ABSTRACT
One of the most spectacular changes in China's economic reforms from 1978 to 1988 has been the rapid growth of rural industry which is a nonstate industrial sector. The study of the growth and behaviour of Chinese rural industry will not only benefit our understanding of the Chinese economy, but will also broaden our insights on socialist reforms and on economic development. This chapter investigates the employment behaviour of township-village enterprises (TVEs) using provincial data. It also argues that the wages of TVE employees are not determined by competitive labour markets — the correlation between TVE wages and marginal products of labour is very weak, and TVE wages as well as the hypothetical worker income are significantly lower than the marginal product of labour. The chapter presents the institutional background and basic facts regarding the growth of TVEs. It discusses the productivity of TVEs and compares it with that of state-owned enterprises and with those in other countries.
