One of the most distinctive features of the economic changes
in China over the last decade was the expansion of the private sector. Whereas
the economic expansion of the 1980s was largely due to the rural collective enterprises,
expansion in the 1990s was based in part on the rapid growth of the private enterprises
(1). In order to understand the conditions under
which private economic activity has re-emerged, identify the modalities of a shift
from planning to markets, and to describe this new market economy, it is not sufficient
to settle for an analysis on a scale of a single province, of one sector of activity,
or of the economic policies applied. A reconstitution of the strategies of the
actors, of their stories, and of the choices they have made is essential. An understanding
of the economic mechanisms now appearing is conditional on their being applied
to the rationales of the individual and of the family according to local configurations.
This was the perspective we adopted in a study that we carried
out in the city of Yiyang, 75 kilometres west of Changsha, Hunan province, in
the autumn of 2002 (2). Several hours of interviews
were conducted with the owners of private enterprises and with local cadres. More
precisely, the analysis concerned the limited area of a neighbourhood, which we
here call an economic area. Up to the beginning of the 1990s, this comprised the
places of residence and work of the employees of three state enterprises. These
have since closed down completely, but their former employees are still resident,
and a number of them have opened private workshopswhich are also engaged
in productionin the very places where formerly they had been employees.
Thus we focused on the conversion of a space in the planned economy into a space
in the market economy, and, thereby, on the conditions of the emergence of a specialised
market (tese shichang or zhuanye shichang) (3).
The aim of this article is to analyse the forms and the underlying resources which
made it possible to move from one production system to another, from a network
of state enterprises to an economy of private enterprises, on the scale of a neighbourhood
in the city of Yiyang.
The specialisation of rural or urban areas in the production
or marketing of one type of product is one of the forms of the return of
the merchant (4) in China. Marc Blecher
and Vivienne Shue (5), for example, have scrutinised
a market in Hebei province, which sells articles made of leather and fur. In the
same province, Shen Yuan and Liu Shiding (6)
are researching a centre for the production and marketing of leather goods. Sun
Liping and Ma Mingjie (7) describe how a canton
in Shandong province specialises in the cultivation of melons. These research
projects are partly a continuation of those carried out by Jonathan Unger and
Anita Chan, which highlight developmentalist local states (8).
Tending to differ from the hypothesis that Chinese local administration is necessarily
predatory or clientelist, this research shows that in places such as Baigou and
Xinji, the government acts as a genuine promoter of local economic activity, and
thus of an entrepreneurial bourgeoisie. The objective is to identify the new relations
being established between society and the state.
The market which was analysed in Yiyang has at least three
distinctive features. Firstly, its state of development places it upstream
from the markets mentioned above. It has existed for only a few years and remains
fragile, and comprises only a few hundred workshops, while those in Xinji and
Baigou have several thousand. It is thus an especially valuable place to study
the processes of emergencerather than of developmentof this new institutional
form which is the specialised market, a place of both production and
marketing. Moreover, Hunan province constitutes a specific field to the extent
that the development of the private economy there is recent (9).
Yiyang is far from the coast and the most mature markets (Guangdong, the lower
Yangtze valley and Peking) (10). Finally,
while the studies mentioned above were of rural China, here it is a question of
an urban market, of a new production system born of the ruins of the bankrupt
From the decline of the state enterprises to the vitality
of the market
At the end of 1986, the textile industry in Yiyang comprised
19 enterprises, which employed 12,785 people and produced more then twenty different
products (11). Textiles production alone,
with four enterprises, represented over half the total capital invested in the
sector, and employed nearly 4,000 people (12).
Three of the four state enterprises manufacturing textiles products in Yiyang
were situated in the same area, in the neighbourhood of Heshan. They were Daren
wachang, which made socks and stockings, Zhenzhi chang, an underwear subsidiary
of the previous company, and Jingwei bianchang, a subsidiary of the latter, which
made woven fabrics. Inside an area defined by a few streets and covering more
than five hectares, were the three manufacturing plantswalled compounds
containing many different buildings and tree-lined lanesand the red-brick
residential buildings where the workers lived. In the 1970s this was one of the
most prosperous neighbourhoods in the city. Fifteen years later, the state textiles
industry was decimated, the enterprises closed down, the workers laid off and
the buildings, both industrial and residential, in bad repair.
The end of the state textiles industry
These three companies were indeed in serious difficulty during
the 1990s. Daren went out of production in 1989-90. The last to close down was
Jingwei, most of whose production is exported. It did not recover from the post-1997
Asian recession and from the competition from cheaper products made in South-East
Asia. In fact, by 2002, the state textiles industry in Yiyang had all but disappeared.
Only a conglomerate survived, with the active support of the public banks, whose
leading enterprise manufactures linen fabrics, a traditional product in Yiyang,
the raw material being cultivated in the surrounding countryside. For all that,
the production of textiles did not cease, because individual entrepreneurs took
over from the public state enterprises.
After a series of bankruptcies, the xiagang workers found
themselves without any income, for no unemployment benefit was paid to them (13).
Within a few years one of the factoriesJingweisituated in the centre
of the neighbourhood, has been transformed into a market, bringing together independent
workshop-stalls set up by the xiagang, while the two other factories have opened
their premises to larger-scale private enterprises.
In 1998, there were about thirty workshop-stalls inside the
walls of the Jingwei factory. In 1999, 60 new ones were created (14).
In the autumn of 2002, there were nearly 300 workshop-stalls inside the perimeters
of the three former state enterprises, of which 155 were set up inside the walls
of the Jingwei factory alone. Most of them, about 200, sell textile articles (15).
This specialised market provides jobs for 2,000 people, most of them former employees
of the three state enterprises, who have become xiagang.
