After 40 years of evolution, China's village and township businesses have become a key force driving the country's market economy. They are adept at adapting to market changes, said Liu Zengsheng, director of the ministry's Township Enterprise Management Bureau.

More than 20.8 million such enterprises employed 128 million rural residents last year, generating a combined export value of 940 billion yuan (US$113.2 billion), recent statistics from the bureau indicated.

With the country's entry to WTO, township enterprises will encounter unprecedented challenges, the result of fierce competition and a more rigid market environment, Liu said.

However, bureau sources believe that rural firms may fare well, given the fact that they have flexible operational mechanisms, and many of them are engaged in labour-intensive sectors.

Most of China's township enterprises have grown in the market economy system and have withstood its tests. The rules of the WTO are based on the market economy, so the rules with regards to rural businesses match those of the WTO, said Vice-Minister of Agriculture Qi Jingfa.

The non-discrimination provisions of the WTO will help rural firms unleash their advantages in sectors including farm product processing, textile and household electrical appliances, Liu said.

Their export volume is expected to expand. For one thing, they will find it easier to obtain the power to engage in export trade, Qi said.

Less than 10,000 township enterprises were given this privilege at the end of 2000, according to statistics from Liu's bureau.

For Liu, accession to the WTO will enable rural firms to compete with other types of businesses in the country on an equal footing.

"Township enterprises will be able to expand the scale of using foreign funds through their advantages in resources, operational mechanisms and labour force," he said.

The development of township enterprises has been bottle-necked by a lack of funds, partly because it is difficult for them to obtain bank loans, as compared with State-owned enterprises.

On the other hand, they can also tap the overseas market by launching more joint ventures outside China, he said.

By the end of 2000, China's village and township-run companies had invested 16.5 billion yuan (US$1.98 billion) to run 1,886 businesses abroad, according to the latest bureau statistics

(China Daily January 21, 2002)