Kariobangi highlights a paper by Yasheng Wang that bolsters the cottage industry approach:
More hereThere are two prevailing explanations of what caused China’s rate of economic growth to take off. The first view gives the pride of place to globalization. According to this view, Chinese growth started when Deng Xiaoping liberalized trade and foreign investments by setting up special economic zones in the in the coastal provinces. In this view, China’s export-oriented manufacturing, largely foreign-funded, employed millions of rural migrants, boosted their income, and reduced poverty far and wide. The second perspective emphasizes the importance of internal reforms—especially in rural, interior regions—of the agricultural pricing system, land contracting, and the entry of rural businesses known as township and village enterprises.Huang argues that township and village enterprises were the key to China’s take-off… the economic contributions of foreign investments do not remotely match those of China’s rural industry. At their peak, firms funded by foreign capital employed 18 million people (in 2010). By contrast, at their trough in 1978, township and village enterprises employed 28 million people. Between 1978 and 1988 China’s poverty headcount declined by 154 million, by far the most impressive record during China’s three decades of reforms.