As well as the workshop-stalls which each employ ten people
at the most, around thirty larger-scale enterprises, with dozens of employees,
have moved into the same space. Former state enterprise management personnel have
set up most of them. Among them there are three enterprises making socks, all
founded by former Daren employees. These private companies employ about 1,000
people. There were thus a total of 3,000 people working at the site in the autumn
of 2002, and one can therefore estimate that most of the former workers at the
three state enterprises have found work, bearing in mind that part of the workforce
was close to retirement.
In 2002, industrial production on the site as a whole amounted
to over 100 million yuan (16). If we add the
turnover of the workshop-stalls, the figure rises to over 150 million. The products
manufactured are sold not only in the province of Hunan, but also in Yunnan, Guizhou,
Sichuan, Shaanxi, Jiangxi, Hubei, Henan, Inner Mongolia and Xinjiang. Some of
the enterprises inside the perimeters of the three state factories export to Hong
Kong, Europe, the United States and even South Africa. Thus, in the space of about
ten years there has been a transition from three state enterprises with several
hundred employees each, to a multitude of small workshop-stalls which produce
within a family framework, as well as several dozen larger private enterprises.
The resurgence of economic activity, under new institutional
forms, has changed the neighbourhood's appearance. Restaurants have mushroomed
on the main street, ranging from small stalls no more than single rooms open to
the street selling food at mealtimes, to more sophisticated establishments, with
enclosed dining-rooms and private rooms with air-conditioning. The former serve
meals to the most modest workers and bosses; and in the latter directors and clients
meet for business lunches and dinners. This street, which runs from the entrance
of the factory-market to one of Yiyang's main arteries leading to the road
to Changsha (17), is now constantly congested.
Stallholders, two-wheeled vehicles, delivery vans and private cars struggle to
occupy the space.
The reconversion of the actors
In the economic space considered here, it is all the actors
of the planned economy who adapted to the bankruptcy of the state enterprises
and to the new conditions of the market economy. The former employees of the state
enterprises have become small entrepreneurs. They rent basically equipped premises
in the buildings of their former factories. Yearly rents for workshop-stalls range
from 4,000 to 10,000 yuan (18), depending
on their situation inside the market (certain alleys are more frequented by customers
than others), and their size (from a few square metres to several dozen). In most
cases, they have four or five people working in them, and sometimes more than
ten. Some stalls only sell items, with manufacturing being carried out elsewhere,
but in most cases manufacturing and sales take place on the same premises. Sales
take place in frontthe goods are exhibited on stands in view of the customerswhile
cutting, at a big table, and the making up of items, on one or several sewing
machines, take place in the rear.
In the case of the businesses located outside the perimeter
of the former factory, in the surrounding streets, these workshop-stalls are also
dwellings. Mr and Mrs Zhang, whose enterprise manufactures sweaters and other
woollen items, began their business in 1991. At the time, they rented 20 square
metres of space which was both workshop and dwelling, shared by four people: themselves,
Mrs Zhang's mother, and their two-year-old son. There were thus three generations
living under the same roof, in one room, which was the family home, the workshop
with its machines, and the shop where the customers came to choose their articles.
Today Mr and Mrs Zhang rent several rooms and the living space is separate from
the manufacturing; one room is used as the showroom, another serves as an office
where the enterprise accounts are kept.
The larger companies within the premises of the former enterprises
of course pay the highest rents. As an example, one of the three private sock
companies, which employs about a hundred workers, pays an annual rent of 50,000
yuan, which is high considering that the premises it occupies remained empty for
over six years. Since 2000, the renting out of space to workshop-stalls and to
the small and medium-size enterprises has brought in over 50 million yuan to the
former state enterprises which no longer exist as production units, but remain
the owners of the buildings and therefore receive the rent (19).
These revenues make it possible in particular for the three state enterprises
to continue paying the pensions of their former employees (20).
This conversion of state enterprises from manufacturing to
property ownership is not peculiar to the area under analysis. Everywhere in China,
enterprises have sought to profit from the value of the sites they occupy. In
the centres of the prosperous coastal cities, they have been sold to the highest
bidders, new economic activities have been developed on them, or they have become
residential property developers themselves (21).
But property values in Yiyang ruled out this kind of development. What is noteworthy
here is that the area under analysis is reconverting with the same actors and
in the same economic sector.
Indeed, it is not only the former workers (or company managers)
who have become self-employed, but also the former factory heads whose professional
activity has been radically transformed. Mr Wang was appointed head of the Jingwei
factory when production had already ceased. He is still in the same job (changzhang)
since the enterprise has not ceased to exist administratively. But a new administrative
entity was created in 2001, the specialised market in textile articles of
Yiyang (Yiyangshi zhenzhipin zhuanye shichang) of which he simultaneously
became the director (zongjingli).
Mr Wang, who is also secretary of the Communist Party, also
adapted to the new environment by carrying out a veritable ideological conversion
to the market economy. In a document addressed to the municipal government of
Yiyang, Mr Wang preached the virtues of the market economy as the basis for the
industrialisation and urbanisation of the city: The basis of industrialisation
is the market (
) It is only by satisfying demand as expressed in the market
that industrialisation can follow the right path and be successful. If one moves
away from the market, industrial production becomes like a tree without roots
or a river with no source. The basis of industrialisation is the market.
What appears to be the ideological conversion of an administrative
and political leader is also a pragmatic conversion to reality. It is his career
in the municipal authorities that Mr Wang is laying on the line by supporting
the interests of the community of independent businessmen. By allowing the xiagang
to engage in new revenue-producing activities, he is solving a problem for which
he is deemed responsible. A central government directive stipulates that a
factory director whose xiagang have not settled the question of how to feed and
clothe themselves, and do not have enough to live on, cannot earn more than 500
yuan a month (23). The market's
success may make it possible for him later to rise in the ranks of municipal administration
or of the Party. Thus both the former employees of the state enterprises and the
managers appointed by the administration are both gambling their survival on the
birth of the specialised market in textile articles.
