Post-Mao Economic Transition: The Role of Non－State Enterprises

Abstract

Pursuing gradual reform process, China has avoided experiencing declining incomes and massive unemployment. This study surveys the speed of China’s and the main sources of the country’s economic growth is mainly derived from the massive rise of non-state enterprises and an increase in competition between state and non-state enterprises. Among the various types of non-state enterprises, the emergence of the fast-expanding rural collectives has been most striking. Their success is largely attributed to the fact that these non-state enterprises face hard budgetary constraints, enjoy artificial cost advantages, and benefit from a faster rate of institutional innovation in the rural areas. However, these enterprises have had major difficulties obtaining funding for long-term investment from outsiders and from banks. Thus, their apparent success is largely to their artificial cost advantages..