WHY TVES HAVE CONTRIBUTED TO INTERREGIONAL IMBALANCES IN CHINA

The major objectives of this paper are to shed some light on the mechanism thatgenerates interregional economic imbalances among communities in rural China. Centralto this issue is the development of township and village enterprises (TVEs) because thepresence of secondary industry is closely associated with the economic welfare of thepeople residing in rural communities. In rural Jiangsu, for example, spatial disparitieshave become more pronounced over the past two decades. This fact suggests that theinfluence of initial conditions—historical and geographical advantages of industrialfrontrunners—has not been erased but rather continues to persist. This is attributed to avariety of factors, including the less efficient use of TVE resources in poor areas, thedecentralized fiscal system, and agglomeration economies. In short, the socialist regime ofself-reliance that still lingers in China’s rural society traps less advanced areas in poverty.