Grey and Black: The Hidden Economy of Rural China

A HIDDEN ECONOMY of very substantial size exists in the Chinese countryside, lying beyond the reaches of state plans and official statistics. At its outermost margins, this hidden economy includes blackmarketing and criminal activities. But most of the hidden economy has tended to occupy a considerable zone of semi-legality: though illegal on paper, it has been important to the rural economy's smooth functioning and, therefore, has been openly tolerated by the authorities. At the same time, however, government policy has shifted over the years, depending upon the leaders' priorities of the moment. During radical periods like the early 1970s, many of the peasantry's undertakings became ideologically unacceptable and were forced underground; the grey zone was narrowed. Since the re-emergence of Deng Xiaoping, however, with China's economic development now receiving top priority, many of these same activities have been allowed to resurface-and the grey economy permitted to expand. Our discussion in this article will span this decade-long shift of government policy. We shall examine, in turn, agricultural production; the marketing of farm produce; the sales of village-factory products; the procurement of needed goods; and peasant labor outside the villages. For each of these major spheres of economic activity, we shall describe those activities which the government considers perfectly legal, those which normally occupy the sector of the economic spectrum, and those which edge off into the black. Through this examination, we