The Yangtze Delta region arose as a model of rural industrial development in the 1980s and mid-1990s. Here, in the greater Shanghai and southern Jiangsu regions, the countryside not only underwent enough economic growth to become the industrial center of China, but saw the unique development of the economy and the party in an anomalous integral fashion. The Sunan model, as it has become known, refers to the collective ownership of TVEs, the dominant role of the local government and party cadres in rural industrialization, and social services provided by local governments. Under the control of local governments and officials, the TVE were the priority asset of the local economy and the main revenue generator. 1
The Sunan model followed the trends of the national economy. In the early 1990s, collective TVEs throughout China began to overtake stateowned players and soon overwhelmed their private counterparts, then still underdeveloped in rural China. In 1994, rural enterprises accounted for 44 percent of the country's industrial gross output, while the contribution of the state-owned firms dropped to a record low of 34 percent (calculated from ZTN 1995). Sunan was one of the leading areas driving this growth.
The collective TVEs did encounter difficulties that hindered their fastpaced growth, however. Since the mid-1990s, the country's economic growth tapered off and rural firms output and profits have dwindled. The GDP grew at an annual average change of 24 percent from 1990 to 1995, for example, but averaged only 7 percent from 1995 to 2002 (Table 1.2). Likewise, rural household net income increased yearly at around 18 percent between 1990 and 1995, but only 7 percent yearly from 1995 to 2001 (Table 1.1). Accordingly, the central government no longer applauded the so-called Chinese socialist model of rural development, and reports and commentaries in state-monitored media and academic journals started to question the orthodox position of the Sunan model.
This economic slowdown put pressure on the collectives around the country, and in Sunan, leading to highly leveraged village run companies. In order to alleviate the state from near crushing debt, the central government pushed privatization. Local cadres began to loosen their control