The development of private businesses in China

China’s economic development since 1978 has been fuelled largely by a new private sector that has depended on entrepreneurship. In 1978 the private sector virtually did not exist. In 2005 it was estimated that about one-quarter of gross domestic product (GDP) was produced by the domestic private sector. However, the academic discourse on China’s private sector is lagging behind the sector’s actual development. Before the market reforms introduced by Deng Xiaoping in 1978, China relied on state entrepreneurship. When the model of state entrepreneurship began to run out of energy, the Chinese Communist Party (CCP) turned to private entrepreneurship as a way of sustaining and accelerating economic development. What were the driving forces behind this rapid growth? An important reason was raw entrepreneurship. This concept has been introduced in the paper as a way of distinguishing new, green-field private firms from privatised SOEs. The definition of raw entrepreneurship or green-field enterprises included two types of genuine private firms: geti gongshanghu and siying qiye. The gaizhi, or privatised firms, have been deliberately excluded in an attempt to generate a study that focussed on the relatively untold story of private business rather than the much better documented history of reformed SOEs. This paper documents the development, history and the present situation of Chinese private enterprises with emphasis on the private sector in Zhejiang province, because private businesses in that province have been best exemplified by raw entrepreneurship and developed more rapidly relative to many other provinces in China.