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The Individually Owned Economy

by the State Statistics Bureau (As published in Beijing Review, Feb 27-March 5, 1989)


China restored individually operated or household businesses in 1978. Since then, this sector of the economy has registered rapid growth in both rural and urban areas, largely in industrial and commercial enterprises.

Expansion

Since 1981, the number of China’s urban and rural household enterprises and their employees has increased yearly (see table).

The development of the household economy has created many new jobs, thus absorbing large numbers of idle workers and school graduates (particularly in the countryside ) and ensuring social stability . According to initial statistics for 1983-87, of all newly employed urban residents, 4.22 million found work with household enterprises.

As the number and income of this economic sector have increased, it has become an important supplementary part of China’s economy. According to the State Administration for Industry and Commerce, by the end of 1987, China’s licensed self-employed had accounted for 4.1 percent of the total social workforce, or 16.4 percent of all workers in state-owned and collectively managed enterprises. In the same year, urban and rural individually operated industry produced a total output value of 50.239 billion uan, 3.6 percent of the national figure, and paid 7.959 billion yuan in taxes to the state.

Distribution

By the end of 1987, the vast majority of China’s urban self-employed, 4.87 million people, worked in tertiary industries. Some 800.000 worked in industry and construction (up from 120,000 in 1981 ). With the continued expansion of material and cultural demands, a large number had started bussinesses in the fields of culture, education, public health, social welfare, public utilities or consultancy services -close to 650,000 people altogether. Only 17,000 worked in agriculture, forestry, fisheries or water conservation.

With this broad spread, the individually owned economy can play a positive role in national economic development given the condition of productive forces at the primary stage of socialism.

In rural areas, the number of workers in industrial and commercial households increased from 1.219 million in 1981 to 16.66 million in 1987. Of this total, 5.076 million (30.4 percent) were engaged in industry (including handicrafts), communications and transportation; 9.274 million (55.7 percent) in commerce and catering; and 2.31 million (13.9 percent) in other trades.

In 1987, these small rural businesses produced 24.45 billion yuan’s worth of output value on a total business volume of 70.23  billion yuan. Their retail sales totalled 48.7 billion yuan (8.4 percent of national retail sales), and by the end of the year they had 18 billion yuan at their own disposal (according to the State Administration for Industry and Commerce, the figure for urban and rural industrial and commercial enterprises combined was 23.61 billion yuan).

As their incomes have increased dramatically, some individually owned enterprises have reinvested most of their profits in expanding production and hiring more workers. Most, however, have not. Because the educational level of most owners is low and government management of this sector of the economy is ineffective, their predominantly short-term orientation needs correction. At present, a large proportion of their income goes on consumption, while some part of the increased value and capital of their enterprises has come from illicit or illegal sources. Both of these factors disrupt the normal order of social and economic activity.

At present, privately owned enterprises appear to make better use of their income than individually owned businesses. They not only tend to have higher rates of productivity but also use more advanced technology and equipment, thus proportionately creating more social wealth.

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TABLE    (Unit: 1,000)

                                    1981     1982    1983      1984       1985       1986      1987

Number of
households                  1,829    2,636   5,901     9,304     11,710    12,111   13,725
       Urban                      868    1,132   1,706     2,222       2,799      2,910     3,383
       Rural                       961    1,504   4,195     7,082       8,911      9,201   10,342
Number of
employees                   2,274    3,198   7,465    13,031    17,660     18,459   21,583
       Urban                   1,056    1,358   2,086      2,911      3,849       4,076     4,923
       Rural                    1,218    1,840   5,379    10,120    13,811     14,383   16,660
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