Self‐employment With Chinese Characteristics: The Forgotten Engine of Rural China's Growth

This article sketches a picture of the self‐employment sector in rural China and examines the nature of its emergence. Using a randomly selected, nationally representative household‐level data set that contains detailed information on household self‐employment activities, this article provides evidence that although the self‐employed enterprises are small, they have grown fast, operate as relatively complex businesses, and perform well in a financially healthy way. These results, taken together with the pattern of the emergence of self‐employed enterprises across China's regions, reveal that the expansion of self‐employment is not symptomatic of a failing economy; instead it is a component of the dynamic development process that characterizes rural China during its reform period. ( JEL J23, D21, O12)