Firms’ Governance Structure in the Chinese Private Sector
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The Development and the Sectoral Distribution of the Private Sector
Development of the Private Sector
The Chinese Communist Party’s policies and formal legal institutions regarding private entrepreneurs have gone through stages of strict prohibition, accommodation, and encouragement. The private sector was suppressed in China during the period of central planning (1957–1978). It has reemerged since the era of reforms started in the late 1970 s and it has grown quickly in the past few decades (Garnaut et al. 2001, p. xi).
A spontaneous boost in the development of China’s private enterprise was triggered by a series of economic reforms at the end of 1978. In the agricultural reform, the introduction of the household responsibility system heightened the income of farmers and enhanced their productivity, and created a labor surplus (Lin 1992; McMillan and Naughton 1996). The state’s recognition of the legitimacy of private businesses strongly encouraged farmers to engage in small-scale and...