Case Studies, China: Individual Firms and Entrepreneurs
Origin and Course of Development As China’s economic reforms unfolded, the share of state enterprises in industrial output declined steadily; some of these enterprises were closed down or privatized; and others were restructured as corporate entities, while maintaining substantial public ownership. The output share of traditional state-owned firms fell from 77.6 percent in 1978 to 49.6 percent in 1998 and 8.2 percent in 2010 (NBS 2005, 2011). During the reform process, millions of employees were laid off, and competition from imports and from growing numbers of new firms intensified. State enterprise profits fell from 15 percent of gross domestic product (GDP) in 1978 to 2 percent in 1997 (Li and Putterman 2008). Over the same period, the private sector’s share rose sharply, benefiting from the country’s liberalized policies and a surge of pent-up entrepreneurial energy and consumer demand. Before start-up. The tale of the founder of Jiangxi Youjia Food Manufacturing Company Ltd. is typical of postreform China. When Wu Youjia failed a college entrance exam in 1993, villagers believed that he had lost his only chance to escape farming, the destiny of most people in the area. But, within only 10 years, Wu would become the owner of the top food manufacturing company in Jiangxi Province and the most famous producer of local specialty foods in the province. Born in the suburbs of Nankang, in Jiangxi Province, central China, Wu received no formal training in business and trade during his formative school years. As China liberalized the economy and encouraged private investment, people around him started opening businesses. In 1994, Wu joined the sales staff of a state-owned food retailing enterprise in Nankang’s Fushi Township. During the year he worked for the firm, he traveled across the province, building connections with people in the food industry. To teach himself about sales, he read all the books he could find on the subject. Meanwhile, the country’s deepening reform exposed the weaknesses in Wu’s company, which ultimately went bankrupt. The experience earned Wu a skill set that would help him launch his own company. In the 1980s, villagers in Jiangxi Province began migrating to work in the thousands of private firms and factories in the Pearl River Delta region. In 1995, encouraged by his neighbors’ successes and assisted
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