Township and village enterprises in China: Reform success or evolution of a traditional institution?
Maria S. Kruglova
TERRA ECONOMICUS, 2020, Vol. 18 (no. 4),
The paper explores the historical continuity of economic and social institutions. We use the example of township-village enterprises (TVE) in China to illustrate this continuity. In the 1980s township-village enterprises became the leaders of economic growth in rural China. We argue that TVEs were an evolution form of “baojia”, the traditional Chinese institution of frankpledge and rural defense. The article outlines a brief historical implementation of the baojia both by the Chinese authorities and Japanese administrators of the Chinese territory. Literature presents a popular theory claiming the TVEs were designed “from above”. We reject this theory. We claim that the TVEs were not created by the Chinese authorities at the beginning of “reform and opening up”. On the contrary, the basis for the TVE formation were informal agreements among Chinese peasants. When enterprises first appeared, authorities prohibited them, accusing of threatening the public sector. Due to political uncertainty in the initial period of reforms and the impossibility of effective official management, the peasants reproduced the economic practices familiar to the Chinese institutional environment. They relied on mutual trust customary for the traditional Chinese tax system. We conclude that it was a powerful institutional tradition which became the basis for the rapid development of the TVEs, strongly affected the Chinese economic growth in the early 80th. We also conclude that the baojia institution works effectively only among the Chinese population. The paper analyzes the interviews we conducted with the employees of three TVEs in Guangxi Zhuang Autonomous Region.
Citation: Kruglova, M. S. (2020). Township and village enterprises in China: Reform success or evolution of a traditional institution? Terra Economicus, 18(4), 111–125. DOI: 10.18522/2073-66062020-18-4-111-125 (In Russian)
Keywords: township-village enterprises; economic growth; institutional changes; baojia; reforms; China
JEL codes: D02, D19, O43, P32
- Beck, T., Lu, P., Yang, R. (2015). Finance and growth for microenterprise: evidence from rural China. World Development, 67, 38–56.
- Breus, Е. (2012). Identity documents in China: history, structure, national idea. Etnograficheskoe obozrenie, (1), 3–23. (In Russian.)
- Brook, T. (2005). The Chinese State in Ming Society. (Illustrated ed.) Routledge.
- Cai, J. (1990). A Study on Legislation on TVEs (Xiangzhen qiye lifa yanjiu), pp. 195–207 / In: Regional Experiment Office of the State Council, Gaige sikao lu (A Collection of Studies on Reform). Beijing: Zhongguo Zhuoyue Publishing Corp.
- Che, J., Qian, Y. (1998). Institutional Environment, Community Government, and Corporate Governance: Understanding China’s Township–Village Enterprises. Journal of Law, Economics and Organization, 14, 1–23.
- Chen, H. (2017). The institutional transition of China’s township and village enterprises: Market liberalization, contractual form innovation and privatization. London: Routledge. DOI: 10.4324/9781315211305
- Coase, R., Wang, N. (2013). How China Became Capitalist. Moscow: Novoe izdatelstvo Publ. (In Russian.)
- Davis, L., North, D. (2019). Zhidu bianqian yu meiguo jingji zengzhang. Gezhi chubanshe. (In Chinese.)
- Endo, M. (2013). Manshukoku tochi ni okeru hoko seido no rinen to jittai: ‘minzoku kyowa’to hochi kokka toiu futatsu no kokuze wo megutte. Ajia taiheiyo kenkyu, 20, 37–51. (In Japanese.)
- Fu, W. (1966). History of the Ming Dynasty, an excerpt from Ch. 67 “Description of land” / In: Agrarian Policy of the Ming Government in the Second Half of the XIV Century. Moscow: Nauka Publ. (http://www.vostlit.info/Texts/Dokumenty/China/XVII/Min_Shi/text1.htm) – accessed: May 23 2020). (In Russian.)
- Fu, X., Balasubramanyam, V. (2003). Township and Village Enterprises in China. The Journal of Development Studies, 39, 27–46. DOI: 10.1080/713869424
- Guitian, M., Mundell, R. (Eds) (1995). Inflation and Growth in China. Proceedings of a Conference Held in Beijing. China.
- Ito, J. (2006). Economic and institutional reform packages and their impact on productivity: a case study of Chinese township and village enterprises. Journal of Comparative Economics, 34, 167–190.
- Karagiannis, N., Cherikh, M., Elsner, W. (2019). Growth and development of China: A developmental state ‘with Chinese characteristics’. Forum for Social Economics, 1–19. DOI: 10.1080/07360932.2020.1747515
- Karpov, М. (2014). The vicious circle of the “Chinese miracle”. Market transformations and the problem of reformability of the Lenin-type party state in the Peopleʼs Republic of China. Moscow, Saint Petersburg: Nestor-Istoriya Publ. (In Russian.)
- Kondrashova, L. (1998). Public sector of the PRC: privatization or modernization. Problemy Dalʼnego Vostoka, (4), 47–56. (In Russian.)
- Li, B. (1993). Retrospect and prospect of TVEs during the fifteen years of Reform and Opening Up. Management World, (5), 156–165.
- Li, P. (2005). The puzzle of chinaʼs township-village enterprises: the paradox of local corporatism in a dual–track economic transition. Management and Organization Review, (1), 197–224. DOI: 10.1111/j.1740–8784.2005.00009.x
- Lin, J., Yao, Y. (2001). Chinese rural industrialization in the context of the East Asian miracle, pp. 143–197 / In: J. Stiglitz, S. Yusuf (eds.) Rethinking the East Asian miracle. N.Y.: Oxford University Press.
