CENTRE FOR ECONOMIC PERFORMANCE DISCUSSION PAPER NO.155 June 1993 CHINESE TOWNSHIP VILLAGE ENTERPRISES AS VAGUELY DEFINED COOPERATIVES

This paper concerns the paradoxes and dilemmas that the very successful "Chinese model" presents for transition theory. The "Chinese model" is centered on the development of township-village enterprises. The main purpose of this paper is to make the case that TVE's are not just some form of disguised capitalist institution; they are much better described as "vaguely defined cooperatives" meaning an essentially communal organization extremely far removed from having a well defined ownership structure. That a transition strategy based on vaguely defined cooperatives should be so successful presents a severe challenge for traditional property rights theory. We speculate that to address this challenge properly, traditional property rights theory should be extended by including a dimension corresponding to the degree of individualism/cooperation existing in a society. A model of the required extension is described. Implications and applications are discussed. This paper was produced as part of the Centre's Programme on Post-Communist Reform CHINESE TOWNSHIP VILLAGE ENTERPRISES AS VAGUELY DEFINED COOPERATIVES Martin L. Weitzman and Chenggang Xu Page