Limited Private Resources

Regardless of how much peasants may have wanted to start rural enterprises, the configuration of resources after the decollectivization of agriculture made it unlikely that many could have the inputs needed to start a firm of any scale. After three decades of Maoist collective production, some peasants were only minimally skilled in farming, especially in the cultivation of cash crops. They certainly had neither the skills nor the resources to develop enterprises capable of employing more than a few family members. Not only market information, connections, and technical skills were necessary, but substantial sums of capital too. Given the low cash income of team members during the collective period,^[24] few peasants could have had much capital in the early 1980s. Figure 8 shows that peasant savings built up only gradually in the years immediately following decollectivization.

Individuals could and did pool their resources and borrow from relatives what small savings could be spared to start family enterprises. One might think that peasants could also have borrowed from banks, but they received extremely limited bank credit during the early years. According to official government statistics, in 1985, private (and jointly owned) enterprises received a total of 2.8 billion yuan in bank loans. In contrast, during the same period, township enterprises received 20.1 billion yuan in loans and village enterprises 5.9 billion yuan, with a much smaller number of enterprises competing for these loans.^[25] The limited capital of the private sector is reflected in the large number but generally small scale of private businesses during much of the 1980s. Most were in the service trades, handicrafts, or small manufacturing—enterprises that required minimal capital.

Wenzhou and places in Fujian are obvious exceptions. A close look at these cases, however, shows that special circumstances intervened to affect the configuration of resources and opportunities. In the area of Fujian studied by Chih-jou Jay Chen, strong clan ties and overseas remittances yielded the private sector extraordinary access to the resources and political protection necessary for successful rural industrial devel-

[24] I document this in State and Peasant. In some teams, peasants never received the money that was owed to them.

[25] The total number of private and joint enterprises at the time was 10.65 million, whereas there were only 420,000 township-owned and 1.13 million village-owned enterprises. Nongyebu xiangzhen qiyesi jihua caiwuchu, 1995nian quanguo xiangzhen.

Figure 8. 
Average peasant savings, 1979-1994 (Sources:
  Zhongguo nongcun jinrong tongji, 1979-1989,  p. 1285; 
Zhongguo nongcun jinrong tongji nian-jian, 1995,  p. 241)

opment.^[26] An unusually active kinship network kept money flowing into the area throughout the post-1949 period, even during the height of radical campaigns. Once the political environment became hospitable to economic development, substantial funds flowed in from Taiwan, Hong Kong, and Southeast Asia, and these were used as capital for private business. In addition to outside funds, considerable sums were pooled and managed by strong lineage organizations encompassing large numbers of clan members within Fujian. These funds were plowed into enterprises owned by clan organizations.

[26] Chen, "Local Institutions."

In contrast, the collective village and township governments in this area were relatively weak, with few resources to compete with the private sector. Moreover, the thick social and personal kin or clan ties encompassed officials. These social ties mediated a relationship between local officials and the new entrepreneurs that might otherwise have been characterized by fear and hostility. It made both economic and political sense for local officials to let private individuals simply take the risks and assume the costs of entrepreneurship rather than to compete with or repress this sector.

Various explanations have been offered for the early rise of the private sector in Wenzhou,^[27] but mounting evidence suggests that there, too, the private sector was much better endowed than local governments. In Wenzhou there is the added factor of a very mobile population that started migrating from an early date in search of labor opportunities and remitted funds home. From 1982 to 1984, migrant workers remitted 465.4 million yuan back to Wenzhou.^[28] By 1986 nearly one-tenth of its rural labor force worked outside Wenzhou, earning approximately 900 million yuan. No available statistics allow us to know how much of this money actually was plowed into private enterprise, but the earnings of the migrants alone suggest that peasants in Wenzhou were in a class of their own during most of the late 1970s and early 1980s. In addition, as in Fujian, large amounts of overseas remittances were sent to Wenzhou. In the two-year period 1983-1984, overseas Chinese remittances amounted to 12.68 million yuan. This figure represented 30 percent of the total remittances sent to the entire province of Zhejiang.^[29] While these isolated facts are not conclusive, they suggest that in Wenzhou, as in Fujian, individuals had substantial funds to undertake entrepreneurial activities. Also as in Fujian, local governments were poor, with a long history of relative financial neglect by the center during the Maoist period,^[30] so that collectively owned assets were comparatively meager.^[31]

[27] Earlier studies have stressed its relative isolation from and neglect by the center, which they argue led to a rebelliousness of local authorities resulting in their support of private enterprise. See, for example, Liu, "Reform from Below."

[28] Zhang Renshou and Li Hong, Wenzhou moshi, cited in Jacky Tsang Wai Chun, "Private Sector in Wenzhou."

[29] Zhang Renshou and Li Hong, Wenzhou moshi, p. 32. Fei Xiaotong, "Nongcun, xiaochengzhen chuyu fazhan," argues that the returned migrants were a key to the Wenzhou model.

[30] One source lists 559 million yuan as the total amount of investment by the state from 1949 to 1978 in Wenzhou. Cha Zhenxiang, "Lun woguo nongcun gufen hezuozhi."

[31] Local governments in Wenzhou during this period had considerably less in fixed assets than other areas where the collective model was strong. Whiting finds that in Songjiangcounty, Shanghai, the assets of township and village enterprises amounted to 280 million yuan in 1985; in Yueqing county, Wenzhou, the figure was only 25 million yuan. Whiting, "Regional Evolution of Ownership Forms."

Thus, in Wenzhou and parts of Fujian, the private sector had the resources and was willing to assume the risks of entrepreneurship, thereby obviating the need for local governments to intervene and take on the task directly.