Making markets work in rural China : the transformation of local networks in a Chinese town, 1979-1999

Personal networks (guanxi) have been central to Chinese business organizations. But how do these networks change in China’s economic transition? Based on the data collected in a small town (Beiyuan zhen) in north China, this dissertation seeks to examine the impacts of marketization on the social networks among rural entrepreneurs and between entrepreneurs and their local officials. In this study, I found the local business networks in Beiyuan have experienced a process of “creative transformation,” the adjustments that make these networks more capable of facilitating market transactions. Therefore, I claim that it is the transformation of these local institutions that contributes to “making markets work in rural China.” Being more specific, my findings regarding the network transformation can be summarized as follows. To begin with, even after the two decades of market transition, the local business networks in Beiyuan have not been replaced by impersonal price mechanism. Instead, they have gradually transformed into “weak ties” (involving limited mutual responsibilities). After such transformation, these new networks usually assume a more active and efficient role in mediating the business transactions of rural enterprises (TVEs). On the other hand, these networks have also gradually diverged from “vertical ties” (relationships between the un-equals). In other words, even though some enterprises continue to rely on local officials for state patronage, many others, especially those successful on the market, are no longer dependent on local officials. Nowadays, those entrepreneurs tend to seek alliances with other entrepreneurs to capture more market opportunities. For them, governmentbusiness relations are not that crucial and lopsided as they used to be. They have been growing out of clientelism.