It is thus all the actors present on the site who have reconverted:
the lifetime employees of the state enterprises have set up in business,
the former factories have become property owners providing premises, while the
directors of these establishments have become the project managers of private
commercial activity. In order to explain this rebirth of production in the framework
of new institutional forms (from the state enterprises to the private ones), we
must look at the economic history of the city of Yiyang.
A long industrial history
The textile industry in Yiyang has a long history. By 1840
the city had family workshops in which fabric was produced. Although after the
Opium Wars, competition from imported products damaged local activity, the existence
of textile crafts is attested by a local chronicle published under the reign of
the Emperor Tongzhi (1862-1874) (24). All
through the twentieth century, the textile industry ranked second among the most
important industrial activities of the city (see table).
Share of the two main sectors of activity in the total
industrial production of Yiyang (in %)
Source: Yiyang ditu zhi, Beijing, Xinhua chubanshe, Beijing, 1997, pp.
1089 and 1090.
Western socks and other textile articles
The sock and underwear industries date from the beginning
of the republican period. In 1919, Mrs Li Yuzhen studied in Hankou, now Wuhan,
the technique of sock weaving, and on her return to Yiyang, bought a machinea
manually operated spinning frameand this was the origin of the Zhenji sock
workshop, and of the industry in Yiyang. The following year, a Lutheran pastor,
Yan Youwen, imported eight machines and set up the Daren company. At the time,
knitted fabric was a new kind of production, and the products were called Western
socks (yangwa) (25). The market developed
quickly and was very profitable. In 1924 Daren became a limited liability joint
stock company (Daren gufen youxian gongsi) with a registered capital of 50,000
yuan. The factory also made towels and other textile articles. In 1923, Daren
bought Japanese machines in Shanghai and began to manufacture jackets and waistcoats.
In 1925, Zhenji also began to make clothes in corduroy and flannel. In May 1925,
Daren invested 7,000 yuan in the construction of a new building. At the time it
was the first factory in the province of Hunan to use electric machines to knit
In the 1930s, the Daren Company had a capital of 100,000 yuan,
or 11.4% of the total capital invested in the industry in Hunan province, and
annual production was 1,080,000 pairs of socks. Recognition of the brand grew
thanks to participation in national commercial exhibitions, in particular in Peking
in 1929 and 1935 where Daren socks won prizes (27).
In 1929, the woven underwear manufactured by Daren won the second prize at the
national commercial exhibition. In the 1930s, the Daren and Zhenji brands accounted
for more than half the province's textile clothing production. In 1936 there
were 28 textile companies which employed 2,116 people. Textiles were the main
activity. Daren, the biggest textile enterprise in the province, employed 554
people. It was then the biggest textile enterprise in Hunan province. In 1937,
Yiyang had 17 enterprises making textiles with over 1,500 machines, an activity
which employed 750 people (28).
The industry suffered during the Sino-Japanese war; activity
declined and at the end of 1948, there were only nine textile enterprises in Yiyang.
In 1948, the Zhenji factory went bankrupt. In 1949, total sock production (Daren
and five other smaller enterprises) in Yiyang was 278,000 pairs. In 1950 the management
of the Daren enterprise became a public-private collaboration (gongsi heying).
The same year, the local government invested 70,000 yuan to modernise the equipment.
In 1952, the enterprise changed names (Daren mianzhi chang) and became a state
enterprise. In 1956, Daren built new buildings and production was modernised with
66 electric machines. During the Cultural Revolution, the enterprise changed names
again. It became Yiyang shi dongfang hong wachangRed East Sock Factory of
the City of Yiyang. The enterprise went back to its original name of Daren in
In 1965 in the course of product diversification, Daren opened
a new company to make undergarments, Yiyang Zhenzhichang, where it set up part
of its plant and of its employees. In 1973, the factory exported to the United
States for the first time. In 1981, Zhenzhichang in turn opened a subsidiary,
Jingwei, which began with production of knitted woollen garments and quickly moved
to the production of undergarments.
Thus it is in Yiyang that the Chinese sock industry was partly
born. At first semi-craft, the activity gradually expanded and modernised over
the century, a process marked in particular by the use of electricity to drive
the machines. While Daren wachang has an almost hundred-year history, the undergarment
industry is over fifty years old. The brands associated with the enterprises (da
for socks and taohua for underwear) enjoy definite brand recognition
The history of the textile industry is not only one of institutionsthe
enterprisesbut also of individuals and families. Individual and family histories
are intimately connected to the industry. Mrs Liu's personal history has
been linked to the textile industry for two generations. Her mother, from the
town of Ningxiang, a few dozen kilometres south of Yiyang, came to work in the
Daren sock factory at the age of 13. She was the eldest child of a family related
to the founders of the company (30). Mrs Liu's
mother spent all her working life at Daren; she began her career as a worker and
finished as head of one of the three workshops in the factory. Mrs Liu's
father, born at the beginning of the century, finished secondary school, after
which, on the recommendation of an uncle, a division commander in Chiang Kai-shek's
army, he began a military career. During the civil war his army corps went over
to the communist camp. After the capture of Yiyang by the communists, he was appointed
Secretary of the Communist Party in a textile factory in Yiyang, not Daren where
his bride-to-be worked, but in another company which manufactured fabrics.
