enterprises
profit rate 24.6 19.4 18.2 19.8 15.4 11.5 11.9 10.1 10.9 10.7 loss-to-profit ratio _ 5.3 6.4 4.8 10.5 22.4 17.2 10.7
proportion of loss making enterprises state-owned enterprises 11.7 13.2 14.7 11.7 15.7 19.4 16.7 13.7 16.5 - profit rate 23.5 20.7 20.3 20.6 17.2 12.4 11.8 9.7 9.7 9.8 loss-to-profit ratio _ 5.3 6.4 4.8 10.5 22.4 17.2 10.7 proportion of loss-making enterprises 9.6 13.1 13.0 10.9 16.0 27.6 25,8 23.4 28.8 - SOURCE: Lo (1997) table 4.1. NOTES:
(i) Profit rate = (profits + taxes) -5- (value o f fixed assets net o f depreciation + working capital), (ii) Profit-to-loss ratio = total losses o f loss making enterprises -f- (profits + taxes), (iii) Proportion o f loss-making enterprises = number o f loss making enterprises -s- total number o f enterprises, (iv) All figures are expressed as percentages, (iv) The figures are for township and above industrial enterprises with independent accounting systems.
Most commentators accept that, on the basis of limited studies comparing relative productivities, T.V.Es appear to be more efficient than S.O.Es. For example Weitzman & Xu (1994) calculate total factor productivities (T.F.P) for S.O.Es and T.V.Es for 1979-1991. The average annual T.F.P for T.V.Es, over this period (12%) was three times the estimate for S.O.Es (4%). Woo et
al (1994) point to a number of possible problems with T.F.P as a measure of
efficiency. But, even allowing for methodological reservations, the magnitude of the differences in T.F.Ps in Weitzman & Xu (1994) suggest that T.V.Es are, relative to S.O.Es, efficient. Jefferson et al (1992) compare the performance of the state industrial sector with collectives at township level and above (ie. including township and urban collectives, but excluding village firms) for the period 1980-1988. They found that the average productivity of labour in the
collective sector had increased by over 12% per annum over the period where the comparable figure for the state sector was 5.2%. They also found that the average productivity of capital in the collective sector grew at an average annual rate of 4.5% which was more than twice the figure for S.O.Es (2.1%). Reservations exist about these results because of possible upward bias in real output measures, but again even allowing for possible measurement errors the magnitude of the differences are at least suggestive.
The results of studies like these, using aggregate data, are supported by studies using firm-level data. Murakami et al (1996) compared T.F.P in a sample of 48 S.O.Es and T.V.Es of different sizes involved in the machine tool industry in Shenyang, Shanghai and Wuhan. While the sample was small, their results suggested that T.V.Es were more efficient than S.O.Es regardless of the latter's size. T.F.P in T.V.Es was found to be 42% higher than in large S.O.Es, 40% higher than in medium sized S.O.Es and 21% higher than in small S.O.Es. In another study employing a larger sample, Fung & Wan (1996) compare economic efficiency in the state and collective sectors using panel data on 7273 enterprises in Hubei in 1990. Their main conclusion (at p.482) is that “the state sector performed worse than the collective sector with a lower median efficiency index in almost all industries”.
T.V.Es also seem to be as efficient as private firms which have well-defined property rights. For example, Svejnar (1990) runs a series of regressions using pooled panel data from 400 T.V.Es and private firms in four Jiangsu counties over a 16 year period. He used ownership dummies to distinguish between T.V.Es and private firms. The co-efficients on the ownership dummies were statistically insignificant, suggesting that “private ownership and community ownership appear to have similar effects of productivity” Svejnar (1990 p.253). Pitt & Putterman (1996) reached similar conclusions in a more recent exercise. Pitt & Putterman pooled data on 200 T.V.Es and
private firms distributed over 10 provinces from 1984 to 1989. These studies provide some evidence to suggest that T.V.Es are as efficient as private firms. But, even if it is going too far to draw detailed conclusions on the basis of a few studies, it is clear that ownership did not matter in these samples.
