1 Ole Bruun, Business and Bureaucracy in a Chinese City: An Ethnography of Private Business Households in Contemporary China (Berkeley: Institute of East Asian Studies/University of California Press, 1993); Yia-ling Liu, Reform from below: the private economy and local politics in the rural industrialization of Wenzhou, The China Quarterly, No. 130 (June 1992), pp. 293–316; Kristen Parris, Local initiative and national reform: the Wenzhou model of development, The China Quarterly, No. 134 (June 1993), pp. 242–263; Minxin Pei, From Revolution to Reform: The Demise of Communism in China and the Soviet Union (Cambridge, MA: Harvard University Press 1994), p. 112; Dorothy J., Solinger, Urban entrepreneurs and the state: the merger of state and society, in Rosenbaum, Arthur L. (ed.), State & Society in China: The Consequences of Reform (Boulder, CO: Westview Press, 1992), pp. 121–141; Ole Odgaard, Private Enterprises in Rural China: Impact on Agriculture and Social Stratification (Aldershot: Avebury, 1992)Google Scholar; Wank, David L., Bureaucratic patronage and private business: changing networks of power in urban China, inWalder, Andrew G. (ed.), The Waning of the Communist State: Economic Origins of Political Decline in China and Hungary (Berkeley: University of California Press, 1995), pp. 153–183; Susan Young, Private Business and Economic Reform in China (Armonk, NY: M.E. Sharpe, 1995).Google Scholar

2 My sociological view admits different possible market configurations in contrast to the economistic view which narrowly defines market as ideal typical transactions between legal equals in costless transactions institutionalized in private property rights defined and enforced by the state. For discussion of sociological versus economistic conceptions of the market see Paul Hirsch, Stuart Michaels and Ray Friedman, Clean models vs. dirty hands: why economics is different from sociology, in Sharon Zukin and Paul DiMaggio (eds.), Structures of Capital: The Social Organization of the Economy (Cambridge: Cambridge University Press, 1990), pp. 39–56. For patron–client ties as market relations see Jean, Ensminger, Making a Market: The Institutional Transformation of an African Society (Cambridge: Cambridge University Press, 1992), pp. 110–11Google Scholar; H.D., Flap, Patronage: an institution in its own right, in Michael, Hechter, Karl-Dieter, Opp and Reinhard, Wippler (eds.), Social Institutions: Their Emergence, Maintenance, and Effects (New York: Aldine de Gruyter, 1990) pp. 225–243, at pp. 237–38.Google Scholar

3 The difference between the prevailing view of clientelism in the private business literature and this article's view is expressed by Eisenstadt and Roniger's distinction between localized and linked patronage. The former consists of efforts by patrons to maintain local power domains in the face of more standardized and centrally defined procedures while the latter emphasizes the supra-local orientation of patrons and merging of clientelist networks with administrative processes and market expansion. See S.N., Eisenstadt and L., Roniger, Patrons, Clients and Friends: Interpersonal Relations and the Structure of Trust in Society (Cambridge: Cambridge University Press, 1984), pp. 243–45Google Scholar. For examples of linked patron-client ties seeShirk, Susan L., The Political Logic of Economic Reform in China (Berkeley: University of California Press, 1993Google Scholar); Fang, Wang, The political economy of authoritarian clientelism in Taiwan, in Luis, Roniger and Ayse, Giines-Ayata (eds.), Democracy, Clientelism, and Civil Society (Boulder, CO: Lynne Rienner, 1994), pp. 181–206.Google Scholar

4 See Roger, Friedland and Alford, Robert R., Bringing society back in: symbols, practices, and institutional contradictions, in Walter W., Powell andDiMaggio, Paul J.(eds.), The New Institutionalism in Organizational Analysis (Chicago: Chicago University Press, 1991), pp. 232–263Google Scholar; Meyer, John W.,John, Boli and Thomas, George M., Ontology and rationalization in the western cultural account, in George M., Thomas et al. (eds.),Institutional Structure: Constituting State, Society, and the Individual (Newbury Park, CA: Sage, 1987), pp. 12–37.Google Scholar

5 I discuss the norms of guanxi capital elsewhere. See David L. Wank, The institutional culture of Chinese capitalism: personal ties in Chinese private business, paper presented at the Association of Asian Studies, Boston, MA, March 1994.

