Anticipatory Ownership Reform Driven by Competition: China' Township-Village and Private Enterprises in the 1990s

Abstract

Since 1992, China's small and medium-sized enterprises (SMEs) have conducted a series of radical and successful restructuring in their ownership and governance arrangements. This paper focuses on the ownership restructure of township-village enterprises (TVEs) and private-household enterprises in the 1990s and examines the incentive-based reasons for the anticipatory restructuring in the absence of crisis in these two sectors. It highlights how market and inter-jurisdictional competitions have induced ownership reforms and how the organization of government matters in providing government itself with incentives for reform. It also explores the implications of China's SME ownership evolution for SME development in Russia and other former Soviet Union economies.