TVEs (Township and Village Enterprises) in China

Chinese growth strategies since the Deng Xiaoping opening up initiatives in the 1970s feature an emphasis on the Ports and their hinterland. This has led to uneven growth and, the evolution of TVEs has been seen as a means to close the gap.

The Pearl River Delta is a classic illustration of the Chinese Port Region strategy which is designed to develop infrastructure capacity to enable the smooth flow of raw materials and finished goods both within the area and, for exports. This strategy became a major motor for the stellar growth that now sees China more than 5% of global output and nearly 7% of both global exports and imports. These figures vary by sector significantly such that textiles 15% of global textile output and 10% of exports; in the clothing sector China produces 20% of total output and 47% of exports. [i]


However, uneven growth has been a feature of this progress and, in particular, disparities between urban and rural regions have been marked. The usual distinction made has been between the coastal areas and the west though the North is often seen as equally under developed. The evolution of township and village enterprises (TVEs) in China. They have played a significant role in promoting economic growth in rural areas and closing the gap between the rural and urban economy.


In the 25 years from 1978 to 2003, the number of TVEs grew at 20% annually. By the end of 2003 there were 21.85 million TVEs employing 135 million generating over 30% of GDP, 49% of industrial added value and 35% of farmers incomes. These enterprises contributed significantly to agricultural and infrastructure development. However, most TVEs are small and are dominated by family ties. Only 167,000 of them are considered to be running modern enterprise systems.[ii] The learning for the informal sector elsewhere is that there is merit in specialisation and, in developing infrastructure and logistics systems to maximise connectivity. Quality connectivity maximises the performance of even the most traditional enterprise. It is a perspective worth closer investigation.


Then, there are the specialised towns. A study of Guangdong[iii], one of China’s growth engines with strong FDI, vibrant manufacturing sector and, the superb infrastructure of the Pearl River Delta to offer a springboard for exports. In 2001, it had 8% of Chinese population; 11% of GDP (compared to 5% shanghai and 2% Beijing) and annual growth was a stellar 14.8%. The approach has been to promote specialised towns and villages, as well as cities, devoted to particular products and services. This is a variation on cluster theory and Government is promotion them hard. There are 63 such TVEs and they are selected on strict criteria. They must have at least 30% manufacturing output produced by one particular industry and the annual value of output has to be more than $200 million.


The Guangdong strategy contrasts with Shenzen and Guangzhou where no such specialised clusters are promoted and industrial expansion is allowed to develop as it wants. This has implications for the utilisation of land and, for the informal economy itself. This approach contrasts starkly with other parts of South America and India where a more haphazard growth is generated by market forces – market fundamentalism.


The Guandong strategy of specialist towns provides detailed evidence of how China’s growth is not just attributed to low wages, scarce environmental protection, dumping and breach of copyright. As the study illustrates, sustainable growth has come from a coordinated effort of self help projects combined with coherent industrial policy aimed at developing the necessary infrastructure, training, technological progress and innovation. In this way, the scope for haphazard growth led by the informal sector is reduced and, synergies are exploited.

[i] Quoted, Bellandi & Di Tommaso, The Case of Specialised Towns in Gunadong, China. European Planning Studies. Vol. 13, No 5, July 2005.

[ii] Xue Liang, The evolution of township and village enterprises (TVEs) in China. Journal of Small Business and Enterprise Development. Vol 13. No 2 (2006) pp 225-241.

[iii] Bellandi & Tommaso, The Case of Specialised Towns in Guangdong, China. Op cit.

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