6 This paper's analysis of guanxi extends the characterization of it as both instrumental strategy and moral purpose to the post-Mao market economy. See Mayfair Mei-hui, Yang, Gifts, , Favors, , &Banquets, : The Art of Social Relationships in China (Ithaca, NY: Cornell University Press, 1994)Google Scholar, and Yunxiang, Yan, The culture of guanxi in a North China village, The China Journal, Vol. 35 (January 1996), pp. 1–25.Google Scholar

7 This can be seen in the reckoning of private business tycoon Zhang Guoxi that one third of his time is spent cultivating officials. See James, and Ann, Tyson, Chinese Awakenings: LifeStories from the Unofficial China (Boulder, CO: Westview Press, 1995), p. 54.Google Scholar

8 I interviewed the operators of 100 private (siying) and people-run collective (minbanjiti) firms. For a description of Xiamen city and discussion of fieldwork and sample see David L. Wank, From State Socialism to Community Capitalism: State Power, Social Structure, and Private Enterprise in a Chinese City, unpublished Ph.D. dissertation, Harvard University Department of Sociology, 1993; Wank, Bureaucratic patronage and private business, p. 157.

9 The conventional image of the market is succintly described in Thráinn, Eggertsson, Economic Behavior and Institutions(Cambridge: Cambridge University Press, 1990), ch. 1Google Scholar

10 For property rights see the literature cited in n. 1; for the legacy of vertical segmentation see Janos, Kornai, The Socialist System: The Political Economy of Communism (Princeton: Princeton University Press, 1992); for bureaucracy as integrative legacy see Shirk, The Political Economy of Economic Reform in China.Google Scholar

11 In my sample of 100 Xiamen companies, 46 have diversified out of commerce as follows: 20 into manufacture, 19 into services and seven into both. See Wank, From State Socialism to Community Capitalism, pp. 75–85, 136–37.

12 SeeMark, Granovetter, Economic action and social structure: the problem of embeddedness, American Journal of Sociology, Vol. 91 (1985), pp. 481–510Google Scholar; Bradach, Jeffrey L. and Eccles, Robert G., Price, authority and trust: from ideal types to plural forms, Annual Review of Sociology, Vol. 15 (1989), pp. 97–118.CrossRefGoogle Scholar

13 See Sharon Zukin and Paul DiMaggio, Introduction, in Zukin and DiMaggio, Structures of Capital, pp. 1–36.

14 This section draws on Nathaniel H., Leff, Economic development through bureaucratic corruption, American Behavioral Scientist, Vol. 8, No. 3 (November 1964), pp. 8–14.Google Scholar

15 Innovation outside state policies is also noted by Liu, Reform from below; Susan, Young, Policy, practice, and the private sector in China, The Australian Journal of Chinese Affairs, No. 21 (January 1989), pp. 57–80.Google Scholar

16 This is also suggested by Odgaard, Private Enterprise in Rural China, pp. 216–17.

17 See Barry, Naughton, Growing Out of the Plan: Chinese Economic Reform, 1978–1993 (Cambridge: Cambridge University Press, 1995).Google Scholar

18 The importance of consanguinity in legitimating in-group/out-group distinctions has been widely noted in Chinese social, economic and political contexts. See Fei, Xiaotong, From the Soil: The Foundations of Chinese Society (Berkeley: University of California Press, 1992Google Scholar). For economic life see Hamilton, Gary G., The organizational foundations of Western and Chinese commerce: a historical and comparative analysis, in Hamilton, Gary G. (ed.), Business Networks and Economic Development in East and Southeast Asia (Hong Kong: University of Hong Kong/Centre of Asian Studies, 1991), pp. 48–65Google Scholar; Wong, Siu-lun; Emigrant Entrepreneurs: Shanghai Industrialists in Hong Kong (Hong Kong: OxfordUniversity Press, 1988); Mayfair Mei-hui Yang, Gifts, Favors, & Banquets.Google Scholar

19 The rags-to-riches career of the watermelon seed pedlar Shazi Guazi illustrates this. See Linda Hershkovitz, The fruits of ambivalence: China's urban individual economy, Pacific Affairs, No. 53 (1985), pp. 427–450.

