ABSTRACT
This chapter focuses on policies and institutions that may have had an impact on transaction costs as faced by small scale industries. The local governments are the legal owners of collective enterprises and to the extent that transaction costs vary with differing relations with the government, the private firms have been placed at a less advantageous position and have experienced higher transaction costs. In China, social norms, conventions, behavioural codes and so forth together with the formal rules, shape modes and patterns of conduct in economic interaction. China had a monobank financial system, with the People’s Bank of China vested with the monopoly over currency issue, transaction clearing, savings and lending for the working capital. The financial market in Taiwan is characterised by a dualism, with a strong illegal curb market coexisting with an undiversified government dominated formal financial institutions.
