Recent work on the subject of economic organization by Alchian and Demsetz has argued that the classical capitalist firm can most efficiently carry out the functions of production and distribution when technical conditions of team production are present. Given that, for political reasons, the classical firm cannot exist in China, the question of the relative efficiency of the methods actually used arises. This article deals with this question. The conclusion is that Chinese methods can only be judged in terms of a composite objective function combining both efficiency and distributional criteria and that important insight into the relative weighing of these criteria may be gained from a close analysis of actual methods used.