| The abrupt expansion of Township Enterprise (TE) in China is one of the most highlights undoubtedly in the 20 years' course of reform and development of China's rural soci-economy and all the national economy. The TE is another great creation of china's farmers after the household contract system, and an epoch-making historic change in the thousands years 'history of china's countryside. The TE's abruptly expansion is called the important component as well as the marked symbol in the construction of china-styled socialism. The TE has expanded at 20 percent annually and becomes the most energetic growth point of the national economy. However, the TE 's "advantages" have weakened gradually or even disappeared accompanied with the establish and perfect of the socialism market economy system and the change of TE's development environment. Simultaneously, the intrinsic defects of TE begin to appear. It proves that TE can not expand on the road of simply duplicating construction and simplifying, low-level, and low-graded growth, the TE's operation and management need to be further reform and innovated.Capital Operation, as a great trend of TE's operation approach change and management idea innovation, is been given more and more attention. This paper tries to explore the necessities and prospect of TE's Capital Operation. And present the theoretic background and guidance for the further development of china's TE, by the systemic study on the issues of TE Capital Operation on the theoretic base of economics and administration The paper takes the logic train of thoughts as followings: three "ask" must be given to the study of Capital Operation of Township Enterprise(COTE), that is: why, how and the result Namely the question that why TE must perform Capital Operation must be answered firstly, and secondly, how to perform or what's the method, finally, the results of COTE, that includes two sides, one is that how to evaluate the effects of Capital Operation, the other is that how to face the risks resulted from Capital Operation must be analyzed, Thus three parts and six chapters are included in the paper, the first includes the 1st and second chapters; and the second includes the third and forth chapters; finally the last includes the fifth and sixth chapters.The connotation, problems and challenges of TE are discussed in the first part, which serve as the base for presenting the COTE issues. For a long time, the cognition of TE's concept has not reached a common sense. In this paper, we hold that TE's concept is given not only beyond the ownership, but also beyond the region, scale, staff and the operation approach.. TE is not equal to collective enterprise, nor rural enterprise or countryside enterprise, nor small and middle-sized enterprise, nor farmer enterprise, nor non-SOE enterprise. The TE's essential characteristics is it's naturally and closely relationship with rural areas, farmers and agriculture. The achievement for TE obtained in these 20 years is great, however, TE has faced more and more difficulties and challenges in the course of market-oriented reform. The objective and subjective factors form the difficulties of TE, TE must rely on itself to overcome the difficulties. TE can just meet the requirements of market economy by means of taking active and efficient measures, and then strive to survive and develop further under market competition surrounding .In order to achieve this goal, many approaches can be used. But from the point of view of operation & administration and development strategy, adoption of Capital Operation is an important strategy or fundamental approach for Township Enterprises in terms of upgrading of self-quality, enforcing adaptability to market, strengthening competitive force, shaking off current tight corner and seeking for sustainable development.The chapter 2, based on introduction and definition of connotation of Capital Operation and relevant concepts, expounded the necessity and significance of TE's Capital Operation. On existing society, althoug...
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