LIKE all good sons, Chen returned from the city to spend Spring Festival in his hometown with his family. There in rural Jiangxi province he noticed that migrant remittances were fuelling a housing boom. He started to believe there could be a market for the steel rods used to reinforce cement floors and roofs. And he knew what he was talking about, as production supervisor in a Guangzhou steel rolling mill.

With the encouragement of local leaders, Chen set up the Xiniu Township Steel Factory in 1994. He bought in machinery from Guangzhou for 600,000 yuan, raised from various sources, including half from an investment company that charged higher interest loans than banks or local credit co-operatives.
Chen was just one of the large number of labourers who left their villages and farms to join the urban manufacturing boom sparked by the economic and social reforms of the early 1980s. Of these migrants, an estimated one third have since returned to resettle in their native villages, and a small number have, like Mr Chen, tried to use their skills, contacts and savings to establish local businesses.

Unfortunately Chen’s steel rods turned out to be of inferior quality to those from Guangzhou, so he failed to attract customers. To make matters worse, with all his capital tied up in machinery, he had no money left over to purchase scrap metal or pay electricity bills and the wages of his twenty workers. “I was spurred on by the enthusiasm of the local government,” Chen explained. “But now that I need help, the government is not so interested. They just want to know when I will pay back the money.”

In many ways, Chen’s experience is representative of that of other returnees trying to set up businesses in their hometowns. Firstly, although steel rod manufacturing is rare among returnee businesses, Chen is typical in that he has chosen to replicate the activity of his urban employment: common products of returnee workshops include shoes, clothes, curtains and furniture - all urban industries that employ migrants. Secondly, Chen’s ‘time-out’ provided him with money and equipment to set up his business. Thirdly, he was courted by local officials who often try to identify which villagers, through their post-office remittance slips and local gossip, have made good in the city. Finally, Chen experienced considerable difficulties with production, investment, and marketing, as well as gaining sound business and technical advice. He even conceded that he might be forced to ‘go south’ again to repay his debts. If he does return to the city, he will join many other failed entrepreneurs trying to recoup their losses.

Yet some returnee entrepreneurs have fared much better. Mr Tan, for example, worked for three years in a Guangzhou plastic helmet factory, first as a spray painter, then production manager. When he returned home for Spring Festival, the new motorbikes caught his attention – and the opportunity for selling helmets. So he moved back and set up a workshop assembling and painting helmets with the materials supplied by his former employer. Now around half of the finished products are shipped back to the company, and the remainder are sold locally. Tan earns more money as an entrepreneur at home than a worker in the city.
It is difficult to estimate how many Mr Chens and Mr Tans there are in rural China. Various surveys suggest that major labour exporting counties often have hundreds and even over one thousand returned migrants setting up entities ranging from roadside stalls to factories with international contracts. This is not to suggest, however, that returnee businesses are found throughout the countryside. Some counties are more successful than others in attracting ‘phoenixes back to the nest’. They tend to boast above average per capita incomes, relatively long migration histories, and extensive local government support for returnee business creation.

The main factor cited by migrants for wanting to return home and set up a business is the poor treatment they receive in the factories of the urban manufacturing zones. Capitalists require a disciplined labour force, which the government provides by repressing organised labour protest. The working hours are usually over ten hours a day for six or seven days a week, the migrant dormitories are generally cramped and the food is unappetising. Many bosses withhold wages to stop workers leaving and to earn interest on the money. Migrants feel that working for a boss cannot continue indefinitely. Many former migrants told me that they set up a business at home to escape their lives as somebody’s ‘ox or horse’.

In the electronics repair shop he opened in the Xinfeng county seat, Jiangxi, a 30 year-old man told his story. “In 1991 I sat an exam and entered a Taiwan-mainland joint venture electronics company and worked there for three and a half years… I worked until 2.00am, so that my eyes were always strained and I was perpetually exhausted. When there is a toilet break the bell rings and you have five minutes to pee…Your heart is always on edge… Now even if a boss gave me thirty yuan a day just to sit at a desk and do nothing, I would refuse… I want to be free.”

A comparison between wage labourers and trading migrants similarly suggests that poor factory conditions underpin returnee entrepreneurship. I interviewed villagers in two townships that experienced hardly any returnee entrepreneurship: Rongtang township, Fengcheng county whose migrants have established clothes shops on Hainan Island, and Songpu township, Fengxin county where migrants work predominantly as decorators in Shanghai. These migrants were directing their energies towards their urban businesses for as long as this strategy was profitable. Although traders are subject to discrimination and exactions in the cities, they are working for themselves and investing in their own businesses. So whereas traders consider returning home as something for the distant future, the different situation of factory workers means that they see return as a more immediate prospect.

