Rural Enterprise’s Development in Deng Xiaoping’s Era
Name:Wang Wei Student ID：
Research paper supervisor:Dr.Seku Conde
Minzu University of China
2007-2008 Academic Year
Abstract
It is considered that rural enterprises’ development is a grand success in 20th century. This article is about rural enterprise. From 1978 to 1992, the development of rural enterprise had experience 4 priods, and performed in different patterns, Southern Jiangsu Model and Wenzhou Model are interpreted here. Rural enterprises’ development has a significant on rural development ----absorbing rural surplus labors, rising rural income, changing traditional thoughts. Meanwhile, it also brings some problems.
Key Words: rural enterprise, development, models, influence
The development of rural enterprise is a marked characteristic in Deng Xiaoping’s era. Urban and rural dual-economic structure leads to the emergency of rural enterprise in China. Rural populaces had been limited to the land by the state policy for a long time. Thus rural enterprises that organized automatically were different from urban ones in the aspects of social status, operation and process of development. Rural enterprises in this article are ones that established in the rural areas and invested by farmers, including both collective township enterprises and private enterprises.
Rural Enterprises’ Development Periods
In China, the policy to develop rural industry was first introduced in 1958. At that time, the focus was on simple processing of local farm produce, preparing handicrafts, manufacturing and repairing farm tools and developing and processing local industrial resources. These industries were small, and used primitive techniques and local raw materials to satisfy the demand of local commune members. Apart from industry, other non-farm activities were few. All enterprises were owned by the commune; no private operations were allowed. After the calamities that accompanied communization, most rural industrial plants and some non-farm enterprises were shut down. Of the small number that remained, they did not expand for the next eight to nine years. During the Cultural Revolution, these industries were often branded as "capitalist economic practices" and banned. It was until 1978 that rural enterprises were permitted.
Considering rural enterprises’ growing importance in employment, the development of rural enterprises in China after the start of reforms from the late 1978 to 1992 can be divided into four distinct periods.
In the first phase from 1978 to 1984, rural industrial growth was overshadowed by the unparalleled performance of agriculture which largely benefited from the rural reform. By 1984, the rural enterprises produced nearly 16 percent of total industrial output compared to 9 percent in 1978. Its share in gross total rural output increased from 24 percent to 33 percent over the period and its share in rural labor significantly increased from 9 percent to 14.5 percent.[1]
The second period from 1984 to 1988 was marked by acceleration in the rate of growth of output and employment in the rural non-farm sector in China. This period also coincided with more stable institutional arrangements in ownership and use of revenue generated in the rural enterprises. Local governments took the lead in utilizing the capital accumulated during the previous phase of agricultural growth to set up rural industrial units catering to increased local demand. The non-farm share in total rural labor increased from 14.5 percent to nearly 24 percent, while the share in gross rural output increased by more than 20 percent from its 1984 level. The stage was set for the structural transformation in the Chinese economy led by the rural non-farm sector.
The third period, from 1989 to 1991, was marked by a backlash from the government against the rural enterprises. It was the only phase in the history of China’s non-farm growth when the number, employment and share of output of the sector all declined. However, this phase did not last long, and the political leadership under Deng Xiaoping came out in full support of the policy of continuing reform and openness in a famous 1992 visit to Guangdong. The opening up of the economy provided the rural enterprise sector a broader space to compete both domestically and internationally. From 1992, rural enterprises began to step into a golden period.
The Southern Jiangsu Model & the Wenzhou Model
Natural resources, environment, cultural tradition, skills, level of economic development and social circumstance vary in different rural districts. Therefore, rural enterprise’s development performed several styles, among which Southern Jiangsu model and Wenzhou model were typical.
