China’s Rural Industries in Historical and Comparative Perspective

1. 18th and early 20th c. rural industries

2. Three decades of socialist economic transformation

3. Post-’78 rural industry: economic causes & impacts

4. Spatial impacts: historical & comparative perspective

5. Property rights: from public to private

18th-century rural industries

1. Agrarian = agricultural + crafts at household level

2. marketing systems locally & long-distance with

large merchant groups & small peddlers

3. Higher population density and higher incomes in rural

areas than possible with just agriculture

4. Gap between urban and rural smaller than if rural just

agricultural

Early 20th century rural industries

1. Beginning of modern urban industries

2. Some connections to rural industries in textiles

3. Growing regional gaps which appear as gaps

between urban and rural, but are regional

4. Isolated rural economies less viable than before.

Socialist Transformation: a new context for rural industries

1. Dismantle marketing systems & merchant networks

2. Separate urban and rural administratively

3. Stop household crafts and transform agrarian into

agricultural

4. Create economically less integrated countryside

subject to political demands

New rural industries under socialism

1. Great Leap Forward (1958-1960) backyard steel

furnaces: mass mobilization & political enthusiasm

2. Cultural Revolution era (1966-1976) promoting

small-scale producer industries to serve agriculture

3. A rural modern: new technologies & agriculture

4. Continued separation of rural and urban, no

markets; political management of rural industries

Reform era Rural Industries:TVE & their economic impact, 1980s-mid 1990s

1. Township and village enterprises (TVE)

2. TVE output 1992 = 35% of national gross value of

industrial output (GVIO); almost = all of 1986 GVIO

3. Initial strategy of economic reform—agriculture and

then rural industrial—growing outside the plan

Markets& firms: historical factors

1. Using informal networks: kinship and friendship for

both product and factor markets

2. Contracts and agreements guaranteed through

trust—expectation of repeated interactions

3. Earlier commercial expansion largely without legal

framework of contracts and government’s courts

Markets & firms: political factors

1. The socialist rural industry legacy—local political

leaders become local entrepreneurs

2. Access to government controlled raw materials

3. Formal and informal networks of party colleagues

4. The local government as a firm; the community as

firm

Variations in firm structure of TVE

1. Sunan model: the village as firm under cadre

leadership

2. Wenzhou model: informal networks and household

initiative

3. Pearl River delta: overseas Chinese networks

4. Ambiguity & flexibility of property rights:

pros & cons

The public nature of TVE: local finance

1. Local cadres decide how to spend money from TVE,

can re-invest, diversify, spend on public goods

2. Health, education, roads, housing

3. A new kind of market socialism

4. TVE and village democracy—political elections &

individual interests

Spatial variations of Chinese rural industry

1. Connecting urban and rural

2. Resource endowments, locational advantages and

economic traditions

3. Challenges in poor regions: local and central

government roles

4. Repeating earlier historical patterns of spatial variation

Chinese TVE in Comparative Perspective

1. European industrialization—capital intensive, from

little to more government planning

2. East Asian industrialization experiences—labor

intensive and government planned development3. Chinese industrialization—planned and market,

urban and rural

The declining importance of rural industries since the mid- 1990s

1. An end to easy profits, the expansion of markets,

increasing numbers of competing firms

2. Difficulties for local officials

3. Changes in ownership forms

4. A Chinese path?

Chinese industrialization: convergence?

1. An end to TVE as local public property: privatization2. SOE privatization complements TVE privatization:

multiple origins of private firms

3. Social implications of TVE privatization: social

inequalities grow

4. Political implications of TVE privatization: public

finance