Chinese Peasant Entrepreneurs: An Examination of Township and Village Enterprises in Rural China

By Fan, Y.; Chen, N. et al. | Journal of Small Business Management, October 1996 | Go to article overview

Chinese Peasant Entrepreneurs: An Examination of Township and Village Enterprises in Rural China


Fan, Y., Chen, N., Kirby, D. A., Journal of Small Business Management


Throughout the Western world, there has been a trend in recent years toward the development of rural enterprises (Townroe 1991; Curran and Storey 1993). In China, since the late 1970s the development of rural entrepreneurship has been closely associated with the emergence and development of rural township and village enterprises (TVEs). While considerable attention has been paid in recent years to aspects of entrepreneurship and small business development in China (Bruun 1990; Chau 1995; Siu 1995), hardly any attention has been paid to the nature and contribution of TVEs and the nature of rural entrepreneurs. Accordingly, this article examines the characteristics of Chinese peasant entrepreneurship as well as the environment in which it has been shaped. It starts with a brief review of the history and growth of TVEs before providing a definition of peasant entrepreneurs and a discussion of their characteristics.

Town and Village Enterprises

One of the most significant achievements in China's economic reform is the emergence and development of TVEs. "Appearing out of nowhere," as Deng Xiaoping was reported to have said in 1987 (Li 1993), TVEs have become an important force in China's national economy. By the end of 1993, TVEs are reported to have contributed two-thirds of the total value of rural social products, and one-third of the total value of national industrial production. TVEs accounted for nearly one-third of the employment in the agricultural sector and one-fifth of the total labor force nationwide. From 1979 to 1991, while China's total societal production grew at an average rate of 10.4 per cent, the total output from TVEs achieved a yearly average increase of 27.5 per cent, more than twice the rate of the total (Li 1993). Table 1 summarizes the development of TVEs between 1978 and 1993.

The term "township and village enterprises" first appeared in 1984 in a government document which announced the breakup of the people's communes and a name change from the former "commune and brigade enterprises" to TVEs. In so doing, the government was formally recognizing the individual and joint capital rural enterprises that succeeded the traditional commune and brigade industries. This recognition was hard-won. For a long period before they were recognized, TVEs were regarded as "illegal" and "non-standardized." Under the centrally-planned economy, only those enterprises within the state system were regarded as "legal," and previous efforts to put TVEs under such control had failed. It should be noted that it is not that TVEs chose to stay outside the state planning system, but that the State would not take them in. This "illegal" status later turned out to be the greatest advantage of TVEs, as it distinguished them from state-owned enterprises (SOEs). The market orientation that has guided TVEs from the outset has resulted in their unique characteristics. For example, TVEs enjoy a clear relationship between ownership and property rights, obtain all production factors (capital, raw materials, technology, personnel, and so on) from the market, use independent distribution and supply channels, [TABULAR DATA FOR TABLE 1 OMITTED] are solely responsible for profits and losses, enjoy complete business autonomy with little government interference, and operate under flexible management.

In short, whereas the state-owned enterprises constitute planning units under the corresponding state bureaus, TVEs are independent business entities accustomed to the rule of the market. It is in this freer business environment that a new generation of peasant entrepreneurs has grown up.

Peasant Entrepreneurs Defined

The great achievement of TVEs in the past 17 years has been mainly attributed to Chinese peasant entrepreneurs. But who are they? Before a definition is given of the peasant entrepreneur, it is necessary to consider who or what a peasant is. According to the Shorter Oxford English Dictionary a "peasant" is "one who lives in the country and works on the land; a countryman, a rustic . …

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