Their daughter, Mrs Liu, born in 1957, joined the Daren factory
in her turn at the end of her secondary education, in 1977. She was taken on as
a worker, employed to sew buttons. Like her mother, she was the eldest, and it
would have been too expensive for her to study further. At the time, she earned
19 yuan a month, a significant income which she gave to her family. In 1979, she
passed the examination to take university courses. While working at the factory,
she began to study again, following classes on television for three years. She
was then appointed to the enterprise's technology office, and was then successively
in charge of personnel management and training. She finished her career as a middle
manager (zhongceng ganbu) in charge of sales. Mrs Liu lost her job at Daren in
1991. This double biography suggests the extent to which, in Yiyang, family histories
are closely linked to the textile industry. Mr Zhang provides another example.
He began working in 1977, at 19. Like his wife, he was to work for 20 years in
a textile enterprise in Yiyang, before both were laid off in 1989-90.
In seeking to understand why the xiagang have gone into business
in family workshops, part of the answer lies undoubtedly in this correspondence
between the individual and family histories and the industrial history of Yiyang.
Biographies of individuals and families have been tied to the textile industry
for one or several generations. Knowledge has been acquiredthe use of the
machines, product design, which all in all is fairly basic in the case of the
manufacture of textile articles, relations with customers and suppliersand
there is a capital of resources which can be drawn on. It is no doubt because
these resources are available that the xiagang have stayed in Yiyang, rather than
choose another possible path, which would have been migration to a coastal city
One of our informants, owner of an enterprise with several
dozen employees, justifies the choice he made of opening his establishment in
Yiyang: not only is the available workforcethose who have been laid offnumerous
(and inexpensive) but there are also technical resources (jishu ziyuan),
as well as a culture (yi zhong wenhua). There are specific advantages here. Competent
Among these specific advantages is the reputation of the city
of Yiyang as a production centre for textile articles. Yiyang has been well known
for a long time (we have already mentioned the prizes obtained at commercial exhibitions
in the first half of the twentieth century) for this kind of article. The brands
constitute a resource in themselves. Thus one of the private enterprises set up
by a former manager at Daren produces socks with the brand Guiren, which makes
a specific reference to the former state enterprise. Even though the new enterprises,
whether family workshops or small and medium enterprises with several dozen employees,
have had to find their own distribution and customer network, it is likely that
the development of the specialised market is partly due to the reputation of the
In this respect, the continuity between the two kinds of production
organisation, from the state enterprise to the family workshop, must be noted.
According to the former head of a state factory: Formerly, the management
of the state enterprise was not very rigorous. Many workers took home parts from
the machines, that is one of the corrupt aspects of state enterprises. Thus many
workers manufactured secretly at home. When the enterprise decided to cease production,
there were in the workers' living quarters already ten or so family workshops
which made underwear (32). There is
therefore continuity between the two production systems which overlapped chronologically.
Before the state enterprise was declared bankrupt, there already existed family
workshops which used raw materials and machines spirited away from the state factory
The transition from the status of employee to that of small
entrepreneur was made all the easier for certain resources being also available
to individuals. The long history of the textile industry in Yiyang, and their
experience in running the machines are factors on the basis of which economic
activity was restored, in the case of individual enterprises.
The municipal authorities and the specialised market
Although the local authorities played no part in the emergence
of the specialised market, an initiative taken by the xiagang themselves, the
former heads of state factories have since, as we have said, taken on responsibility
for the market. That is to say that a new form of collective authority or individual
intermediary between the individual enterprises and the local administrations
has appeared. Spokesmen for the interests of local entrepreneurs, these institutions
are at the same time the representatives of the state which appointed them. Analysis
thus shows how far local authorities are from making up a homogenous whole.
An indifferent local government
The main obstacle to the establishment by the xiagang of individual
business (as well as to the emergence of a private sector in general) is the initial
capital (34). Most of them financed their
establishments out of their own pockets or by means of personal and private finance
networks, most often providing between 10,000 and 20,000 yuan. In order to obtain
the indispensable cutting or sewing machines, former factory employees have used
their personal savings, or have borrowed money from relatives or friends.
The government gives us no money, the banks don't
lend to us, I am a small individual entrepreneur (getihu), confides Mr Zhang.
Another, who has created an enterprise with a hundred employees, testifies in
these terms: The money was all borrowed, from my mother, from my mother's
sister and from other relatives. To start up, I borrowed 300,000 yuan, and then
I borrowed another 600,000 yuan. I pay 12% interest a year. The banks don't
lend. You have to have a sum deposited in an account as a guarantee. But if I
had savings, why would I go and borrow? Getting a bank loan is difficult.
(35) The lack of access to bank credit for
private entrepreneurs, particularly the smallest of them, is a well-known and
frequently mentioned problem (36).
If Mr Wang, head of the specialised market and also director
of the factory in which it is established, is to be believed, the initiative for
the development of the specialised market is strictly local and due to the xiagang.
We [the management of the Jingwei factory], we wanted to restart the factory's
production. So we took two decisions. The first was to lease the machines to the
employees. The second was to develop this market. We had a visit from the deputy
mayor in charge of industry who considered that leasing the machines was a good
way. We took the mayor to meet the xiagang who were making underwear. He suggested
organising these people and installing them in a market which already existed.
The mayor wanted me to organise a meeting with the xiagang. But the xiagang didn't
want to leave this place which has its particularities. At that time we imagined
a big market, but nothing was decided (
). When it started there wasn't
a single shop. Between 1998 and today, 155 shops have opened (
). The government
did not invest a single yuan in the plan (
). The money received in rent
is used to set up the workshops in the factory. It did not cost us any money.
In any case, we don't have any money either. So the development was gradual.
