(TVEs)and FIEs-in the two provinces was virtually identical.In Jiangsu,domestic private firms accounted for 0.53 percent of the total value of industrial output,compared with Zhejiang's 0.57 percent.Historically,the two provinces had produced some of China's best entrepreneurs. In the 1930s and 1940s,many of the top industrialists in Shanghai came from these two provinces. In the 1980s and 1990s,the domestic private sector grew much faster in Zhejiang.In 1995,domestic private firms generated 38.7 percent of Zhejiang's industrial output value, compared with 10.5 percent in Jiangsu.12 After 1995,the two provinces began to converge somewhat.By 2001,domestic private firms generated 69.3 percent of the gross industrial output value in Zhejiang,compared with 44.7 percent in Jiangsu.(In Jiangsu,the private sector has developed faster since 1995(the period beyond our dataset)because of the large-scale privatization of TVEs.) Jiangsu and Zhejiang represent two contrasting development models in China,a phenomenon first noted by Professor Fei Xiaotong,China's most prominent sociologist.In Jiangsu,the"Sunan model"prevailed whereby the government played a significant role of sponsorship and operating in entrepreneurial management and supported collectively-owned TVEs rather than,or even to the detriment of,genuinely private firms.The Sunan model was 12The private sector is defined here as the residual of the industrial output value of all firms minus that of the SOEs, collective firms,and FlEs.By this definition,some of the firms tangentially owned privately are also counted as private firms,e.g.shareholding firms.A stricter definition of private firms,i.e.firms that are solidly controlled by private entrepreneurs,would yield a higher differential between Zhejiang and Jiangsu.The output value of privately-operated(siving)and individually-operated (geti)firms accounted for 34.4 percent of the total industrial output value in Zhejiang but only 6.2 percent in Jiangsu 1111 (TVEs) and FIEs—in the two provinces was virtually identical. In Jiangsu, domestic private firms accounted for 0.53 percent of the total value of industrial output, compared with Zhejiang’s 0.57 percent. Historically, the two provinces had produced some of China’s best entrepreneurs. In the 1930s and 1940s, many of the top industrialists in Shanghai came from these two provinces. In the 1980s and 1990s, the domestic private sector grew much faster in Zhejiang. In 1995, domestic private firms generated 38.7 percent of Zhejiang’s industrial output value, compared with 10.5 percent in Jiangsu.12 After 1995, the two provinces began to converge somewhat. By 2001, domestic private firms generated 69.3 percent of the gross industrial output value in Zhejiang, compared with 44.7 percent in Jiangsu. (In Jiangsu, the private sector has developed faster since 1995 (the period beyond our dataset) because of the large-scale privatization of TVEs.) Jiangsu and Zhejiang represent two contrasting development models in China, a phenomenon first noted by Professor Fei Xiaotong, China’s most prominent sociologist. In Jiangsu, the “Sunan model” prevailed whereby the government played a significant role of sponsorship and operating in entrepreneurial management and supported collectively-owned TVEs rather than, or even to the detriment of, genuinely private firms. The Sunan model was 12 The private sector is defined here as the residual of the industrial output value of all firms minus that of the SOEs, collective firms, and FIEs. By this definition, some of the firms tangentially owned privately are also counted as private firms, e.g. shareholding firms. A stricter definition of private firms, i.e. firms that are solidly controlled by private entrepreneurs, would yield a higher differential between Zhejiang and Jiangsu. The output value of privately-operated (siying) and individually-operated (geti) firms accounted for 34.4 percent of the total industrial output value in Zhejiang but only 6.2 percent in Jiangsu