20 Informant no. 59, personal interview, September 1988.

21 Regulations require a minimum of four partners to establish a co-operative.

22 After the partnership&s break-up the firm legally remained a co-operative to continue such advantages as tax holidays and heightened legitimacy.

23 Informant no. 14, personal interview, March 1989.

24 Informant no. 51, personal interview, April 1989.

25 Victor Nee, Organizational dynamics of market transition: hybrid forms, property rights, and mixed economy in China, Administrative Science Quarterly, No. 37 (1992), pp. 1–27.

26 This view is clearly found in: Odgaard, Private Enterprises in Rural China; Willy, Kraus, Private Business in China: Revival Between Ideology and Pragmatism (Honolulu: University of Hawaii Press, 1991).Google Scholar

27 In Japan economic actors prefer personal contracts despite the availability of a legal contract and a legal system because they are considered more easily adaptable to volatile markets. See Ronald, Dore, Goodwill and the spirit of market capitalism, The British Journal of Sociology, Vol. 34, No. 4 (1983), pp. 459–82Google Scholar. In the United States sales agents settle deals with a handshake rather than a contract because handshakes are simple to understand whereas the fine print of contracts is cumbersome. See Stewart Macaulay, Non-contractual relations in business: a preliminary study, American Sociological Review, No. 28 (1963),Google Scholar pp. 55–67.

28 Institutions are not neutral but bias behaviour and outcomes. Therefore institutionalization is an inherently political process because it affects the distribution of power among groups to advance institutional preferences. See Jack, Knight, Institutions and Social Conflict (Cambridge: Cambridge University Press, 1992), pp. 40–47Google Scholar. See also Walder, Andrew G., The quiet revolution from within: economic reform as a source of political decline, in TheGoogle Scholar Waning of the Communist State, pp. 1–24; Wank, David L., Private business, bureaucracy and political alliance in a Chinese city, The Australian Journal of Chinese Affairs, Vol. 33 (January 1995), pp. 55–71.CrossRefGoogle Scholar

29 See Nee, Organizational dynamics of market transition. This is also suggested by Lin Qingsong, Private enterprises: their emergence, rapid growth, and problems, in Byrd, William A. andLin, Qingsong (eds.), China's Rural Industry: Structure, Development, and Reform (Oxford: Oxford University Press :The World Bank, 1990), pp. 172–188Google Scholar

30 For a relevant critique of efficiency see Anthony, Oberschall andLeifer, Eric M., Efficiency and social institutions: uses and misuses of economic reasoning in sociology, Annual Review of Sociology, Vol. 12 (1986), pp. 233–253.Google Scholar

31 For a relevant critique of efficiency see Harold, Demsetz, Information and efficiency: another viewpoint, Journal of Law and Economics, Vol. 12, No. 1 (1969), pp. 1–22.Google Scholar

32 Consider this account of overseas Chinese businesses in Vietnam. The outward appearance of a shop gives no real indication of the amount of business which is transacted from it or of how many other business interests its owner is engaged in. Often a small shop with two or three employees is the front for a booming business empire controlling dozens of other enterprises operating behind closed doors in adjacent buildings or scattered through…the city. Barton, Clifton A., Trust and credit: some observations regarding business strategies of overseas Chinese traders in South Vietnam,” in Linda Y.C., Lim andL.A., Peter Gosling (eds.), The Chinese in Southeast Asia: Volume 1, Ethnicity and Economic Activity (Singapore: Maruzen Asia, 1983), pp. 46–64, at pp. 47–48.Google Scholar