Growth of Rural Industries in Post‐reform China: Patterns, Determinants and Consequences

Abstract

ABSTRACTThe first question addressed by this paper relates to the very high growth rates achieved by China's rural industries during the post‐reform period. While growth rates have undoubtedly been extremely high, they can only be put in a proper perspective when growth in different components of the sector (i.e. township‐ and village‐owned and privately owned industries) is examined separately and compared with performance before the reforms. In this regard, an important finding of the paper is that as far as township and village industries are concerned, growth rates in the post‐reform period do not represent a sudden break from the rates of the earlier period — particularly the 1970s. It is mainly in the emergence and growth of private enterprises that the growth experience of the 1980s differs substantially from that of the 1970s. The sharp decline in the growth of all rural industries in 1989 does not appear to mark a reversal in their growth environment, but the beginning of a period of consolidation and rationalization; and, contrary to popular notion, private enterprises are not the worst sufferers in this process. Finally, the paper looks at regional imbalance. Historically, rural industries in China have been concentrated more in the eastern provinces along the coast, and this regional concentration has increased during the post‐reform period of high growth.