Political rhetoric actively encourages transition from peasant to worker, and then, for a progressive minority, from worker to boss. Here the worker is not like the person who works (gongzuo) in a state-owned enterprise, and until recently enjoyed cradle-to-grave security. For them working involves dagong – selling their labour to a boss. “I don’t gongzuo,” replied one man when I asked why he worked in the city. “I sell my blood and sweat to the boss for a pittance, I dagong!” People without money do not count, he explained, so they must dagong.

Dagong is portrayed as enabling some peasants to obtain the resources required to become a boss (laoban). Only in the past two decades has being a ‘boss’ (laoban) become socially acceptable. Most private entrepreneurs were social and political outcasts - now the term laoban denotes anyone who has standing in an economic or even an administrative sense. In imagining themselves as a laoban, migrants are attracted by thoughts of independence, status and freedom. Returnees who establish a business relationship with their former bosses proudly note their change in status.
But why, having accumulated the necessary resources to set up a business and escape factory work, do migrants return home rather than stay in the city? Above all, it is easier to become a laoban on home soil. The hometown offers government help, easy access to natural and social resources, and the support of family and kin.

Local government supports returnee entrepreneurs by giving those with savings and urban contacts preferential access to land, permits and credit and by protecting them from onerous levies and tax demands. In Hunan province, one prefecture-level government even installed plaques outside factories established by returned migrants: ‘protect this returnee business, do not extort money’ read the warning to rapacious lower-level officials. Protection can also work the other way: township officials may help entrepreneurs circumvent the levies of higher government levels by turning a blind eye to unregistered businesses. In return for this protection, the businesses pay a more generous local tax contribution.

The support of the local government and the remoteness of townships permit activities that might be disapproved of by higher levels. Some returnees use their urban connections to arrange for locally produced cigarettes to be falsely packaged as national brands. Other workshops make imitation designer shoes, usually assembled with poor quality glue, zips and soles. My shoes fell apart just as I reached the door of a returnee shoe-maker. Fifty yuan bought a replacement pair - which lasted just a fortnight!

Hometowns are also attractive for their cheap labour and resources. “Xinfeng has timber resources and an abundant supply of labour,” explained Wang Qisheng, co-proprietor of the Huadi Furniture Factory. “What it lacks is new skills and new ideas. If it is possible to integrate skills learned from the coastal regions with the natural resource advantages of home, then it forms an unstoppable economic force.”

Xinfeng officials hope that their county can copy the success of Nankang, another Jiangxi county along the Beijing-Kowloon Railway, where former migrant carpenters have been lured home by cheaper timber, land and electricity to establish over 700 workshops. This ‘furniture city’ acts as a central supply and distribution point for materials and final products within Jiangxi and Guangdong.

In recent years, many Jiangxi counties have relaxed controls on the private sector and the consumer capacity of rural households has increased. Meanwhile, the coastal areas that benefited first from reform policies are now becoming saturated. Several Jiangxi carpenters told me that competition in Guangdong had forced their return home.

A final major factor behind the decision of entrepreneurial migrants to return is the desire to reunite with family members and create something tangible for themselves and their descendants. “I had a furniture workshop in Guangzhou, but what is the use of the years of toil alone if the next generation goes to waste?” one returnee explained. “I came back and set up a factory here in Yudu county, and bought a house in the county seat so that my son can go to the key school ... if he doesn’t get into university, then at least I have created something for his future.”

Importantly if deployed in the city, the savings and skills of most migrants would not change their marginal social status, but when transferred home, these resources enable entrepreneurial returnees to demonstrate their socio-economic progress in tangible ways, for example, a new house and small business.
As China’s reforms unfold, increasing numbers of rural labourers will be released from the land. The central state is trying to promote returnee entrepreneurship as a low cost way to generate local employment opportunities for them. Meanwhile county, township and village officials hope that returnee businesses will contribute to local tax coffers and earn them political brownie points for business creation. Given that migrants only started returning and establishing businesses in the mid 1990s, it is too soon to tell whether most of them will fare like Mr Chen or Mr Tan.

Dr Rachel Murphy is a Research Fellow at Jesus College, Cambridge, and author of ‘How Migrant Labour is Changing Rural China’ (Cambridge, 2002). She also writes on gender and migration, and education and population policy in rural China.