- Mayorov, V. (1988). Baojia in Kuomintang China in the 1930s – 1940s. Voprosy ekonomiki, istorii, vneshnej i vnutrennej politiki stran Dalnego Vostoka, (1), 152–160. (In Russian.)
- McDonnell, B. (2004). Lessons from the Rise and (Possible) Fall of Chinese Township-Village Enterprises. Wm. & Mary L. Rev., 45.
- Michie, J., Padayachee, V. (2020). Alternative forms of ownership and control in the global south. International Review of Applied Economics, 34, 1–10. DOI: 10.1080/02692171.2020.1773635
- Mote, F. (2003). Imperial China 900–1800 (Illustrated ed.). Harvard University Press.
- Naisbitt, J. (1994). Global paradox. New York: Avon.
- Naughton, B. (2007). The Chinese Economy: Transitions and Growth. Cambridge: MIT Press.
- Park, A., Shen, M. (2003). Joint Liability Lending and the Rise and fall of China’s Township and Village Enterprises. Journal of Development Economics, 71(2), 497–531.
- Perotti, E., Sun, L., Zou, L. (2014). State-owned versus township and village enterprises in China. China’s Economic Development, 33–59. DOI: 10.1057/9781137469960_3
- Polterovich, V. (2006). Institutional Reform Strategies: China and Russia. University Library of Munich, Germany, MPRA Paper.
- Polterovich, V. (2007). Institutional Reform Strategies, or The Art of Reforms. Preprint WP10 / 2007/08. Moscow: SU HSE. (In Russian.)
- Rouvinsky, R., Tarasov, A. (2020). “System of social credit”: Historical background and doctrinal foundations of the phenomenon. National security / nota bene, (3), 72–88. DOI: 10.7256/2454-0668.2020.3.33021
- Ryabinin, A. (2020). The Rural Community in China: Pro et Contra. Part 1. Oriental courier, (1–2), 57–80. (In Russian.)
- Ryabinin, A., Ryabinina, I. (2018). Was there a rural community in China? Journal of the Institute of Oriental Studies RAS – Vestnik Instituta Vostokovedeniya RAN, 5(5), 95–109. (In Russian.)
- Saich, T. (2001). Governance and Politics of China. New York: Palgrave.
- Scharpf, F. (1997). Games Real Actors Play: Actor–Centered Institutionalism in Policy Research. Boulder, CO, Westview Press.
- Sima, Q. (1996). Records of the Grand Historian (“Shi Ji”), vol. VII. Moscow: Vostochnaya literatura RAS. (In Russian.)
- Tan, H., Jia, Y., Li, Y., Hou, W. (2020). China Neighborhood and Village Committee confront the COVID–19 Pandemic; Cultural history and tracking back review of relevant public health events in last century. Preprints 2020, 2020040447. DOI: 10.20944/preprints202004.0447.v1
- Tang, W., Sun, C. (2016). Disputes and Trials on Properties of Chinese and Portuguese in Macau during Qianlong and Jiaqing Periods: Based on Investigation of Torre Do Tombo Archives. China Legal Sci., (4), 61–88.
- The Book of Lord Shang (“Shang jun shu”) (1993). Moscow: Ladomir. (In Russian.)
- Tian, M. (2016). The Baojia System as Institutional Control in Manchukuo under Japanese Rule (1932–45). Journal of the Economic and Social History of the Orient, 59, 531–554.
- Tominaga, N. (1936). Hoko seidoron. Shinkyo: Manshukoku minseibu keimushi. (In Japanese.)
- Tyapkina, N. (1973). Local administrative system of the Republic of China after the establishment of the Kuomintang regime. Proceedings of IV Scientific conference “Society and State in China”. Moscow: Nauka Publ. (In Russian.)
- Veblen, Т. (1984). The Theory of the Leisure Class. Moscow: Progress Publ. (In Russian.)
- Vernikov, A. (2015). Comparing the banking models in China and Russia: Revisited. Studies on Russian Economic Development, 26, 178–187. DOI: 10.1134/S1075700715020136
- Volynskii, А. (2019). Mesoeconomics of the economic growth: studying the experience of Chinese reforms. Voprosy teoreticheskoj ekonomiki, (1), 84–99. DOI: 10.24411/2587-7666-2019-00007 (In Russian.)
- Wang, C. (1936). Complete Works of Wang Yangming. Shanghai. (In Chinese.)
- Wasserstrom, J. (1997). Student Protests in Twentieth Century China: The View from Shanghai (Illustrated ed.). Stanford University Press.
- Weitzman, M., Xu, C. (1994). Chinese Township-Village Enterprises as Vaguely Defined Cooperatives. Journal of Comparative Economics, 18(2), 121–145.
- Zheng, L., Batuo, M., Shepherd, S. (2017). The Impact of Regional and Institutional Factors on Labor Productive Performance – Evidence from the Township and Village Enterprise Sector in China. World Development, 96, 591–598.
- Zhu, Q., Elbern, S. (2002). Economic institutional evolution and further needs for adjustments: Township Village Enterprises in China. ZEF Discussion Papers on Development Policy, 56, University of Bonn, Center for Development Research.
- Zhu, Z. (2008). Who created China’s household farms and township–village enterprises: the conscious few or the ignorant many? / In: G. Solomon (ed.) Academy of Management Annual Meeting Best Paper Proceedings. Washington, DC: George Washington University.
- Zong, J., Chen, J. (2018). Lishi bu hui wangji xiangzhen qiyede zhongyao gongxian – wei jinian woguo gaige kaifang sishi zhounian er zuo (http://www.moa.gov.cn/xw/bmdt/201807/t20180731_6154959.htm)– accessed: May 5 2020). (In Chinese.)
Publisher: Southern Federal University
Founder: Southern Federal University
Founder: Southern Federal University