It wasn't all at once that we had a big market. (37)
The birth of the specialised market can thus be attributed
to the initiative of the xiagang in going into business in co-operation with the
management of the factory who provided them with premises and rented them the
machines. While a representative of the municipal government did visit the premises,
his suggestion (installing the workshop-stalls in another market in the city,
in a space properly designed for that activity) was rejected. Several reasons
can be advanced for this refusal: the costs incurred (particularly in daily travel
since here the individual entrepreneurs are close to their places of residence),
the necessary proximity between places of sale, of production and of residence
(often in fact one and the same), fear of seeing their influence diluted by mingling
with other kinds of businesses (and a vague awareness of the advantages of forming
a specific interest group). The transformation of the factory buildings into commercial
spaces was in fact entirely self-financed by the factory managers, which explains
the gradual character of the development, the rents of the initial occupiers making
possible the fitting-out of new stalls.
The indifference of the local authorities to the fate of the
xiagang, and their lack of any participation in the creation of private establishments,
explains the bitter resentment they feel towards the state, taken as a whole:
Those who are in politics discuss how to promote private enterprises (minying
qiye), but I will say something which is not pleasant to hear. All that is to
deceive people. (
) I haven't anyone in the background to support me.
There is no way [to obtain financing]. (38)
Confronted with the problem of financing his private business,
this individual entrepreneur, in the name of his entire generation, passed a severe
and disillusioned judgement on the communist Party and its responsibility: We
are both [he and his wife] people of Mao Zedong's generation, we thought
that the Communist Party could not abandon power, that the state work units could
not do otherwise than take care of us (buhui buguan women), that there would always
be enough to eat. At that time we had it figured out all wrong (
us, in our generation, there are many who are in difficult situations. They get
no support from the government. They devoted their youth to the enterprises of
the Communist Party. When we reached the age of forty they forgot about us. And
when our [private] activities reached a certain level, the government's
Bureau of Industry and Commerce came again to ask us for money, for management
costs. I laughed at them: what do you look after? All you do is extort money from
us. You don't bother about whether I have enough to eat. (39)
Bitterness toward the state and the Communist Party for its
past behaviour, and the feeling of having been a sacrificed generation changes
to anger towards the administration which imposes taxes of all sorts on private
activities. For all that, it would be wrong to conclude that there is hostility
between local government (and its offices, particularly of taxation) and the private
entrepreneurs. At the same time as the specialised market was being formed, there
appeared actors related to the local state whose ambition is to federate the energies
of local entrepreneurs and to co-ordinate the activities of local administration.
From this point of view, the local state seems to have means of taking on individual
The birth of an institution for regulation and planning
What is to be seen in Yiyang is not a confrontation between
individual entrepreneurs and the municipal government; there are intermediate
institutions to connect them. First of all the management of the former state
factories, who, as we have said, have remained in place with a new mission: no
longer that of mobilising men to organise production within the plan, but of collecting
rent from tenants to finance the development of the market; the enterprises have
not disappeared but have become property companies. But there are
also new organisations in place. We have mentioned the specialised market
in textile articles. There is also a management committee of the market
in textile products (zhenzhipin shichang guanli weiyuanhui) set up in 2001.
This committee brings together the factory directors (who are still at their posts)
as well as a number of representatives of local government, in particular the
Bureau of Industry and Commerce (gongshang xingzheng) and the tax office (shuiwu).
This bureau has a triple role: that of intermediary, co-ordination and programming.
It is an intermediary, since it has, since the beginning,
collected taxes from the enterprises on behalf of the various administrations.
As Mr Wang states: In order to maintain the healthy development of this
market, we set up this committee. In order to prevent each office of the administration
coming and interfering in the market and levying taxes in a disorganised way (lailuan
shoufei). Offices which want to make levies have to go through us, and cannot
do it alone. It is us who collect the taxes and then pass on the amounts collected.
(40) This suggests that the committee plays
a regulating role in the collections carried out by the administrations, apparently
in charge of protecting the interests of the individual entrepreneur against their
predatory behaviour. It is also a co-ordinator to the extent that it is the only
interlocutor between the various administrations and the actors in the market.
In terms of programming, the committee organises a development
plan. It participates (like other administrations) in the definition of a medium-
and long-term development strategy. Since 2000, various government offices involved
have been conducting research into the market in order to encourage its development.
At the beginning of 2001, the municipal government organised a conference to discuss
development projects, and the market management committee was the product of these
How can the market be built and developed in future? To answer
this question, the authors of the text Enquiry and proposals on the construction
of a programme and the development of the Yiyang specialised textile article market
met the management of the three closed state enterprises and the owners of the
private enterprises located on their premises.
A number of problems were identified. The quality of collective
facilities, which all date from the time of the planned economy and which are
unsuitable for the development of a market of stalls which sees large numbers
of visitors, needs to improved: public toilets, refuse collection and street maintenance
need to be renovated or improved. At present the environment of the market is
described as dirty, chaotic, insufficient (zang, luan, cha). As we
have said, the main street, which is too narrow and without sidewalks, which goes
from the main Changsha-Yiyang road to the entrance of the market, is permanently
congested, making access difficult for both goods and potential customers. Fire
prevention equipment is inadequate, as is the electricity supply to the workshops,
both factors linked to the transformation of premises formerly designed for mass
production into a multitude of small establishments (41).
For the moment, our management of the market is not
perfect. The committee has just been set up. But we will soon put in place a general
plan: how to upgrade the street, how to build the workshops, all that will be
done according to the rules, the projects will be submitted to the committee.
It won't be like before. Someone builds. Someone else builds, but there
is no overall plan. Today the stalls (tan) are dirty, but they provide a living
for a lot of people, so we have to develop in a stable manner. First we have to
protect (bao) ourselves, first we have to mark out a development zone (fazhan
qu) here, and then develop it.
