In This Review

Internationalizing China: Domestic Interests and Global Linkages
Internationalizing China: Domestic Interests and Global Linkages
By David Zweig
Cornell University Press, 2002, 320 pp
Back-Alley Banking: Private Entrepreneurs in China
Back-Alley Banking: Private Entrepreneurs in China
By Kellee S. Tsai
Cornell University Press, 2002, 316 pp

Zweig has brought intellectual order to the chaotic process of China's opening to the world by providing a general overview of China's experiences, including four detailed case studies. The first covers the urban opening involving the special economic zones and favored cities; second, the rural opening, largely through the development of the village and township enterprises that produce mainly for export; third, the role of education and the career choices of Chinese students studying abroad; and finally, the effects of foreign aid to China, illuminated mainly by Canada's program. Zweig has accumulated masses of data, so the book is rich both in ideas and as a statistical resource.

Although there has been widespread amazement over the mushrooming of private enterprises in China, Tsai is the first scholar to research where new entrepreneurs get their necessary capital. Through probing interviews and archival research, she directs a bright light into the dark corners of China's gray economy. The main hurdle for these private firms is that legally established banks in China are absorbed with the problems of the state-owned enterprises (soes) and are not allowed to help the private sector. As Tsai shows, however, there are a host of clever ways by which some 30 million private businesses can raise capital, ranging from rotating-credit associations to borrowing from family and friends to loan sharks. Some businesses have even established back-door relations with soes to obtain their stationery: that way, they can appear to be official entities when communicating with state banks to get loans; then, as is the case with an soe, this credit appears in the bank's books as just another nonperforming loan. Tsai shows that although there is no universal pattern, the growth of the private sector depends on local conditions -- above all, the willingness of the officials on the ground to cooperate.