ABSTRACT
This chapter provides an empirical assessment of the performance of the CMI model of the Chinese socialist enterprise, and discusses how the CMI model deals with the dual hierarchy problem. Based on the property rights and agency problem framework, it argued that the CMI model has not successfully solved the dual collusion problem. For empirical analysis, several hypotheses about the performance of the CMI model are developed. The contracted management system (CMS) deals only with the relations between local state organs and enterprises. Without effective control and rewarding mechanisms over local state organs by the central leadership, there remains the possibility of collusion between local state organs and enterprises. Availability of 1986 data for seventy-five large- and medium-sized state enterprises in the Chinese steel industry permits the testing of several hypotheses regarding both the combined and the individual effects of CMS, manager responsibility system, and internal contract system on enterprise performance.
