firms could either register as getil,and be given permission to employ more than eight people,or they could pay an administration fee and obtain a collective license to a state or collective unit.The latter category were called"red hat"firms since to avoid harassment,they put on a hat of collective ownership,even though they were essentially privately owned(Gregory,Tenev,&Wagle,2000).Red hat firms continue to exist to this day in China,making interpretation of government issued statistics difficult.Using a sample of300 villages surveyed,it's estimated that there were 500.000 gerh,or private firms at the end of 1988(Zhang&Liu,1995) Economic reform was put on hold in 1989,however.Inflation and corruption as well as the political uproar from the Tiananmen Square incident allowed conservatives to gain more power and to implement from 1989-1990 an"austerity program"throughout much of the country.Credit was sharply cut to rural enterprises and total employment in TVEs fell by 3 million between 1988 and 1990(People's Daily,March 23,1990).There was relicensing of private operators and a major tax collection drive among private enterprises.There was even discussion of recollectivizing agriculture and recentralizing financial power and investment away from the provinces and local governments.Debate within the country grew as jealousy and outrage emerged over the high incomes of business owners and the exploitation of workers(Young,1995).The new boom period of private sector development in China began after Deng Xiaoping's"South Touring Talk"in early 1992.Motivated by the economic slowdown(4.4%and 3.9%GDP growth in 1989 and 1990)and the gridlock within the central government,Deng Xiaoping made stops in several special economic zones,which would be sympathetic to his views in the Southern part of the country,to give speeches about further economic reforms.It worked firms could either register as getihu, and be given permission to employ more than eight people, or they could pay an administration fee and obtain a collective license to a state or collective unit. The latter category were called “red hat” firms since to avoid harassment, they put on a hat of collective ownership, even though they were essentially privately owned (Gregory, Tenev, & Wagle, 2000). Red hat firms continue to exist to this day in China, making interpretation of government issued statistics difficult. Using a sample of 300 villages surveyed, it’s estimated that there were 500,000 getihu, or private firms at the end of 1988 (Zhang & Liu, 1995). Economic reform was put on hold in 1989, however. Inflation and corruption as well as the political uproar from the Tiananmen Square incident allowed conservatives to gain more power and to implement from 1989-1990 an “austerity program” throughout much of the country. Credit was sharply cut to rural enterprises and total employment in TVEs fell by 3 million between 1988 and 1990 (People’s Daily, March 23, 1990). There was relicensing of private operators and a major tax collection drive among private enterprises. There was even discussion of recollectivizing agriculture and recentralizing financial power and investment away from the provinces and local governments. Debate within the country grew as jealousy and outrage emerged over the high incomes of business owners and the exploitation of workers (Young, 1995). The new boom period of private sector development in China began after Deng Xiaoping’s “South Touring Talk” in early 1992. Motivated by the economic slowdown (4.4% and 3.9% GDP growth in 1989 and 1990) and the gridlock within the central government, Deng Xiaoping made stops in several special economic zones, which would be sympathetic to his views in the Southern part of the country, to give speeches about further economic reforms. It worked