The value and importance of cultural historic heritage has been increasingly recognized and emphasized for the reason that its conservation contributes to human diversity, something which is crucial for human creativity and inspiration. From the perspective of the psychological needs of human beings, cultural heritage is a very important resource for shaping both national and local identity, and its conservation is significant in improving social wellbeing. Accordingly, cultural historic heritage has become the focus of rural and urban sustainable developmental strategies in both developed and developing countries. Using Peitien village in Fujian Province of Mainland China as a case study, this article seeks to analyze the major challenges facing Peitien’s governance of its tourism through its construction of an eco-museum. The dilemma facing the governance of cultural heritage conservation— entrepreneurial politics where the majority benefit from the interests gained, and the minority bears the cost— stems from the subtractability of use and difficulty of excluding potential beneficiaries of cultural heritage from the new commons. The conclusion emphasizes the need for institutional innovation if Peitien is to sustain its economic development and make it more equitable and just. Essential prerequisites to this innovative institutional design include: a polycentric governance regime where multiple centers/ arenas of power exist, an institution of co-production which breaks the divide of state/public and market/private, and civic participation.