It is not only the physical infrastructure of the market which
is inadequate: the same document admits that the immaterial conditions of business
are also inappropriate. The report mentions the fact that most of the workshops
have developed on individuals' own private funds, that it is very difficult
for them to obtain the support of the banks, and that as a consequence their financial
capacity is limited. Also pointed out is the lack of established brands or labels
for the products produced, which also harms their development (in fact, some stalls
use their own brand, as do the small and medium enterprises on the premises).
In order for the products of the Yiyang textile article market to be known all
over China and even abroad, a brand (pinpai) must be established, and possibly
promoted on television. Therefore a brand and a symbol of the market need to be
created. Also necessary is the establishment of a professional association (tongye
xiehui) to bring together all the entrepreneurs.
The stages of future development have been decided (42).
Over the next three to five years, the creation of several hundred new boutiques
is planned in order to bring the workforce up to over 6,000 people. Fifty factories
need to be brought in and production and turnover brought up to over 500 million
yuan, reaching, in a second three- to five-year stage, a production value of over
1 billion yuan. In the framework of this development will have to be created a
raw materials supply market. Finally, the document also contemplates the development
of a ready-to-wear market.
The drawing up of a development model
Beyond the drawing up of a development plan with concrete
objectives in terms of public investment, of enterprise and job creation and of
production values, there is a real model theorised by the local market leaders.
Several points seem worth emphasising: the determination of the committee, its
insistence on the necessity for collective action, the importance of specialisation
and the reference made to the advantages specific to the area under consideration.
The Party's municipal committee and the municipal government are enjoined
to draw up a development policy (43). The
authorities must take seriously the growth of the market which has up to now developed
spontaneously. The management of the market needs to be improved. All the administrations
concerned must support the development of the market, especially the Bureau of
Trade and Industry and the tax authorities. The text therefore calls for
supporting action from municipal government as well as from the municipal committee
of the Party.
Moreover, the same document justifies a leading role for the
organs related to local state government and draws up a basic theory of the mode
of development which has been applied largely spontaneously. What the market economy
requires, it says, is that the government supervise the market, [that] the
enterprises obey the market. The development of the private sector,
the small enterprises need leadership, it is not good for them to rely exclusively
on themselves, it matters little whether it is the government or structures under
the government's authority, if there is no leadership, then there is no
chance of development (45). These formulations,
which give themselves airs of a development theory, are in fact means of bringing
pressure to bear on local government, which has been indifferent up to now.
If a programming and co-ordinating role is recognised where
the state-related structures are concerned, it is in particular in the face of
the lack of capacity of influence of each establishment taken separately. And
here we are confronted with a kind of theory of the mode of development characteristic
of the specialised market areas in China: One must conform to the slogan
‘a small product, a big market, a small industry, a large number of enterprises,
a high density of enterprises (xiao chengpin, da shichang, xiao qiye, da juji)'.
The expression juji here translated as a high density of enterprises
evokes the bringing together in one space of a large number of similar and independent
units. This is the heart of the development model under consideration.
It designates a type of collective different from that characteristic of the collective
economy (jiti) and suggests a voluntary association of members with common interests.
This new model could be summarised as follows: favouring the development of small
private establishments in a local area with specific resources.
Local leaders comment repeatedly on the specific resources
of the area considered, which must translate economically into the specialisation
of the market. Their argumentation takes on the appearance of a scientific theory
summarised by an outline which suggests that the higher the degree of specialisation,
the greater the development possibilities.
In our interviews great emphasis was laid on the specific
characteristics of the economic area under consideration: If a locality
wants to develop the private sector of the economy (minying jingji), the most
important element we call the power of the culture (wenhua diyun); development
of the private sector calls for choosing an objective. Here we have made a choice,
we make textile articles. The slogan printed on the advertising billboard
at the entrance to market also makes an explicit reference to the industrial history
of the place: Recognise a century old tradition, make the splendour of textile
In the minds of the market leaders we met, it is indeed a
model in the sense that they deliberately draw inspiration from the
experiences of development in other areas. They speak of the visits they have
made to other cities in Hunan, in particular to Zhuzhou, fifty kilometres south
of Changsha, to the market of LoudongThere's a market which
has managed to export its particularities (tese). It's a ready to wear market,
known all over China. It's a model of success, or in the province
of Guangdong, in particular to Humen, where there is the biggest ready-to-wear
market in the whole country.
Once these local resources are identified, the development
of the private sector is planned in the framework of a determined policy on the
part of the local authorities, whose role it is to bring diverse energies together
and in particular to finance the necessary infrastructure: Each area has
its specificities, so we have exploited ours. In order to favour the industrialisation
of Yiyang, we believe that the government may make a major investment. No firm
decision has yet been taken, but members of the government have mentioned it.
Once the decision is taken, the government will invest in infrastructure.
In the present state of development of the city of Yiyang's
textile articles market, it appears that local state government is not a homogenous
whole. Its representatives within the market are now putting pressure on the local
authorities to obtain investment, after years of indifference. With an acute awareness
of the resources specific to the area considered, these actors are making themselves
the spokesmen before local government.
In contrast with other markets studied by other authors in
China, Yiyang's specialised textile articles market is recent and modest
in scale. The first workshop-stalls were set up in the area considered at the
end of the 1990s, and in the autumn of 2002, the market's leaders were trying
to pressure the municipal authorities, who had until then been indifferent, into
a financial commitment to the development of the market. What was observed was
thus the beginning of a process which could mean an increasing involvement by
the local authorities in the form of investments (in streets or buildings), as
has been observed elsewhere. No doubt the involvement of the state here depends
also on the profits it deems possible, since all in all developing a market is
one of the less expensive ways of increasing local financial resources (45).
