Township and village enterprises, openness and regional economic growth inChina

By most standards China's post-1978 economic reforms have been a colossal s uccess. Much of that success can be attributed to China's encouragement of foreign trade and its shift from state-owned enterprises to more market-ori ented institutions such as township and village enterprises (TVEs). This ar ticle uses a province-level panel analysis to measure the contribution thes e reforms have made to China's growth. Like earlier cross-section studies o f economic growth rates, the model explains differences in growth rates of per capita income between provinces by using initial endowments, demographi c variables and measures of investment in human and physical capital as exp lanatory variables. Important contributions in this study are its focus on the role of TVEs and foreign trade and its use of time series data from the provinces. The results are consistent with earlier cross-country studies: strong evidence of convergence, a positive role for lagged investment and a n insignificant role for human capital investment as measured by school enr olment. China's market-oriented reform has also contributed to its growth: openness has played a positive role and township and village enterprises ha ve been strongly significant.