The Growth of China’s Market Economy

CHINA’S RURAL INDUSTRIALIZATION
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China’s Rural Industrialization
Introduction
The growth of China’s market economy has been featured with significant changes as well as a tremendous geographical concentration of economic activities. The alterations resulted from the use of three models namely; South Jiangsu, Wenzhou as well as the Pearl River Delta Models that triumphed in developing diverse paths of economic development to become the very popular instances of domestic development in the country’s economy transformation as well as market development (Wang, 2010). The systems transplantation and institutional transition that happened in the country was two-fold from global and local perspectives. The country’s successful change as well as market development has for sure been driven by a motivation for change. China has gained from the West’s transplanting the market-focused economic system and World Trade Organization (WTO). This essay analyzes transplantation and transition in market development primarily from a domestic development view point to evaluate how distinct local development models impact the country
Origin of TVEs
Following the founding of the Republic, the regime transplanted the Soviet model of centralized planning from 1952 to 1957. But, disputes among the model and the governance structure occurred and numerous economic and political campaigns that caused tremendous decentralization, the 1950s Great Leap Forward as well as the 1960s Cultural Revolution. According to Xu (2008), the progress of the rural industries prior to the changes that started towards the end of the 1970s was partially a result of the decentralization changes which enabled and empowered domestic governments. They were partially entrenched in entrepreneurial conventions specifically in the coast regions that can be found in history of tea processing, pottery and textile industries of centuries ago.
The first decentralization saw people’s communes get founded in rural regions. The communes had dual responsibilities in the rural regions as they formed high levels of rural collective systems as well as low government apparatus. The communes were arranged hierarchically and the adjacent lower units of the communes were brigades and at the lowest level were production teams. As Mao’s policy fostered rural industries, the brigades and communes budgets were from the Commune and Brigades Enterprises (CBEs).
During the campaigns, the government started running the industry by masses which enabled the CBEs grow fast. By 1958, employment by CBEs had grown to 18 million and their products were valued at 6 billion Yuan as indicated by Table 1. But the mass movements caused the lack of markets and bureaucratic rules made the products useless. The Great Leap Forward Campaigns failed and raw materials went scarce and the government decided to close the CBEs. CBEs again started growing as the economy regained towards the end of the 1960s.
Table 1: CBEs Output Growth from 1957 to 1979 in ‘000,000,000s


Source: Xu (1995)
The Cultural Revolution of 1966 to 1976 saw the second decentralization happen. At this period, small COEs and SOEs established. Their growth accumulated human capital and enabled the rural sector to increase its industrial outputs in technology as well as goods. At the end of Cultural Revolution in 1976, CBE were 1.1 million and their output totaled 28.2 billion Yuan.
TVES and Models
China’s economic reforms began with agricultural progress towards the end of 1970s. The reforms had a primary goal of de-collectivization the ownership of land. The very significant element was the household responsibility system (HRS). Its initial part took place from 1978 to 1984 whereby the agricultural output increased to over 61%. About 49% of the output was because of the HRS and it came from increased inputs (Lin, 1992). In 1984, the country abandoned the commune system owing to the triumph of the Agricultural reforms and the governments were altered to form township governments whereas the CBEs became township-village enterprises (TVEs). Township governments had roles of managing and establishing TVEs (Qian & Xu, 1993).
The TVEs were collectively owned and were situated in villages or townships and all the residents in the villages or townships owned the firm together. Governments acted on behalf of the people thereby becoming executive owners of TVEs. The control rights of the TVEs were partially delegated to managers via contracts. The overall TVEs output from 1981 to 1990 grew at 28.1% yearly. The growth of the TVEs made the agricultural sector the 2nd biggest in the national economy. The progress of TVEs climaxed in mid-1990s as indicated by Table 2 below. By 1995, employment had hit 61 million while the GDP had hit 37.5% (Xu & Zhang, 2009). It became a major engine of the country’s industrialization and growth in early phases of reforms.
Table 2: Employment based on ownership in ‘000s


Source: TVEs/MOA (2003)
The growth of TVEs indicated the performance of the regional models of the firms. Areas with stronger TVEs success indicated a convention of entrepreneurship as well as stronger social norms that benefited business operations.
The Southern Jiangsu (Sunan) Model was used in Jiangsu province. Jiangsu province is the most successful and developed region of the Yangtze delta at Shanghai. Under this model, village and township governments led. The TVEs succeeded early starting the 1970s when the collective system was strong in the rural. The primary feature of this model was the leading responsibilities of community governments. The technical-assistance and subcontracting relation with urban state-owned Enterprises (SOEs) were always significant. Owing to history as well as great capital resources in t...