Urban Village Shareholding: Cooperative Economic Organization in Northeast China

Abstract

Since the economic reforms of the 1970s, local Chinese urban authorities have requisitioned rural land near cities. To protect their land from these practices, many urban village collectives have established a cooperative shareholding system, but their motives remain unclear. Neoclassical economics suggests that such enterprises seek to maximize profits. Guided by the original institutionaleconomics approach, I investigate this question empirically by interviewing residents of Mengke village in Chaoyang city, Liaoning Province, northeast China. These data reveal four startling findings about the motives behind the shareholding system. First, collective economic organizations do not simply seek the maximization of profit. Second, the shareholding cooperative system adopted by village collectives helps villagers resist external threats such as land loss. Third, the collective economic organization is not merely a firm or a single market; it may work as a firm and a market simultaneously. Finally, managing of common property contributes to maintaining the identity of the collective. These findings suggest that the theories of neoclassical urban economics and new institutional economics fundamentally mischaracterize urban cooperatives.