Township and Village Enterprises (TVEs, ) are market-oriented public enterprises under the purview of local governments based in townships and villages in China.
History
Before the Reform and Opening
Although Chinese leader Deng Xiaoping was reported to have said that TVEs "appear(ed) out of nowhere" in 1987, the industrial development in rural China could be traced back to as early as 1950s. During this period, rural enterprises, often with names "commune and brigade enterprises" and of neglectable size, served as a supplement to those state-owned enterprises (SOE), which mainly focused on heavy industrial sectors, and were established by the people's communes and bridges to support agricultural production and to produce rural social products for local and domestic needs. The political turmoil between late 1950s and early 1960s, like the Great Leap Forward, at one time halted the development of rural enterprises and some were suspended. Nevertheless, encouraged by the Chinese government to produce rural social goods, the enthusiasm of rural enterprises increased again in 1965. According to official records, the number of rural enterprise was about 122,000 in 1965, and quickly increased to 447,000 in 1970. During this period, however, rural enterprises were restricted to certain industrial and agricultural sections, including the production of iron, steel, cement, chemical fertilizer, hydroelectric power, and farm tools.
After 1978
Most TVEs emerged during the Reform period in the 1980s (Huang, 2008). There were only 1.5 million in 1978, at the start of the Reform period, and after the State Council of the People's Republic of China first officially used the term "Township and Village Enterprises" in March, 1984, number of TVEs had been over 12 millions by 1985. The reforms of 1978 changed TVEs, which became the most vibrant part of the Chinese economy as they experienced significant expansion in the 1980s and early 1990s. TVE employment grew from 28 million in 1978 to a peak of 135 million in 1996. Likewise, production of TVEs increased to 1.8 trillion yuan in 1992 from 49 billion yuan in 1978. More than half of TVE production in the 1980s occurred in the east coastal and central provinces like Guangdong, Fujian, Zhejiang, Jiangsu, Shandong, and Hunan provinces. In Jiangsu and Shandong TVEs employed some 30 percent of the rural workforce. However, it should be noticed that many TVEs are specialized in the production of labor-intensive commodities without higher technological requirement.
In a strategy which came to be known by the slogan "wearing a red hat," some private entrepreneurs obtained permission from townships and villages to register their private enterprises as TVEs in order to avoid restrictions on the number of employees a small private business could have.
As private ownership became less politically-controversial after the mid-1990s, the TVEs' proportionate share of the national economy declined. Many were either privatized or turned into shareholding companies.
Notable characteristics
Locations and Ownership
Many of these firms were “collectively owned” in the sense that theoretical ownership rested with the collectives, either as a legacy of earlier sponsorship, or because township and village governments took the lead in establishing new TVEs after the breakup of the agricultural collectives. Ultimate “ownership rights” stayed with the collective, while “use rights” were delegated to managers in collective TVEs. The complexity of this arrangement led to the labeling of collective (township and village) TVE property rights as “fuzzy.” This lack of a true system of property rights collapsed in a short amount of time, as townships and villages expropriated the use rights using their ownership rights.
TVEs referred to the location of the enterprises, as opposed to the ownership structure. That is, TVE never referred to only companies owned by township and villages; rather, TVE refers to companies located in townships and villages. Huang (2008) quotes a Chinese Ministry of Agriculture document from 1984 in support of this: TVEs include enterprises sponsored by townships and villages, the alliance enterprises [private stock companies] formed by peasants, other alliance enterprises, and individual enterprises." Some collective TVEs were notable for their unique ownership and corporate governance setup.