Prosper or Perish: Credit and Fiscal Systems in Rural China

5. Diverging Pathways to Prosperity: Privately Led vs. Local Government–Led Industrialization

101 5 DIVERGING PATHWAYS TO PROSPERITY: PRIVATELY LED VS. LOCAL GOVERNMENT–LED INDUSTRIALIZATION On a bitterly cold winter day in 2006, I was riding a coach to Taizhou, Zhejiang province, for some fieldwork. When I reached the city, I was greeted by a giant poster captioned “the first shareholding cooperative (gufen hezuozhi) in China.” The ad was for a company called Baolite (pronounced bao-li-te) priding itself as a national pioneer of private enterprise. It was established in 1982, more than a decade before the central government formally recognized and permitted private ownership. Things are different now: private entrepreneurship is a muchcelebrated attribute of Taizhou these days. This chapter describes the journeys to prosperity traversed by two rural townships. One of these townships is Zen, in Taizhou prefecture in the southeast corner of Zhejiang province, a cradle of private enterprise. Taizhou’s path to development greatly resembles that of its better-known neighbor, Wenzhou. On the eve of economic reforms, both Taizhou and Wenzhou were on a very low economic base. But they quickly prospered once market forces were unleashed by the reforms. Homegrown credit institutions played a significant role in the growth of small and medium-sized private enterprises in Taizhou. The other township is Han, in Zouping county in central Shandong. The first locale in rural China to open its doors to foreign scholars, Zouping has been hailed as“typical”of rural China by those who studied its early development. But Zouping is not so typical anymore. It is now home to a cluster of textile industries and to the world’s largest cotton weaving company. In contrast to Taizhou, economic growth in Zouping was prominently fueled by formal and state-owned credit institutions rather than by homegrown ones. Zouping’s developmental 102 PROSPER OR PERISH history approximates the local government–led Sunan model of rural development and industrialization, famously championed by the region in Jiangsu. Taizhou and Zouping on the Eve of Economic Reform Zen is located in Wenling county, in Taizhou prefecture, in Zhejiang province. It neighbors the oft-studied township of Wenzhou, the epitome of private entrepreneurship in the country. The story of Taizhou’s success, though much less publicized, greatly resembles that of Wenzhou. Located in the mountainous southeast of Zhejiang province, Wenzhou and Taizhou were densely populated and extremely poor on the eve of Deng Xiaoping ’s economic reforms.1 Much as in Wenzhou,Taizhou’s population had grown at double-digit rates during the 1950s and 1960s. In the early 1980s, Wenling county, including Zen, had a population of 1.16 million, or 1,388 people per square kilometer, making it one of the most densely populated counties in China.2 This high population density resulted in low arable land per capita, which together with the vast mountainous terrain significantly reduced the degree to which farm income was sufficient to support peasants’livelihood.As a result , Taizhou peasants had seized the earliest opportunity to reinstate household farming, making Taizhou one of the first locales to decollectivize agriculture in 1979.3 Taizhou’s financial plight was also worsened by the fact that,like Wenzhou, Taizhou historically received little investment from the communist government due to its geographical proximity to noncommunist Taiwan (Republic of China) (figure 5.1). Located in Shandong’s Binzhou prefecture, Zouping county borders Zibo, a highly industrialized prefecture, on the east, and the provincial capital, Jinan, on the west. Though it is not a coastal county, Zouping’s residents have easy access to railroads and road transport, connecting them with Jinan and with the port city of Qingdao (figure 5.2). In comparison to Taizhou, Zouping was relatively sparsely populated (551 people per square kilometer in 2005). Unlike in Taizhou, farm income in Zouping was mostly sufficient to support farmers’ livelihood. Indeed, agricultural decollectivization in Zouping began as late as 1987—some six to seven years after it was declared a national policy, and almost a decade after it was carried out in Taizhou.4 Agricultural income per capita in Zouping in 1980 was 100 yuan, compared to 80 yuan in Taizhou.5 W E S N Wuxi Wuxi Taipei Xiamen Xiamen Fuzhou Fuzhou Ningbo Ningbo Wenzhou Wenzhou Shanghai Shanghai TAIZHOU 0 40 80 120 160 20 Kilometers Wuxi Xiamen Fuzhou Ningbo Wenzhou Shanghai FIGURE 5.1 Map of Taizhou prefecture and surrounding area, Zhejiang province 104 PROSPER OR PERISH Both Wenling county in Taizhou and Zouping...