The Puzzle of China's Township–Village Enterprises The Paradox of Local Corporatism in a Dual-Track Economic Transition

Abstract

This paper seeks to reconcile and synthesize the diverse views about the township–village enterprises (TVEs) and local corporatism in the context of ongoing institutional changes in China as a transition economy. Specifically, I attempt to integrate the economic, political, cultural, and social explanations for TVEs, especially the two competing views of market competition and political corruption. I focus on the puzzle of TVE efficiency as well as the paradox of local corporatism as a government–business partnership with both a positive function of public alliance for wealth creation and a negative function of private collusion for wealth transfer. I argue that the key to both the puzzle of TVEs and the paradox of local corporatism lies in China's dual-track reform paradigm (i.e. a market-for-mass track and a state-for-élite track). Lastly, I discuss the critical implications for theory building and policymaking regarding economic transition in general.

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