China Changes with Thriving Township Enterprises

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Last updated at: (Beijing Time) Tuesday, October 22, 2002

China Changes with Thriving Township Enterprises

After a short period of slowdown and restructuring during the late 1990s, Chinese township enterprises have now regained steam and completely shaken the longtime monopolistic economic status held by State-owned enterprises.

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The rapid growth of China's township enterprises is re-picturing the overall economic landscape of the country.

After a short period of slowdown and restructuring during the late 1990s, Chinese township enterprises have now regained steam and completely shaken the longtime monopolistic economic status held by State-owned enterprises.

By 2001, the industrial added-value produced by township firms rose to 2.03 trillion yuan (US$245.47 billion), or 47.8 percent of the nation's total, at an annual increase rate of 23.8 percent since 1989, which has resulted in an 11-fold increase of the industrial added-value from 1989 to 2001, according to the statistics by the Agricultural Ministry.

Only ten years ago, what conjured up in people's mind at the mention of township enterprises usually included, but not only, the small business scales, shabby equipments and facilities, primitive technologies and insufficiently trained staff. But now, it is already starkly different.

Take east China's Zhejiang Province for example.

Here are operating the Asian No 1 alfalfa producer, the world No 3 electronic shaver producer, and a cigarette-lighter maker which has taken up nearly 80 percent market share of the product in the world, according to an article.

After turning out an output more than the whole agricultural sector in 1987, Chinese township enterprises have been developing very fast.

Experts attribute their amazing growth to the seemingly never-satiated market demand throughout the 1980s and the preferential policies granted by local governments at the level of towns and villages, which range from the low and exempt taxes to the cheap and sometimes free land, production premises and infrastructure.

With the advent of a domestic deflation in 1996 and following the aftermath of the Asian financial turmoil in 1997, Chinese township enterprises ran into a cold winter. Not only did their growth rate slow down, but their capacity of absorbing the rural excessive laborers also shrank a lot.

It's from then on that Chinese township enterprises started an institutional and technological transformation.

Nearly all of them detached themselves from the local governments' protection, changing from the so-called village- or town-owned collective entities to the private or share-holding firms.

Meanwhile, with now more money in their hands, profitable township enterprises were able to upgrade their technologies and management know-how, which further enabled them to crowd those weaker ones out of market and increased their economic scales.

Although now it is still too early to say that Chinese township enterprises have been well-formed in terms of their institutional organization and management, they seem to have outgrown the harshest period.

By 2001, the aggregate added value produced by all township enterprises stood at 2.94 trillion yuan (US$355.50 billion), which is 34.5 percent of China's gross domestic product, said the Xinhua News Agency website article.

From 1989 to 2001, the total added value by Chinese township enterprises increased over 13 times, with an average growth rate of 24.7 percent per year, according to the article.

The rapid development of Chinese township enterprises has also boosted the industrialization and urbanization level in the country.

By last year, of Chinese farmers' net income, the proportion out of the non-agricultural businesses rose to 44.7 percent from 23.7 percent in 1989.

Meanwhile, the general urbanization level edged up from 26.2 percent to 37.7 percent.

By PD Online staff Forest Lee

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