Balancing the retention and distribution ratios of collective economic earnings is crucial for achieving the dual objectives of developing collective public affairs and safeguarding farmers’ property rights. This study constructs a theoretical framework for analyzing the profit distribution mechanism within collective economic organizations from the perspective of financial revenue and expenditure balance. Based on longitudinal surveys conducted in 176 village in Nanhai District， Foshan City in both 2017 and 2024， the study delves into the distribution mechanism of economic benefits between the collective and individuals， as well as the effect of raising the collective retention ratio on the governance of village. The findings are as follows： First， during the “free exploration” phase， villages tended to allocate a larger share of earnings to shareholder villagers， with an average collective retention ratio of about 31% in sample villages in 2016. Second， villages with higher expenditures on public affairs have higher collective retention ratios， while wealthier villages have lower collective retention ratios. Third， during the implementation of the “60% distributed， 40% retained” policy from 2016 to 2024， the average collective retention ratio has risen to 41.9%， accompanied by a rise in public affairs spending and improvements in village governance. The “ 60% distributed， 40% retained” policy， through a combination of “ strict guidance” and “flexible implementation”，not only safeguards farmers’ property rights and interests， but also enhances the village’s capacity for self-sustainability.