani,1986, Contrasting Experiences in Rural Industrialization: Are the East Asian Successes Transferable? Asian Employment Program Working Papers (New Delhi, India: International Labor Organization).

    • Search Google Scholar
    • Export Citation

    Schumpeter,Joseph,1934, The Theory of Economic Development (Cambridge, Massachusetts: Harvard University Press).

    Shao,Xinfu, and others, 1991“Jiadingxian xiangzhen qiye chengbaozhi de shijian” (The experience with Jiading County’s township and village enterprise contracting system), in Jiading nianjian, 1988–1990 (Jiading yearbook, 1988–1990), ed. byJiadingxing Yearbook Editorial Bureau (Shanghai: Tongji University Publishing House).

    • Search Google Scholar
    • Export Citation

    Shen,Sandu,1990, “Dui xinyong pinggu gongzuo de jidian sikao” (Several thoughts on credit rating work), Shanghai jinrong (Shanghai finance), No. 2, p. 40.

    • Search Google Scholar
    • Export Citation

    Shirk,SusanL.,1993, The Political Logic of Economic Reform in China (Berkeley: University of California Press).

    Shu,Hengchang,DeyongWei, andCanwenWang,1990, “Qingli duotou Kaifu, Jiaqiang Zhanghu guali” (Clear up multiple accounts, strengthen account management), Shanghai jinrong (Shanghai finance), No. 12, pp. 41–42.

    • Search Google Scholar
    • Export Citation

    Song,Guoqing,1982, Jingji zengzhang he jingji jieguo (Economic growth and economic structure) (Beijing: China Encyclopedia Press).

    Svejnar,Jan,1990, “Productive Efficiency and Employment,”in China’s Rural Industry: Structure, Development, and Reform, ed. by W.Byrd andQ.Lin (New York: Oxford University Press).

    • Search Google Scholar
    • Export Citation

    Walder,Andrew,1992, “Local Bargaining Relationships and Urban Industrial Finance,”in Bureaucracy, Politics, and Decision-Making in Post-Mao China, ed. by K.Lieberthal andD.Lampton (Berkeley: University of California Press).

    • Search Google Scholar
    • Export Citation

    Weitzman,Martin, andChenggangXu,1993, “Chinese Township-Village Enterprises as Vaguely Defined Cooperatives,”London School of Economics and Political Science, Development Economics Research Programme, China Programme, No. 26 (September), pp. 1–23.

    • Search Google Scholar
    • Export Citation

    Wen,JamesGuanzhong,1993, “Total Factor Productivity Change in China’s Farming Sector: 1952–1989,”Economic Development and Cultural Change, Vol. 42 (October), pp. 1–41.

    • Search Google Scholar
    • Export Citation

    White,Gordon, andPaul, Bowles,1987, Towards a Capital Market? Reforms in the Chinese Banking System: Transcript of a Research Trip, Research Report No. 6 (Sussex, England: Institute of Development Studies of China).

    • Search Google Scholar
    • Export Citation

    Whiting,Susan,1993, “The Comfort of the Collective: The Political Economy of the Rural Enterprises in Shanghai,”paper presented at the Annual Meeting of the Association for Asian Studies, Los Angeles, California, March 25–28.

    • Search Google Scholar
    • Export Citation

    Whiting,Susan,forthcoming, “Market Discipline and Rural Enterprises in China,”in Reforming Asian Socialism: The Growth of Market Institutions, ed. by J.McMillan andB.Naughton (Ann Arbor: University of Michigan Press).

    • Search Google Scholar
    • Export Citation

    Wong,Christine,1988a, “Between Plan and Market: The Role of the Local Sector in Post-Mao China,”in Chinese Economic Reform: How Far, How Fast?ed. by B.Reynolds (Boston: Academic Press).

    • Search Google Scholar
    • Export Citation

    Wong,Christine,1988b, “Interpreting Rural Industrial Growth in the Post-Mao Period,”Modern China, Vol. 14, pp. 3–30.

    World Bank, 1990, China: Revenue Mobilization and Tax Policy, World Bank Country Study (Washington: World Bank).

    Wu,Xiang,1980, “Yanguan dao he dumuqiao” (The open road and the log bridge), People’s Daily (Beijing), November 5.

    Xu,Heping,1992, “Zhongshi danbao shencha que bao zhaiquan luoshi” (Take seriously the investigation of guarantors, ensure the fulfillment of creditors’ rights), Shanghai nongcun jinrong (Shanghai rural finance), No. 1, pp. 42–43.

    • Search Google Scholar
    • Export Citation

    Yang,Xiaokai,WangJianquo, andLanWillis,1992, “Economic Growth, Commercialization, and Institutional Changes in Rural China, 1979–87,”China Economic Review, Vol. 3.

    • Search Google Scholar
    • Export Citation

    Yu,Chiqian, andHaiguanHuang,eds., 1991, Dangdai zhongguo de xiangzhen qiye (China today: village and township enterprises) (Beijing: Modern China Publishing House).

    • Search Google Scholar
    • Export Citation

    Zhang,Neiguo,1993, World Economic Herald, April 13.

    Zhou,Qiren,1995, “Rural Reform in China: The Changed Relationship Between the State and Property Rights,”paper presented at the International Symposium on Reform of China’s Rural Economy, Hainan, China, March.

    • Search Google Scholar
    • Export Citation

    Zhou,Qiren, andZhuangjunHu,1987, “lsquo;Fuzhai jingying,’ de hongguan xiaoying” (The macro effects of ‘chronic indebtedness’), Fazhan yanjiu tongxun (Development research), No. 54, p. 312.

    • Search Google Scholar
    • Export Citation

    Zhongguo nongcun fazhan wenti yanjiuzu (Study Group of Development Issues in Rural China), 1981, Baochan daohu ziliao xuan (A collection of materials on the household responsibility system), Vols. 1 and 2 (Beijing).

    • Search Google Scholar
    • Export Citation

Note: The author would like to thank Li Yuan of People’s University for composing Tables 1 and 2. The econometric test in the appendix is taken from joint work with Jeffrey Nugent and Qiu Jicheng. The materials on market imperfections are drawn extensively from the work of Susan Whiting (forthcoming). The author also thanks Zhou Qiren for his excellent expositions on the role of TVEs in the reform process in Zhou (1995).

    Other Resources Citing This Publication