Success of Firms and Clear Lines of Ownership and Assets

Topics: Economics, People's Republic of China, Economy Pages: 8 (2449 words) Published: May 26, 2013

The term ‘TVE’, Town and Village enterprises, was officially used in the year 1984, with their previous role being limited to the manufacturing sector, in the production of farm tools, chemical fertilizers, cement, steel, iron and hydroelectric power. However, it is during the reform period (1980s) that a majority of the People’s Republic of China TVEs emerged. During the 1978, reforms were fundamentally crucial to the radical and dynamic nature with which TVEs took over China’s economy. During the post 1980s, TVEs were to become the most pulsating of China’s economy through an experienced growth into the 1990s. From roughly employing 28 million people, they were to reach a peak of 135 million employees by the year 1996. Therefore, the economic impacts generated tipped over the 1.8 trillion Yuan mark by the year 1992, thus showing the resilience and acknowledgment of such enterprises. Specifically so, was the marked growth in TVEs along the border line of China and the Pacific Oceanic five provinces including Fujian, Guangdong, Zhejiang, Shandong and Jiangsu. The latter two provinces proved themselves fruitful in their operation and management of the aforementioned TVEs, as a rough estimate of 30% of rural folk was employed there. “TVEs included enterprises that were sponsored by villages and townships, individual enterprises, alliance enterprises (private stock companies) formed by peasants, and other alliance enterprises” (Huang, 2008, p. 86). As detailed below, I agree with the thesis that the secret success of China’s Town and Village Enterprises was that no one knew exactly who owned the firm and its assets. The fact that the collective ownership of these enterprises was unknown, aided in the Chinese citizenry working tirelessly in improving not only their welfare, but that of the republic as well. These well-grounded and funded government projects instilled a sense of nationalism, patriotism and respect for the republic, as they were viewed as collective entities owned and, therefore, beneficial to the people (Walder, 2002, p. 86). Unfortunately, the successful TVEs were largely taken apart during the early 1990s due to the number of reasons such as the unstoppable trend towards privatization, a consequential need for restructuring procedures throughout China’s business arena, an increase in both market competition and subsequent integration/ mergers, bureaucratic discrimination of TVEs and the government’s official inclination towards foreign-owned ventures. Jiang Zemin’s administration, responsible for the above, was greatly criticized for not doing enough to promote these once thriving local ventures (Saich, 2001, p. 45). The above was unavoidable because of the market orientation of the early 1990s. China, to increase its competitiveness abroad, was forced to reconsider its options as to the promotion of local enterprise at the expense of reduced exports and global competition. Its aspirations to gain entry into the WTO, World Trade Organization, forced reconsideration of its economic dynamics, which were then under pressure from the wave of liberalism that swept across the global arena. “Liberalism was fundamentally rooted in the freedom, expansion and maintenance of Capitalism in the global economic arena. Capitalism entailed the need for protection and promotion of private property; thus, the shift experienced in China’s economic arena” (Park & Shen, 2003, p. 76). The success of these TVEs from years 1978-1989 can be attributed to several reasons including the favoring of these ‘public’ enterprises by the existing institutional political environment from the beginning years of reform and superior decision-making. Another one was the clout of local governments that linked official career advancement to increased fiscal revenue. The others were the local high demand for...
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