Analyses Of Contracts And Restructuring Of Institutions On Initial Property Rights Of China's Nongovernmental Enterprise

The market-oriented economic reform of china has achieved world remarkable success in the past 28 years. The dynamic growth of its economy has established the mainland of China a status as a country and region with the fastest economic growth rate in the world. One of the main driving forces of China's economic miracle is the rapid development of its nongovernmental economy sect which has contributed greatly to the tremendous change of its economic system..There is a basic theorem under the theoretic framework of the modern property rights, which clearly state that the property right is a collection of rights indeed. The property rights grant the owner rights to manipulate his assets, such as using the assets, transferring assets, and redistributing the income generated by the assets, etc. Generally speaking, a well-defined property rights will greatly stimulate the economic activities, and improve the efficiency of the distribution and usage of the resources. When we look at the China's nongovernmental enterprises in the early economic shift stage, however, we find that most companies in the nongovernmental sector, whether they appear as "township collectively owned enterprises", or "Red-hat enterprises" under the formation of "collective property rights", or directly "private-owned" companies, share a commonality of defining contracts of property rights. Almost all of the enterprises define their property rights ambiguously in a either direct or indirect manner.This paper will focus on the study and explanation the economic mechanisms of the origin, existence and development of the initially ambiguous property rights of nongovernmental enterprises by adopting the method of standard and case analyzing of new systematic economics. On the base of the study, the paper will also raise suggestions on policy level about the restructuring of economic systemThe paper firstly analyses the prerequisites for the origin and existence of the property right, fully generalizing the scope, function and drive for it, on basis of which the principles and means of change in the property right are carried out. With further analysis, two important concepts concerning ambiguous property right are introduced — surplus controlling right and surplus claiming right, supported by the incomplete contract theory of modern contract economics. In addition, the paper lays special emphasis on the arrangement for enterprise property right on the condition of incomplete contract, thus determining the theoretic basis and researching framework for the paper.In view of the aforementioned analytical framework , the paper will analyze the transformation of Chinese economic system from the angle of the incentive mechanism of the property right , and explore the basic conditions of Chinese nongovernmental enterprises in their stage of transformation, and thus will point out that the development achievements of Chinese nongovernmental enterprises relate to their contract arrangements of the initial property right. The paper will also induce the five forms of manifestation of the nongovernmental enterprises by analyzing the contract process and basic characteristics of their initial property right, and show that, owing to the imperfection of the market, the incompletion of the contract , and the partiality of the government as well, the ambiguous property rights of Chinese private enterprises will be in existence on a wide and inevitable basis and act as a second -best systematic arrangement.However , there is a further indication in this paper that in the long run ,the initially inexplicit property right will have no prospect because of its inefficiency caused by the perfection of the market , and even will disappear due to the transformed economic objective. In the following passages, the paper will discuss the economic achievements of the initially ambiguous property right and its function as obstacle to the further development of Chinese nongovernmental enterprises will also be brought to light by case analyzing in detail. At last, the paper will advance the basic thoughts and objective modes of the restructuring of the property right system of the Chinese nongovernmental enterprises.The basic ideas and concepts that this article is intended to illustrate are as follows: 1. The property rights are the development form under the category of the ownership rights. The property rights appear as the following five major types: rights of owning, rights of using, rights of trading, rights of benefit claiming and assetshandling including transferring, denoting and leasing. The benefit claiming right is the principle one within the property rights.2. The contract rights can be divided into designated rights and residual rights. Under the incomplete contract condition, the designed rights defined in the contracts play less important role. The residual rights not defined in the contract, i.e., residual control rights and residual claim rights, become the dominating rights.3. There are five primitive types of China's nongovernmental enterprises during the current economic shift period: "township collectively owned enterprise" managed by the local village authority to utilize its own resources; "Red-hat enterprise" favored by the local authority and owned by individuals who are willing to maintain a close relationship with the local government for the seek of "political safety"; private-owned enterprise set up under the help of village authority by taking the advantages of its political monopoly and its economic resource; private enterprise created by individuals or families relied on unofficial administrative rules posted by local village or township authority; and private-owned high-tech companies. From the initial contract point of view, these enterprises all have characteristics of retaining of ambiguous property rights.4. Under the circumstances of certain economic conditions, the nongovernmental enterprises are still willing to retain the ambiguous property rights which seem to be economic "inefficient" to the companies. For most of the nongovernmental enterprises, it is an acceptable choice based on the consideration of specific restrictions of the trade costs. Also, such choice comes from the arrangements of efficient organizations or institutions.5. The ambiguous property rights are unreasonable. As the economic reform continues and the market systems are gradually being perfected, the ambiguous property rights will be the leading cause of the economic inefficiency for the nongovernmental enterprises. Therefore, we must reconstruct the institutions of the property rights for nongovernmental enterprises.