The Chinese Triangle of Mainland China, Taiwan, and Hong Kong: Comparative Institutional Analyses

By Alvin Y. So; Nan Lin et al. | Go to book overview

4

LOCAL INSTITUTIONS AND PROPERTY RIGHTS TRANSFORMATION; REGIONAL VARIATIONS IN CHINESE RURAL REFORMS

Chih-Jou Jay Chen

Since the late 1970s, China has experienced significant departures from the command economy. In particular, reforms gained early success in rural areas where they stimulated rural industrialization and entrepreneurship, making significant progress toward a diversified market economy. With the adoption of the household responsibility system and removal of local government's control over agricultural surplus, industrial enterprises have become local governments' major source of income and have also directly contributed to local development. Local governments and peasants eagerly used all the resources available to set up rural enterprises. In the 1980-1996 period, the average annual growth rate of industrial output in China was 16 percent. However, considering growth in different sectors in the same period, the average annual growth rates of industrial output for state-owned, collective (urban and rural), and individual firms were 8 percent, 21 percent, and 63 percent, respectively. 1 The gross value of industrial output of rural nonagricultural enterprises (township, village, and private enterprises—TVPs) jumped from 9.8 percent of the country's total in 1980, to 44 percent in 1994. Also, employment in TVPs climbed from 9 percent of total rural labor force in 1980, to 35 percent in 1996. 2 These figures reveal that while the state sector in Chinese reforms continued to grow steadily, its performance paled beside the soaring success of the rural enterprises. Thus, the reform process in the countryside holds the key to understanding the transformations taking place in the rural areas and, more importantly, in the changing economic, political, and social dynamics of Chinese society.

Central to the analysis and understanding of the reforms in rural China are what institutions have undergone changes and how they have changed. One of the most notable changes in China's institutional transformation has been in property rights relations. As far as rural reform is concerned, there has existed

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