The Political Economy of Service Organization Reform in China: An Institutional Choice Analysis

In China, service organizations refer to many semi-governmental organizations that perform social or public functions, partly or fully on a self-financing basis. A key item on China's governance reform agenda is about which service organizations should be integrated into the core government bureaucracy and which should be turned into self-financing enterprises units or private, nonprofit organizations. By examining 12 organizations affiliated with the Guangzhou Environmental Protection Bureau using an institutional choice perspective, our analysis suggests that although various political and institutional factors have remained key constraints, such transaction cost concerns as probity, accountability, legitimacy, efficiency, and reliability have increasingly been raised as criteria in deliberating institutional choices in China's governance reform, paving the way for the gradual development of a more rational and accountable governance system.