The developments since 1980 explain the emergence of enterprises such as the Xizhang shoe factory in Beibei. Under the ‘Responsibility System’ established by Deng Xiaping and his followers, agricultural production and management once more became the responsibility of individual households, and industries in rural areas were taken out of the control of the communes and contracted out to the highest bidder. In an effort to increase the level of enterprise and profitability, foreign investment was encouraged. As a result, a range of ownership models has developed, including wholly state-owned enterprises, joint ventures, and smaller-scale locally-owned factories. The success of those factories that have attracted foreign investment has led to a restructuring of many state-owned enterprises. Those which are inefficient or unable to make regular profits are being closed down, while profitability for others has been improved by reducing their overheads: for example, they no longer have the responsibility (and expense) of setting up welfare systems and arrangements for their employees; these are now the responsibility of municipal governments. The conditions under which all factories and enterprises operate are, as a result, much more competitive than they were previously under tight central control. The results of this competition are sometimes surprising, with some state-owned enterprises taking advantage of their new freedoms to compete effectively with TVEs (Township and Village Enterprises).

One major consequence of these policies has been a large increase in the amount of internal migration in China, with workers moving temporarily from their registration area to jobs in more prosperous regions. This has led to poorer and more remote areas losing many of their workers, particularly men, leaving women to take on the tasks and responsibilities of food production on family farms.

The Beibei Shoe Company in Xizhang is an example of a TVE which welcomes investment from other countries and aims to develop its export trade. Under the old collective system, the rewards each person or family could receive were determined not by their own hard work but by group effort. Under the new responsibility system, individuals are rewarded. Each family’s contract specifies how much they must produce to fulfil their contract with the township or village government. Anything above this amount can be used by the family as they see fit: they may decide, for example, to sell any surplus on the open market for profit. The system is seen as encouraging maximum production, free markets, and a greater incentive to work. However, although the factory’s technology is at present labour-intensive, ensuring high levels of employment, there are worries about how long this can continue. As the company is a private share-holding corporation, it must pursue efficiency, which may mean greater mechanisation and consequent loss of jobs. In addition, it has been allowed to retain its profits for dividends to its shareholders, which means that it no longer pays local tax. As a result, the village as a whole loses out.

The great success of many TVEs has resulted in the revival of the township system as the basic form of local government, instead of the discredited commune system and other forms of collective administration. One problem caused by this shift has been the growth of towns, roads and industry at the expense of agricultural land. Farmers regularly complain about lack of compensation for their losses.