For many years China has been considered as a role model for the developing world. One of the main reasons is due to the shift from state-owned enterprises to township-village enterprises. Many argue one of the main reasons for the growth of industry is down to the rapid growth of township-village enterprises (TVE’s). Now much discussion is surrounding how to move China’s legal system toward the Rule of Law and determining which laws will encourage economic efficiency (H Williams, 2001, p228). Townships and villages are often deemed to be at the bottom of the Chinese governmental hierarchy. The growth in TVE’s was not especially encouraged by the central government, but seems to have emerged as a result of the decentralised nature of the Chinese political and economic system (William & Mary, 2004, p.960).
One of the main reasons for TVE’s positive impact on economic growth was due to the nature of the enterprises as they increased welfare of the community by providing employment opportunities, this aided in reducing inequalities in China.
Another reason for this positive impact is due to the vaguely defined property rights which have now been bought to the forefront of recent discussion. This is due to the lack of property rights allowing co-operation among major agents of the production process leading to efficient results thus increased development.
You can also look at these vaguely defined property rights as a negative, due to no individual knowing what rights they have to the enterprise. This could lead to confrontation and may well lead to results that are inefficient which is contrary to the previous point made.
It is clear to see that TVE’s had an exceptional impact on the growth of China and can be considered a resounding success, clearly showing that the advantages heavily outweigh the disadvantages. In this case the lack of defined property rights lead to positive results but this may not always be the case.
Williams, H. (2001). Property Rights and Legal Reform in Township and Village Enterprises in China. Available: http://blog.hawaii.edu/aplpj/files/2011/11/APLPJ_02.1_williams.pdf. Last accessed 13th Feb 2014.
William & Mary. (2004). Lessons from the Rise and (Possible) Fall of Chinese Township-Village Enterprises. Available: http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=1322&context=wmlr. Last accessed 13th Feb 2014.