Small Business as a Supplement in the People's Republic of China (PRC)

During the past 20 years, several nations that formerly embraced communism, including those with centrally-planned economies, have totally rejected that ideology. They have allowed market forces to transform the economy and have allowed independent small business owners to become major economic players. In the late 1970s, the People's Republic of China (PRC) developed policies of reform that opened it up to the world. Numerous new programs directed the people of China toward a prosperous entrepreneurial sector, especially in the townships and villages. These programs, however, did not abandon the socialist ideology inherent to the PRC, but sought to maintain it as the basis for its policies, with small business as a supplement to the socialist market economy. This article will consider the nature of the integration of socialism and small business in China. Recent History of Business in China On October 1, 1949, the Communist Party of China (CPC) declared the inauguration of the People's Republic of China (PRC), and all private enterprises were absorbed into the state sector of the economy. Small shops were converted into retail outlets for state-produced goods. At first the retailers were entitled to earn a profit, but it soon became obligatory to join a cooperative. No major changes in this policy occurred until 1978, when the nation adopted its third constitution, which led to the legalization of small business. The fourth constitution followed in 1982, placing China's modernization within the guidelines of socialism. The nation's fundamental laws specify four central principles: (1) adherence to the path of socialism; (2) adherence to the dictatorship; (3) adherence to the leadership of the Communist Party of China; and (4) adherence to Marxist-Leninism and to the ideology of Mao Zedong. One article of the constitution stipulates that the private economy in both urban and rural areas should supplement the socialist economy of public ownership. Another article allows the National People's Congress to amend the constitution, and in March 1993, such an amendment proclaimed that China will practice a "socialist market economy. " Since this amendment, a siying quiyejia (private enterprise) is defined by the state as a firm owned by individuals and providing jobs for eight or more employees. Under this definition, over 200,000 owner-managers, partners, and shareholders are proprietors of 100,000 private enterprises in China, employing almost 2 million people. Enterprises employing fewer than eight employees are called geteihu, literally "one-man businesses. " In rural areas, the xiangzhen qiye evolved, operated by members of an extended family. Chinese Culture and Small Business To understand the current Chinese attitude toward small business, it is important to understand some of the underlying cultural influences on it. One very important influence is Confucianism, the major religion in China. Although Confucianism does not encourage small business per se (Jones and Sakong 1980), it does value hard work, diligence, and frugality (Petersen 1971), qualities that Weber (1904-1905) linked to small business . Wu (1983) suggested that Chinese cultural values also include: (1) a high propensity to save and reinvest business earnings; (2) a universally strong desire to secure a better education for their children, who would then be expected to carry on the business and often do; and (3) a strong sense of loyalty and mutual obligation within the Chinese extended family. Shapero (1984) observed that overseas Chinese in Southeast Asia value small business more than do people from other cultural groups, and Dana (1986-1987) noted the success of Chinese small business owners in Singapore, Vietnam (Dana 1994), and Laos (Dana 1995). The Return of Small Business Without abandoning its ideology, the PRC initiated its program of reform in 1978, and in the following year the State Council of China officially endorsed the policy of encouraging small business owners as a supplement to the socialist economy. …