Institutional Dynamics of Tapid Industrial Growth in Rular China: Local Property Right Regime and Informal Privatization





Published date: 

December, 1998


Jieh-min Wu


Three perspectives have been prevalent in explaining the rapid growth of rural industry in China: producer cooperative, local government ownership, and market transition. This article contends that the first two approaches do not hold empirically. Instead, the market transition can better interpret the dynamics of the Chinese development. However, it lacks a comprehensive framework for the analysis of property rights across regions. A concept of local property rights regime is proposed to explore the processes of informal privatization in China. This research finds that the strategy of informal privatization, on the one hand, provided enterprises with incentives for rapid growth; but on the other hand, it brought about complicated webs of pseudo-ownership arrangements. The pseudo-ownership enabled rural cadres to manipulate property rights. Farmland were re concentrated in the hands of village leadership; and collective assets were transferred into private coffers. The peasants, deprived under this pattern of privatization, staged collective protests in response to the collusion between cadres and local governments. Whether to overhaul the vague property rights or not has become a dilemma for the central government. It is predicted that if this issue is not resolved properly, the rising rural conflict could dampen the rural development and threaten the Communist power.