Qiu, "Ownership, incentive contracts, and autonomy of Chinese TVEs," 1997

Jicheng Qiu, Ph.D.

Abstract (Summary)
Chinese rural TVEs (Township and Village Enterprises) have played a very important role in Chinese economic reform and economic development since the late 1970s. The success of TVEs services to raise the incomes of rural peasants, and effectively facilitates the development of the Chinese rural economy.

The success of Chinese TVEs creates a distinct paradox inasmuch as they are largely collective enterprises. Without clearly defined property rights, generally believed to be a prerequisite for success, how can Chinese TVEs be successful? This dissertation analyzes the success of Chinese TVEs during 1985-90 in terms of ownership, incentive contracts, and autonomy in managerial decision-making. The main result of this study is that Chinese TVEs have been successful during the years under study even without privatization, due to strong incentives and product market competition and local government assistance in overcoming incomplete and imperfect markets.

The main contribution of this study is that, it tests the comparative efficiency of different types of ownership, as well as the effects of incentive contracts, managerial autonomy, market development on TVE productivity. The main findings are: (1) Private enterprises outperformed collectively owned enterprises in the past in terms of profitability; (2) Increased managerial autonomy in collectively owned enterprises increases TVE productivity; (3) Share contracts are more profitable than quota contracts under conditions in which local government assistance to TVEs in overcoming market imperfection is important; (4) Product market competition and incentive measures have proven to be major factors contributing TVE's success.

Advisor: Not listed