Similarly, in 1987, then-premier Zhao Ziyang, hoping to use rural China's cheaper labor to promote his export-led growth strategy, opened rural industries to exports and foreign investors. The channels of global transactions were joint ventures (JVs), owned by both foreign and Chinese investors and supervised by local foreign trade officials. Joint ventures that exported the majority of their products (70 percent) had their revenues taxed at the preferential rate of 15 percent, as opposed to the standard 55 percent rate on domestic enterprises.
In the countryside, joint ventures allowed rural factories to circumvent the state's foreign trade monopoly and establish direct access to foreign markets. Also, foreign technology helped JVs create products that were in short supply domestically and could earn high profits. Local governments, which owned the rural enterprises, were also partners in the JV and shared in those profits. So, after Deng's 1992 southern trip, a 'joint venture fever' swept rural China.
Although the first round of opening was successful, the domestic interests that drove the... [continues]
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