Chinese experience:
China opened its economy to global integration in 1978 but with enough caution. The “dual-track-system” followed by the Chinese government allows both state control in key areas and free-market-guidance in some spheres. China achieved overall-total-factor productivity growth of more than 3 percent during 1985-94,— exceptional by international standard.
China has developed “halfway” forms of industrial enterprises that are neither state owned in the classic sense, nor privately owned in the capitalist sense. One important configuration is the Township and Village Enterprise (TVE) owned by local government and citizens. These TVEs produce consumer goods for domestic and international markets.
TVEs are of two types. The first, owned by the local government, act like a holding company to reinvesting profits in the existing or new ventures as well as in local infrastructures.
The second, more recently developed type is much closer to private enterprise controlled and owned by an individual. Still they too maintain close fiscal ties to the local Government.
The performance of TVEs has been extraordinary. Their share in GDP rose from 13 percent in 1985 to 31 percent in 1994. Output has grown by about 25 percent a year since mid-1980s.
The non-state share of industrial output in China rose from 22 percent in 1978 to a startling 66 percent in 1995. TVEs have created 95 million jobs in the last fifteen years.
The commendable achievement of TVEs is attributed to:
* Strong Kinship (Risk and Reward sharing between entrepreneurs and local Government)
* Decentralization plus Financial Discipline
* Competition
* Market Opportunity and Rural Saving
* Links with State Enterprise Sector.
We can learn good lessons from Chinese TVEs experience about the importance of liberal entry, competing, hard budget constraints, and appropriate fiscal incentives or local Government.
Special mention may be made of me fact that strong Kinship - links among Chinese villages encourage responsibility in entrepreneurs. The greatest asset of Chinese society is the state of mind or objectivity, sincerity and discipline.
Really right thinking is best asset. Above, all, China adopted a practical strategy which gives them enough strength to absorb the cost of deceleration and loss without fundamentally destabilising the economy.
— to be continued
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Part V |
Part VI |
Part VII |
* Prof Mohendro Singh wrote this article for The Sangai Express
This article was webcasted on July 22nd, 2006
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