Efficiency, Performance and Changing Corporate Governance in China's Township–Village Enterprises since the 1990s

Abstract

This article outlines some of the major challenges facing Chinese township–village enterprises (TVEs) since the 1990s. The authors argue that the internal mechanisms associated with the unique ownership structure of TVEs has allowed them to perform better than state‐owned enterprises (SOEs). Since the mid‐1990s, debt levels in the TVE sector have increased sharply. Most of the problems of TVEs have been magnified by the close relationship between local governments and enterprises, which was once one of their major strengths. Since the mid‐1990s, local governments have come to regard TVEs with high levels of debt as a burden rather than an asset. In response local governments have moved to other, more indirect forms of governance over most TVEs under their control, while retaining direct control over the most successful. These alternative ownership structures include share‐holding co‐operatives and outright privatisation.