Overview of the Decline of Township and Village Enterprises in china

18 Feb

From 1978 to 1989 Township and Village Enterprises (TVEs) in china thrived under the new economic reforms and were cited as one of the most important factors in the country’s transition to a market economy. Statistics produced by Peter Harrold for the World Bank in 1992 illustrated this importance as the industrial output of TVEs grew at an average rate of 38.2% during 1982-1988, compared to China’s State Owned Enterprises (SOEs) which only grew at a rate of 9.8% in this period. TVEs were particularly favoured during this period as they helped citizens to deal with the ideological change from a state owned and run economy to a more market orientated and privatised economy. This was because, although TVEs were seen as collectively run enterprises, they were mostly in practice private enterprises. The period from 1989-1996 however saw dismantling of a large proportion of these TVEs because under the leadership of Jiang Zemin there was a lessening of restrictions on private businesses. Many TVEs had also increasingly become privatised or transferred into shareholding entities mainly controlled by private owners leading to a decline of public ownership of the economy, as can be seen in figure 1.

graph TVEs

Fig.1. Relative significance (%) of public enterprises (TVEs) in the rural non-farm sector, 1984-2004. Sources: Township Enterprise Yearbook (1987-2005), Statistics of Township Enterprises (1978-2002) (Taken from James Kai-sing Kung, Yi-min Lin, 2007)

During the mid-1990s TVEs were coerced into major restructuring due to increased foreign owned enterprises within China. As credit became more difficult to attain due to the banking system favouring foreign owned enterprises, TVEs have once again become strongly tied to local governments and the loans they afford. In recent years trends show TVEs impact on the national economy as decreasing, possibly as a result of increased deregulation within China and thus increased private and foreign completion towards the TVEs.


Xiaolan Fu and V.N. Balasubramanyam. 2010. ‘Township and Village Enterprises in China’, The Journal of Development Studies, Vol. 39, No.4, pp. 27-46

James Kai-sing Kung and Yi-min Lin. 2007. ‘The Decline of Township-and-Village Enterprises in China’s Economic Transition’, World Development, Vol. 35, No.4, pp. 569-584

Yongqiang Li. ‘An Overview of Township and Village Enterprises in China during 1949-2009’, Proceedings of the 2nd International Conference on Corporate Governance

Putterman, L. 1997. ‘On the Past and Future of China’s Township and Village-Owned Enterprises’, World Development, Vol. 25, No. 10, pp. 1639-1655


One Response to “Overview of the Decline of Township and Village Enterprises in china”

  1. timhaythorne February 19, 2013 at 1:45 pm #

    I think the point you make about the TVEs easing the ideological transition from a public- to private-dominated economy is really interesting and is worth expanding on. The significance of this transition, I believe, is massively underplayed. Remembering that China is indeed a Civilisation (opposed to a nation-state), a transition this radical is to be treated as a genuine landmark and turning point for the Chinese economy.

    Characteristics such as China’s longevity and tradition-orientated culture reverberate not only throughout society, but the economy also. Moving from a near-pure state owned economy, to one of private substance in reality means a shift of power from Government to the people (if only a few!). This was a transition that had never happened before and the process may have had far more destructive side-effects had TVEs not existed. They allowed small increments of power to shift in to the hands of local communities, which was in turn a huge step away from state autocracy.

    Even though TVEs dissolved relatively quickly, they thrived in their period because they offered a fantastic trade off between public empowerment and economic growth. I believe they played a significant role in building the powerful Chinese economy we see today.

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