The Southern Jiangsu Model
Under the Southern Jiangsu model, as the main initiator and organizer, the township or village government, planned, set up, and financed rural enterprises. The government used the profits from township enterprises and funds obtained from other sources to build more enterprises or expand existing ones. Production plans, income distribution, appointment of managers, and labor allocations in the affiliated enterprises were managed centrally by the government. A portion of the profit was remitted to, and the loss was absorbed by, the township paying state taxes, enterprises must remit 25 percent of their profit to the township government.
Under this model, it was easier for the township government to control and regulate enterprises in order to reduce hazard, stabilize operations and protect various economic interests. Township-owned enterprises operated in areas close to big cities, where they received the backing of large industries. They generally worked in cooperation with or in an ancillary position to large urban industries, or manufacture parts and components for the latter. Some urban and rural enterprises became partners through investment, provision of technology, or technical assistance. In such cases, rural plants often recruited retirees from city plants to serve as the technical consultants. Therefore, publicly owned township enterprises were often larger in scale, had higher technical input, and produced better quality products than privately owned rural enterprises under the Wenzhou model.
In southern Jiangsu, most rural enterprises were simple agricultural processing plants that did not require much technology, or handicraft factories using local resources, or mining and building material enterprises whose products were sold locally or to neighboring areas. Because of unified management by the local government and the concentration of portions of enterprise profit, the township government had more power to regulate income distribution.
The Wenzhou Model
Under the Wenzhou model, the principal initiators in the development of rural industries were individual farmers. The local government's role was mainly to implement appropriate policies to create a congenial environment for the development of privately owned enterprises. Farmers owned two types of private industry: the rural household enterprises set up by farm families; and the joint-capital ones set up through joint investment by farm families. The latter was also called a joint household enterprise or economic association. Because the local government regulated them only indirectly, these enterprises enjoyed more independence and autonomy. Under market competition, their operations were more adaptable to changes in demand than those of state-owned urban enterprises and township-run rural public enterprises. Because every enterprise was responsible for its own profit and loss, these enterprises must improve their operations, raise efficiency, lower costs, and expand to survive. They achieved a higher degree of efficiency generally, were more competitive, and their products cost less.
Villages adopted the Wenzhou model were generally located away from big cities; therefore, assistance from the urban industrial sector was hard to obtain. Private rural enterprises were small and used backward technologies. For instance, in 1985 an average private enterprise in rural Wenzhou employed only three persons, who produced 8,600 yuan in output value. Leqing County of Wenzhou was the location for 12,770 rural enterprises in 1986; 30 percent of these employed eight workers or more. These private rural enterprises needed little capital and technology, so they expanded easily in the vast rural areas. Between 1981 and 1985, the output value in Wenzhou city's township enterprises increased at an average rate of 34.7 percent a year. The growth rate in 1985 was 42 percent faster than in 1984.[2]
The role of rural enterprises
First, rural enterprises absorbed large numbers of rural surplus laborers. It is knowed that nearly 80 percent populations were farmers during that period, and the farmland was limited, so there were lots of surplus labors. Between 1978 and 1988, about 67 million rural laborers switched from farm work to rural industries from the table above; In some areas where non-farm industries were well developed, the proportion of people working in non-farm sectors exceeded the proportion engaged in farming. In Southern Jiangsu, for instance, non-farm labor constituted 65 percent of the total rural labor force in 1986. In Wenzhou City, 89 percent of the 1.8 million rural laborers in 1978 worked in agriculture, and the remaining 200,000 (or 11 percent) worked in rural industries. In 1986, only 58 percent of the 2.67 million rural laborers worked in agriculture. An estimated 830,000 laborers moved to the non-farm sector in Wenzhou City between 1979 and 1985. In the coastal villages in Wenzhou's various counties, over 70 percent of the laborers had found employment in the non-farm sectors; in some villages, the figure was as high as 90 percent. In 1992, the number of employees in the rural industries had reached to 1.02 billion, namely, one fifth farmers worked in the rural enterprises[3]. Rural enterprises made a big contribution to resolve employment issue in [...]
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