A Study of Public Policy Influences upon the Development of China's Rural Enterprises 1978-1992 (review)

Reviews 277 Zhonghui Wang. A Study ofPublic Policy Influences upon the Development ofChina's Rural Enterprises 1978-1992. Aldershot (England) and Brookfield (Vermont): Avebury Press, Ashgate Publishing Ltd., 1997. xi, 152 pp. Hardcover $55.95, isbn 1-85972-543-0. The rapid transformation ofsocialist China into a more market-oriented, highgrowth exporting economy challenges many of our preconceptions regarding the effectiveness ofgovernment intervention and die optimal path ofeconomic transition. Significant research has been made into die effects of economic reform policies on agriculture, state-owned industrial enterprises, and foreign direct investment. Less direct attention, however, has been given to the rural, nonagricultural enterprises—the individually-owned, private, and nominally collective township and village enterprises—that have actually accounted for most of China's growth since the mid-1980s. This book makes an effort to update the existing literature in this forsaken area,1 and provides the reader with a detailed narrative description ofthe evolution ofChina's policies toward rural enterprises. It is the author's thesis that Chinese government policy toward rural enterprises has been successful only insofar as it has removed direct control and interference, and thus this book is an argument against interventionist theories. This central theme is clarified in the introduction and die conclusion, but it is often lost in the intervening chapters as the author focuses on relatively narrow aspects of the problem. The author stresses that China's rural enterprises do not, however, operate at present in an atmosphere that even remotely resembles laissez-faire. In fact, what clearly emerges from this book is a picture ofa conflicted government policy and a diverse group offirms. Firms struggle with government agencies, local governments struggle for control with the central government, and different groups within the central government struggle with each other.2 Policies are inconsistent not only over time, but at the same time. For example, at the same time the CCP General Secretary, Zhao Ziyang, is enunciating a policy in 1988 to allow and encourage private ownership, local officials are favoring firms with "red hats" and die central government is beginning to tighten credit and access to intermediate inputs for non-state firms. Rural enterprises have succeeded not because die political environment was so conducive, but rather because the economic opportunities were so much better than the alternatives in agriculture.© 1999 by Universityj^e J300^^ organized into aseries ofdescriptive essays,with nine chapters, including the introduction and conclusion, and each chapter averages about fourteen pages oftext, witii no graphs, tables, diagrams, or equations. The introduction is short and simple, justifying the study's relevance in the context ofthe ex- 278 China Review International: Vol. 6, No. 1, Spring 1999 isting literature, defining what is meant by rural industry, explaining the author's basic hypothesis and methods, and outlining the book's organization. The author's main point is that the government's main contribution to the development ofrural industry was getting out of the way, inasmuch as that was possible given the push and pull ofparty politics. Chapter 2, providing a briefoverview of the evolution of China's policy toward rural enterprises, can more properly be considered the introduction to the subject rather than die study, giving an overview ofrural enterprises since the 1950s and summarizing the material in the following chapters. Chapter 3 explains how local government policy has differed from, and in many ways has induced changes in, central government policy. The author outlines how divergent local policy can be, using Wenzhou, Wuxi, and Nanhai as examples. In Wenzhou, in soutiiern Zhejiang Province, the development ofprivate enterprise in an otherwise backwards area ultimately pushed Communist Party officials to reevaluate the role ofprivate enterprise (domestic or even foreign wholly owned) in China's socialist economy. Wuxi, in soutiiern Jiangsu Province near Shanghai, is instead a model ofcollectively owned, export-oriented rural enterprises, financed in no small part by overseas Chinese and Taiwanese. Finally, Nanhai, outside Guangzhou, is a model ofan eclectic, open approach to allowing the development ofrural enterprises in any form. The author stresses that the central government allowed local governments to experiment, and diese experiments led to ideological debates in Beijing that ultimately resulted in the adoption of a rationalizing policy. Chapter...