Opening to the Outside World } 369
grow rapidly. China was on the way to restoring its historic position as one of
the world’s leading trading countries.
A powerful symbiosis developed between the decollectivization of China’s
agriculture and the growth of China’s foreign trade. Once agriculture was
decollectivized via the family responsibility system, China’s newly liberated
farmers began finding all sorts of inventive ways of enriching themselves and
their country. Permitted to engage in nonagricultural lines of work, China’s
farmers set up small enterprises, called township and village enterprises
(TVEs) because of their rural location. Many prospered and grew rapidly.
Goods from the increasingly market-driven and entrepreneurial countryside
began to flood into the cities, demonstrating the wealth-producing power
of markets.^36 These TVEs played a leading role in China’s reemergence as a
trading country. Between 1980 and 1990, TVEs provided 67 percent of China’s
increase in exports.^37 Rural entrepreneurs, operating on a purely market basis
outside the state-planned sector, were quick to recognize the opportunities
presented by selling goods to rich foreign markets, and were flexible in sup-
plying that demand. These dynamic TVEs provided local governments with
tax revenue and a large portion of the locality’s foreign currency, producing
strong incentives for local authorities to cooperate to make firms successful.
As private ownership and investment and market-based entrepreneurship be-
came ideologically acceptable and spread ever more broadly across China’s
economy, the rate of growth accelerated. China had finally found the path to
economic wealth.
Ten years into China’s reform process, China had re-entered the global
trading system. It was not yet a global trading power, but its role was growing.
Trade had been decentralized to local governments hungry to expand trade,
increasingly knowledgeable about how to do that, and operating in an in-
creasingly marketized environment. China’s central governmental organs
had been transformed from bodies organizing and conducting foreign trade
to regulatory bodies supervising trade activity by autonomous, market-based,
and profit-seeking enterprises. China, following the path of earlier East Asia
industrializers, had begun the path of export promotion and technology ac-
quisition. It still had a long way to go before it became the world’s leading
exporter that it would eventually become. But it had begun the long march in
that direction.
Foreign Investment and the Special Economic Zones
According to Marxist-Leninist theory, when capitalists from advanced capi-
talist countries invested in underdeveloped areas of Asia, Africa, or Latin
America, the result was the transfer of wealth from these poor countries
to the advanced capitalist counties. The poverty of Third World countries