5
services.
7
Meanwhile, due to restrictions on businesses with more than eight employees, these
figures underestimated the true scale of the private sector. To avoid official harassment during
the early years of reform, larger private businesses registered themselves as collective
enterprises, which were considered part of the non-state sector because they were supposed to be
run by local governments—in contrast to state-owned enterprises, which were considered
nationally owned and managed. This strategy of disguising a large private enterprise as a
collective one was popularly called, “wearing a red hat” because it cloaked a capitalist operation
in a more ideologically acceptable form. By 1986 it was estimated that 89 percent of all
collective enterprises in Wenzhou were wearing red hats.
8
And during the 1983 to 1985 period,
local economists estimated that up to 95 percent of all financial flows in the locality were
occurring outside of the state banking system.
9
Wenzhou’s reform-era development thus came to
be associated with not only success in rural industrialization, but also a high degree of local
initiative and even disregard for national regulations that stood in the way of its entrepreneurs.
Throughout the 1980s, there were several phases during which national political
campaigns were highly critical of bourgeois liberalization, spiritual pollution, and corruption—
all undesirable symptoms associated with the spread of market forces.
10
As such, during those
periods it also became politically sensitive to imply that Wenzhou's petty capitalism might serve
7
Xie Jian and Ren Baiqiang, Wenzhou minying jingji yanjiu: touguo minying jingji kan wenzhou moshi (Research on
Wenzhou’s Private Economy: A Penetrating Private Sector Look at the Wenzhou Model) (Beijing: Zhonghua
gongshanglian chubanshe, 2000), 18.
8
Ibid.
9
Ya-Ling Liu, “Reform from Below: The Private Economy and Local Politics in the Rural Industrialization of
Wenzhou," China Quarterly 130 (June 1992), 298.
10
On the policy and ideological fluctuations during the reform era, see Richard Baum, Burying Mao: Chinese
Politics in the Age of Deng Xiaoping (Princeton: Princeton University Press, 1996); and for early reform-era policies
regarding the private sector, see Susan Young, Private Business and Economic Reform in China (Armonk: M.E.
Sharpe, 1995).
Convention