In this hypothesis, the government of Yiyang would become a developmentalist
What deserves to be emphasised is that, at the origins of
this market, are to be found the initiatives of the xiagang who found in private
activity a means of economic survival. Laid off without any compensation, they
were forced to innovate. The creation of the stalls is done without any public
support; the financing is by the individual or the family. The xiagang bring together
the only resources at their disposal: their skills as textile workers and the
premises at their disposal, living and production places abandoned by the bankrupt
state enterprises. As in other markets, the local state thus took no part in the
creation of the market, no doubt indifferent also because of its own shortage
of resources. In Baigou, Shen Yuan (46) has
observed a comparable process: the local authorities first reprimanded and then
tolerated, before deciding to support the initiatives once they understood all
the financial benefits they can derive from them. In Yiyang the process of development
of a specialised production and sales area has not owed much to the local government,
whose actionand this remains to be seenmay eventually come to supplement
In Yiyang, those who have become the spokesmen of the workers-turned-bosses
are the former factory directors who are both administrative and political leaders.
Because their careers are at stake, these men, representatives of the local authorities
within the markets, make themselves the defenders of the private entrepreneurs
who are their tenants. One of the questions which another study will have to answer
is the legitimacy of these representatives in relation to those they administer.
Apparently, they act more as defenders of the interests of the local economic
area than as representatives of the local authorities who, in fact, have no development
policy. Thus one should understand the emergence of developmentalist
local authorities as the result of deals being made within the authorities themselves.
The developmentalist character of a local state is the fruit of a process of construction.
A second conclusion seems to us essential: there is continuity
between the planned economy and the market economy. The example of Yiyang's
specialised textile articles market is another illustration of the originality
of Chinese economic reforms, far from any shock therapy, and argues
in favour of the gradual adaptation of the existing structures and institutions.
The salaried workers and managers of the state enterprises have become private
entrepreneurs, the state enterprises, no longer producers, have become landlords
and rent collectors, while the representatives of the local authorities and of
the Party within the state enterprises have become promoters to the local government
of private entrepreneurs. This conversion of the actors and of the area is certainly
born of necessity, for they had all lost their source of income. But it is also
a consequence of the management of resources particular to the local area.
The initial response to the new environment came from the
workforce which had been laid off. They had skills, they controlled resources,
and, as we have said, some of them, even before the factory closed, had already
set up in business. There were already the beginnings of individual activity.
The market economy did not appear here as grafted from outside onto a derelict
system; it has emerged in the framework of an endogenous adaptation by the local
actors and institutions.
All territories have a history. In Yiyang, the specialised
textile articles market, a new social form, grew within an older institution,
the state enterprise, which is itself the heir of industrial establishments set
up at the beginning of the twentieth century. The community of workers, some of
whom have several generations of experience in the textile industry, is becoming
a community of independent producers and sellers (47).
We therefore agree with Isabelle Thireau's assessment that, in studying
China in transition, we must take into account the institutions, customs
and norms which support new possibilities (48).
Do we have here a possible model for the reconversion of urban
areas in crisis? This reconversion would not have been possible without two major
conditions which guarantee particularly low production costs: the lack of application
of legal requirements and the choice made of family self-employment. For example
the legislation dealing with the distinction between individual enterprises and
private enterprises is not applied; one can make the supposition that, generally
speaking, it is not the regulations which prevail, but case-by-case negotiation
between the administration and private entrepreneurs.
Above all, both the employees of private enterprises and their
bosses now work more hours than they did as employees of state enterprises, a
situation which is likely to continue, given the number of workers without any
available jobs. The key to this reconversion is therefore former employees setting
up on their own business but in worse working conditions, of extreme insecurity
and without a guaranteed income. While they have kept their living quarters, they
are now without any protection against all other dangers: illness, unemployment
and retirement. The owners of small enterprises in China now find themselves in
the situation of their Asian neighbours in the 1960s and 1970s (49).
Moreover, the development of this kind of market in Yiyang
depends also on the character of the products manufactured. It is possible in
industrial sectors where laid-off workers can easily reappropriate the technology,
the skills and the market. This is particularly possible in the case of the textile
industry and clothing manufacturing, and in other manufacturing industries, but
this is not the case in heavy industry sectors or in high-capital industries.
Moreover, although the products manufactured in Yiyang are unsophisticated, they
correspond to the demand of rural populations. On the coastal edge of the country,
consumers would probably be more demanding and competition keener. The case of
Yiyang's specialised market is therefore only one possible way of reconversion,
among others, of the urban economic areas dating from the planned economy.
While the local authorities are still barely involved in the
promotion of the economic area considered, the role they will play will have to
be observed. They will promote local development by investing in infrastructure
but will also participate in the construction of the market as an institution.
We have mentioned the building of a brand which would be used collectively, but
more widely they will participate in the setting up of product normsthese
are the condition for the common use of a brand and possible advertising campaignsand
the standardisation of employment conditions. The specialised market thus appears
as a revealing area of observation at the local level of the state and of its
agents as producers of norms and regulations in negotiation with local actors.
Already, the construction of a theory of local development by the leaders appears
to be a means of legitimising their role.
Translated from the French original by Michael Black
1.For a quantitative evaluation
of the sector in China and commentary on the relevance of this category, see Gilles
Guiheux, The Incomplete Crystallisation of the Private Sector, China
Perspectives, No. 42, July-August 2002, pp. 24-35.
2.The results presented
here are those of an introductory study which will be pursued.
3.We have adopted the term
specialised market because it is used by the local actors themselves.
In fact this market brings together stalls which are places of both sales and
4.We have taken this expression
from the collective publication directed by Isabelle Thireau (« Le retour
du marchand dans la Chine rurale », Etudes rurales, 161/162, Paris, éd.
de l'EHESS, 2002) which we found particularly stimulating.
5.Marc Blecher and Vivienne
Shue, Into Leather: State-led Development and the Private Sector in Xinji,
China Quarterly, 166, 2001, pp. 368-393.
