Recent rural growth in China: the performance of the rural small-scale enterprises, 1980–86

Abstract

This article focuses on the evaluation of the process of growth in rural China since the 1978 rural economic reforms. By dividing the rural economy into two sectors: the agricultural sector and the RSE (rural small scale enterprises) sector, it analyses the relative contributions of labour, capital and other factors. Two major findings are that the RSE sector has its marginal labour productivity double that of the agricultural sector over 1980–86 and the high-income regions (mainly the coastal provinces open to world exports) exhibited a positive role of increasing returns to scale. This trend lends strong support to the market-based incentives offered by the openness in free trade which influenced the coastal provinces of the RSE sector.