However, a few words of caution are needed. It is difficult (if not impossible) to draw conclusions about comparative performance without detailed consideration of broader development issues at a macro level. This thesis, in the next few chapters looking at T.V.Es, will largely abstract from wider development issues. Instead, the focus will be on the institutional characteristics of T.V.Es so that comments about comparative performance are just suggestive. To illustrate, the growth in gross output value of T.V.Es has been high and is expected to continue. A Working Conference on National Township Enterprises held in September 1993 set a target gross output value for rural enterprises for the year 2000 of 7,600 billion yuan. This would represent a five-fold increase over the gross output value in 1992. The industrial gross output value is also expected to grow to 5,400 billion yuan. The figure, in 1992, was 1250 billion yuan.28 At one (superficial) level this figure gives support to suggestions in, inter aiia, Mei (1993) that T.V.Es have been important vehicles for absorbing large numbers of surplus rural labourers. It is pretty clear that they have, but whether this is positive or not depends on the inter-sectoral effects this has had on agriculture and these sort of comparative development issues lie outside the scope of this thesis.
Regional Differences in Development
The contribution of T.V.Es varies across regions. This, in part, reflects the fact mentioned above that some provinces, such as Jiangsu, took advantage of decentralisation, whether it was de fa cto or deliberate, to get a “head start” in setting up T.V.Es. However, the existence of regional differences in the level of T.V.E development also mirrors regional disparities in general
economic indicators (Yang & Wei 1996, Yao 1996). The provinces can be classified into three different zones.29 The eastern zone contains the coastal and suburban provinces. These have the highest G.D.P per capita and their enterprises produce the largest share of rural enterprise gross output. The central and western zone contains the lesser developed interior provinces. The western zone has the lowest G.D.P per capita and share of rural enterprise gross output. The central zone is in between in terms of G.D.P per capita and rural enterprise gross output value. Table 4.9 gives regional differences in G.D.P per capita for the period 1988 to 1995. Over the period the “gap index” shows that G.D.P per capita in the eastern zone has been about 50% higher than that in the central and western regions combined.
TABLE 4.9
Regional Differences in G.D.P per Capita 1988-1995 (Yuan. %) 1988 1989 1990 1991 1992 1993 1994 1995 (a) Eastern 1787 1991 2077 2392 2984 4077 5443 6768 (b) Central & Western 985 1083 1178 1286 1510 1934 2674 3453 (c) Gap Index 44.9 45.6 43.3 46.2 49.4 52.6 50.9 47.7 SOURCES:
Yang & Wei (1996), Statistical Yearbook o f China 1995,1996 NOTES:
(i) (c) = 100x(a-b)/a (ii) The eastern zone covers Beijing, Tianjin, Hebei, Liaoning, Shanghai, Jiangsu, Zhejiang, Fujian, Shandong, Guangdong, Hainan and Guangxi. The central covers Shanxi, Inner Mongolia, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei and Hunan: The western zone covers Sichuan, Guizhou, Yunnan, Shaanxi, Gansu, Tibet, Qinghai, Ningxia and Xinjiang.
Tables 4.10 through to 4.12 give some statistics on regional differences for rural enterprises up until the end of 1995. Table 4.10 shows regional shares of rural enterprise employment and gross output value for 1980, 1985 and
1990-1995. The eastern zone share was constant at around one-half of total employment and two-thirds of total gross output for most of the period. This is in spite of the fact that it has only about 40% of the population (41% in 1995 - Statistical Yearbook of China 1996 p.70). The central zone had around one-third of rural enterprise workers and produced just under one- third of total gross output for most of the period, although this figure fell in 1995-1996. Finally, about 15% of people working in rural enterprises were in the western zone; however, over the period it only accounted for around 5% of total rural enterprise gross output, increasing to just over 10% in 1995.
TABLE 4.10