6.Shen Yuan, « Naissance
d'un marché » and Liu Shiding, « L'alliance entre
un grand marché et une multitude d'ateliers domestiques »,
in I. Thireau, op. cit., 2002, pp. 19-36, 37-52.
7.Sun Liping et Ma Mingjie,
« Forcer le peuple à s'enrichir ! », in I. Thireau, op.
cit., 2002, pp. 165-182.
8.Jonathan Unger and Anita
Chan, Inheritors of the Boom: Private Enterprise and the Role of Local Government
in a Rural South China Township, The China Journal, 42, July 1999, pp. 45-74.
9.In 1999, the province
of Hunan ranked seventeenth in the number of its private enterprises (siying qiye)
and fifth in the number of its individual enterprises (getihu). Zhang Houyi, Ming
Zhili, Liang Zhuanyun, eds, Zhongguo siying qiye fazhan baogao n° 3, 2001
(Report on the development of private enterprises in China), Peking, Shehuikexue
wenxian chubanshe, 2002, pp. 22 and 36.
10.In the province of
Hunan, at the time of the census in 2000, the population was 70% rural, whereas
the national average was 64% (Hunan nianjian (Hunan Annual), Peking, Zhongguo
tongji chubanshe, 2002, p. 81 and China Statistical Yearbook 2002, Peking, Zhongguo
tongji chubanshe, 2003, p. 95).
11.Yiyang shi zhi bianzuan
weiyuanhui (Commission for the compilation of the chronicle of the city of Yiyang),
Yiyang shi zhi (chronicle of the city of Yiyang), Peking, Zhongguo wenshi chubanshe,
1990, p. 221.
12.Yiyang shi zhi, p.221.
13.The former employees
are now xiagang, literally fallen from their jobs. Technically without
jobs, they are nonetheless not considered unemployed (shiye) for they continue
to be accounted for by their former enterprises. In theory they should be receiving
a minimum income. But in fact, in the case at hand, the enterprises did not have
the resources to pay compensation to their former employees. For an assessment
of this phenomenon on the national scale, see Jean-Louis Rocca, 2000, «
L'évolution de la crise du travail dans la Chine urbaine »,
Etudes du Ceri, 65.
14.« Guanyu guihua
jianshe he fazhan Yiyang zhenzhipin zhuanye da shichang de diaocha he jianyi »
(Study and proposals for the elaboration of a programme and for the development
of the specialised market in textile articles in Yiyang), internal document, municipal
administration of Yiyang, October 2002, p. 2.
15.« Guanyu guihua
», p. 2.
16.Figures quoted in «
Guanyu guihua jianshe
17.Since 1998, Yiyang
has been connected to Changsha by a 75-kilometre toll highway.
18.The salary of a worker
in a private enterprise in Yiyang is 600 yuan per month.
19.Figure quoted by «
Guanyu guihua jianshe
20.If the state enterprises
which have gone bankrupt do not disappear as administrative entities, it is in
particular for this reason, that they are responsible for the payment of pensions
of former employees.
21.Another kind of development
has been the handing over of sites to a property developer in exchange for the
delivery of a certain number of buildings or apartments, where the
enterprise houses its own personnel.
chanye, chanye jinrong shichang, jianshe he fazhan tese shichang, tuijin Yiyang
gongyehua jincheng (Developing industry beginning with the market; industry
which makes the market prosperous; building and developing a specialised market;
promoting the industrialisation of Yiyang), internal document, municipal administration
of Yiyang, October 2002, 14 pages.
23.Interview with Mr Wang.
24.Yiyang shizhi, p. 220.
because the equivalent in China was a strip of fabric rolled around the ankle.
Westerners introduced the knitted sock.
26.Yiyang xian zhi (Chronicle
of the district of Yiyang), Yiyang xianzhi pianzuan weiyuanhui, 1992, p. 243.
27.Yiyang ditu zhi, p.
28.Yiyang shi zhi, pp.
29.Yiyang ditu zhi, p.
30.This relationship was
sufficiently indirect for Mrs Liu not to be able to remember it precisely (Interview).
31.Migration to a coastal
city probably presents more dangers than the assurance of a better financial situation.
33.On the subject of the
widespread theft in state enterprises, see the example of Shenyang in Antoine
Kernen, State Enterprises in Shenyang. Actors and Victims in the Transition,
China Perspectives, No. 14, November-December 1997, pp. 26-32.
34.See Kelle S. Tsai,
Back-Alley Banking, Private Entrepreneurs in China, Ithaca and London, Cornell
University Press, 2002.
35.In this interview,
the high level of family borrowing (almost 1 million yuan) can be explained by
the high quality of the family network. In particular, the informant had a brother
36.In fact, the state
banks lent money to one of the three private sock factories, but this seems exceptional
37.Interview with Mr Wang.
38.Interview with a xiagang.
41.The effective upgrading
to security standards of buildings erected for one purpose and now used for something
else is a widespread challenge in China, where there are so many converted
, p. 7.
, pp. 9-10.
45.Wang Hangsheng, «
Finances publiques et marchés locaux », in Isabelle Thireau, op.
cit., 2002, pp. 53-66.
46.Shen Yuan, «
Naissance d'un marché », in I. Thireau, op. cit., 2002, pp.
47.Research is being conducted
into the means of co-operation and competition among private entrepreneurs.
48.I. Thireau, op. cit.,
2002, p. 12.
49.Their situation recalls
family production workshops in Taiwan in the 1970s (see Hill Gates, ?Dependency
and Part-time Proletariat in Taiwan?, Modern China, Vol. 5, No. 3, July 1979,
pp. 381-407), with the major difference that the latter produced for the international