BY NISAL WEERAKOON AND LEWIS TELFER What are TVEs in rural China?

What are TVEs? Township and Village Enterprises Officially started in 1958 as Commune and Brigade Enterprises under during the Great Leap Forward ‘TVEs’ started in the 1980s during the economic reforms

Why were TVEs created Role was to aid in change from SOEs to market- oriented under jurisdiction of local government Aim was to generate ‘decent’ pay in rural areas and slow rural-urban migration Originally there were barriers restricting TVEs to agriculture When barriers were lifted (mid-1980s), diversification started (cement production, tourist sites) Allowed farmers to branch out and gain better incomes as well as the TVEs gaining better profits

Advantages of TVEs The ability to transform control over assets into income without becoming privatised Profits of enterprises could be used for whole community Facilitated channelling of funds to local govt Most studies show that TVEs are more effective than SOEs Better flexibility and autonomy Greater focus on financial objectives Special ties with the state sector

Figures (1) 28 million employment which peaked at 135 million in 1996 In Jiangsu and Shangdong (both eastern) provinces TVEs in these provinces employ 30% of rural workforce

Figures (2) Average employment of a TVE is 6 people but large ones have 10000s TVEs account for 30% of GDP (2007) and play a crucial role in poverty alleviation They have put back 200 billion yuan into the modernisation of agriculture TVEs allocate inputs more efficiently than SOEs From 1979 to 1991 TVEs total factor productivity grew 3 times as fast as SOEs Major polluting sectors are dominated by TVEs (cement production, etc.) Sixth of China’s total emissions produced by TVEs (2007)

Current situation After mid-1990s situation changed Official discrimination for TVEs and official preference for foreign-owned enterprises 1993 to % of TVEs gone bankrupt Local officials forcefully removed weak TVEs Collectively-owned TVEs now more prosperous than private-owned TVEs Rural industries more tied to local govt and community ‘Industrial clusters’ of small, competing and cooperating businesses to form a chain