EFFICIENCY OF CHINESE TOWNSHIP AND VILLAGE ENTERPRISES IN THE 1990s BASED ON MICRO DATA FOR WUXI CITY, 1991–97

We examine the (technical) efficiency of collective‐owned township and village enterprises (COTVEs) in Wuxi City, China, after 1990 to study whether the acknowledged success of township and village enterprises continued in the late 1990s. Our results suggest that COTVEs did not decline in relative efficiency compared with other types of enterprises in the late 1990s, but that their productivity leveled off or declined. Furthermore, we find that COTVEs faced with a more serious shortage of working capital had a lower efficiency after the mid‐1990s recession. These findings cast doubt on the view that the vaguely specified property rights of COTVEs are responsible for their declining performance problems during the period just before 1998 when massive privatization began. Privatization of COTVEs without other macroeconomic policy changes may now be insufficient to cope effectively with their declining productivity.