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TITLE THE SECOND ECONOMY OF RURAL CHINA AUTHOR Anita Chan and Jonathan Unger CONTRACTOR The University of California Berkeley PRINCIPAL INVESTIGATOR Gregory Grossman COUNCIL CONTRACT NUMBER 620 5 DATE October 1986 The work leading to this report was supported by funds provided by the National Council for Soviet and East European Research It is one of several papers originally prepared for a Conference on the Soviet Second Economy held in January 1980 at the Kennan Institute for Advanced Russian Studies in Washington D C Anita Chan and Jonathan Unger The Second Economy of Rural China Summary Drawing chiefly on interviews with emigrants from villages in rural China this study focuses on the participants of peasants in the second economy By defining the second economy rather broadly as any economic activities legal or illegal that fall outside of the state plan the authors underscore the fact that the Chinese peasant economy is characterized by significant enclaves of legal private activity in particular the private plots and the free markets Moreover the very illegality of a wide range of economic activity in the peasant economy is largely a function of pendulum swings in government policy which repeatedly push second economy operations underground and then pull them back again out into the open The body of the discussion of second economy activity is divided into six sections agricultural collectives and the state plan private production marketing village owned factories procurements and second economy workers A common theme emerging from the discussion is the interaction between peasants and government policy with two aspects of peasant behavior standing out in particular their constant efforts to evade government regulations which conflict with their self interest and their response to the incentives set up by the official government pricing structure In the agricultural collectives for example second economy activity chiefly takes the form of a collective effort

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