Industrial associations across China are bound by the policy of ″one industry， one association.″ The administrative regulation prescribes that additional industrial associations with same or similar business scope as the existing one are not allowed to be established in the same administrative district. Taking into consideration the differences between industrial associations and other ordinary groups or clubs， we propose a model of the relation between the size of an industrial association and its performance in providing collective goods， and it indicates that the latter is constrained by the former. Empirical data confirm that this theoretical conclusion derives from the model. So， the principle of ″one industry， one association″ limits the number of industrial associations in a certain industry， and the optimal size of an industrial association limits the number of members that can be enrolled in an industrial association. Because of these two constraints， some enterprises in the industry that contain a large number of potential members cannot join the current association without affecting its performance， neither can they set up a new association to supply collective goods for themselves， thereby affecting the supply and consumption of collective goods in the industry.
However， the removal of the principle of ″one industry， one association″ will cause industrial associations to operate as clubs and fall into the strong control of their members. In the context of ″one industry， many associations，″ associations are likely to be free riders on providing collective goods which benefit the whole industry. Correspondingly， industrial associations will transform themselves into clubs from original industrial organizations representing the interests of the whole industry. The more associations act as clubs， the more excessive attention will be paid to the internal interests of the associations rather than to the whole industry. Accordingly， interest representation by industrial associations will be fragmented. In addition， the competitive environment resulting from the principle of ″one industry， many associations″ will probably lead to associations overdependence on their members. As a result， associations will to some extent lose their ability to integrate interest appeals of their members and to pursue the interests of the industry as a whole.
To overcome problems caused by industrial associations transformation towards clubs in the new institutional context of ″one industry， many associations，″ appropriate industrial association system needs to be set up when the administrative regulations of industrial associations are modified. If the system of industrial associations can be set up to integrate interest appeals of all industrial associations and to supply collective goods which benefit the whole industry， the deficient performance of public functions and the fragmentation of interest representation caused by the transformation of the operational logic of associations can be avoided. To avoid excessive control by members， and to obtain independence relative to their members in some degree， industrial associations need to find ways to restrict the influences of their members by means of undertaking certain functions transferred to them by the government and selfimprovement， and develop into a balanced status among the members， the government and themselves so as to avoid member manipulation， political dependency and corporatization. Industrial associations will therefore realize selfgovernance through structuring their internal balance mechanism and establishing an operational mode.