Lynette H. Ong. Prosper or Perish: Credit and Fiscal Systems in Rural China

Excerpt

As the title of Prosper or Perish indicates, Professor Ong examines the sources and consequences of uneven development in contemporary rural China. The book begins with a primer on the financial institutions in the Chinese countryside, highlighting the predominant position of rural credit cooperatives (RCCs), which collectively account for over 80 percent of deposits and loans in the rural area (p28). More importantly, in Part II Ong traces the sources of the highly biased loan practices of RCCs in favor of township and village enterprises prior to the collapse of the collective sector in the late 1990s. She argues convincingly that local government intervention in RCCs’ lending operations is an unintended consequence of the confluence of the institutional design of the Chinese Communist Party’s cadre evaluation system and of the vertical imbalance in public finance exacerbated by a series of fiscal reforms since the 1990s. The third part of the book contrasts the experiences of the “prospered” townships with those of the “perished” townships through studies of eight cases in different regions of China. This comparative case study shows that either a private sector-led Wenzhou model or a local government-led Sunan model could serve as successful avenues of rural industrialization. Unfortunately however, successful industrialization is an exception rather than the rule for the Chinese countryside as a whole. The six “perished” townships that Ong studies not only failed in their attempts of local government-led industrialization but also as a direct result became mired deeply in RCC debts and unable to meet demands for public services such as education and health care. …