UNDERSTANDING "HUMAN RELATIONSHIPS" IN CHINA

KAMAL SHEEL

The phenomenal growth of local enterprises in China is marked by a simultaneous increase in the role of social networks and corruption. It is said that for entrepreneurs and. rural enterprises corruption has become an indispensable means of operation (Rocca 1992). Why is it so? How should one explain the paradoxical phenomenon of corruption and growth? What role does the particular nature and pattern of rural economic growth, evinced by the process of informalization, play in the rise of social networks and corruption?

The most essential characteristics of informal economy, is that it is a process of income generation activity that is unregulated by the institutions of society, in a legal and social environment in which similar activities are regulated. Its dynamism stems from its subversion of formal, bureaucratic and legal processes of production and distribution through informal, personalized, and extra-legal formats of arrangements. The informal economy is thus aboullinkages. Its deeper social embeddedness within the broader pattern of human interaction differentiates it from depersonalized and limitless competition of political economics of respectively the state plan and the free market. As a more socialized economy, defined by norms of primary communities and individualized choices of families or of individual participants, its reproduction and expansion, Shanin writes, is characterized by "lesser significance given to money-wages nexus vis-a-vis barter, inter-family and intra-family cooperation, self consumption and such considerations as patronage and clientelism, kinship loyalties and factional hostilities." (Shanin 1988: 114).

In the growth of local enterprises in China. the play of such social networks as family. clan and lineage connections or guanxi (literally. "relationship/connections")cannot be denied. This often manifests itself in economic efficiency and better productivity on the one hand, and informal and extra-legal practices or corruption and graft on the other. Thus, while they account for the widespread corruption and normalness, they are also the source for the success and growth of new income generating activities. As Helen Siu writes it would be naive to expect local wisdom and entrepreneurship to flourish if and when these irrationalities are removed (Siu 1989 :196). In fact such "irrationalities" may be seen embedded in the particular pattern of economic growth in rural China, of which social networks and norms are an integral part.

1. Guanxi, Yan (1996) explains. is a uniquely Chinese normative social order which is based on the particularistic structure of relationship as characterized in Confucian ethics. In its primary form, that is based on primary relations familial, kinship, and communal as opposed to the voluntarily constructed -guanxi provides one with a social space and at once incorporates economic, political, social and recreational activities. Incorporated within guanxi is the notion of renqing (human feeling) which maintains moral obligations, emotional attachments and stable reciprocity over a long period of time. Yet, it is. Yan writes. "not a static structure but a dynamic process embedded in social interactions in everyday life, all of the relational boundaries in one’s guanxi networks have to be defined and redefined repeatedly through active participation in social exchanges." (lbid:4). In its extended form. guanxi refers to the cultivation of myriad forms of new short-term and instrumental connections outside the framework of primary relations for mutually beneficial purposes. Here it "ceases to be a total social phenomenon; instead, it has become a web of single-stranded connections, each of which has a special function in advancing one’s personal interest." (Ibid: 23). "The distinction between the primary and extended forms of guanxi, while recognizing the different practices between villagers and urbanites, takes into consideration all possible links between rural and urban, between old and new and between past and present." (Ibid: 25). Its specific nature is dependent upon historical socio-cultural context of a region.

Explaining the role of guanxi in Chinese socio-cultural order, Mayfair Yang terms the collection of practices in the realm of personal relationship and social exchange in society as the Chinese gift economy, or the art of guanxi. According to Yang the gift economy consists of the personal exchange and circulation of gifts, favours and banquets, and the art in guanxi exchange "lies in the skillful mobilization of moral and cultural imperatives such as obligation and reciprocity in pursuit of both diffuse social ends and calculated instrumental ends." (Vang 1989: 35). She notes that in the contemporary political and cultural economy of China, the gift economy along with the state redistributive economy and the resurgent petty commodity economy is one of three distinct and contesting modes of exchange. "The gift economy thus does not arise in a vacuum, nor is it a totally independent mode of exchange lying completely outside of state distribution. Rather, it poaches on the territory of another mode of exchange, seeking the right occasions to strike and divert resources to its own method of circulation. In the process, it alters and weakens in, a piecemeal fashion the structural principles and smooth operation of state power." (Vang 1994:189). In this fashion, it challenges the official power and subverts the dominant mode of economy.

Yang, however, correctly cautions us not to conflate informal economy with the "gift" economy. Both have their own distinct forms. They follow their own rules and operational logic. But they are not mutually exclusive in the sense of representing separate institutions of functions (political, economic, religious, etc) of social structure; rather their techniques traverse institutions and are intertwined within them." (Vang 1989: 27). This distinguishes what is deeply socially rooted and acceptable and what is "invented" and mayor may not still be acceptable. To be more precise, it points to one form of "gift giving" as socially acceptable and to the other as socially inappropriate or corruptive part of informal economy.

Conversely, it would however be equally wrong to equate the informal economy exclusively with venality. As noted above, its reproduction depends upon entering into both formal and informal social exchange within a given context. What is important to note here is that the informal economy transgresses boundaries of the existing moral economy in the same fashion as it did of the command economy. This transgression may make some of its activities acceptable and some condemnable for not being exclusively geared towards both "diffuse social ends" and "calculated instrumental ends" but only the latter. Also, such transgression may indicate reconfiguration or extension of existing social networks and relationships in a novel form within the specific historical context of China, with its characterizction as positive and/or negative functional-roles or its viewing as the return of the suppressed traditional or pre-capitalist values.

To the extent that the growth of local enterprises depend upon circumvention or subversion of the formal command as well as moral economy, its articulation results in informalizing social relationship through redeployment of existing socio-cultural norms and through restructuring, recycling, or "invention" of tradition. Multiple forms of socio-economic arrangements are thus generated at the fringes of command (as well as moral) economy. Sneaking into the territory of formal networks, these arrangements blur the boundaries of formal and informal, and old and new or reconfigured social relationship. In such a situation, guanxi may be established by revitalizing or reconfiguring such traditional institutions of society as family, village or communal units. It may also come about, as Rocca writes, through linkages to the newly reform-introduced culture of consumption, ostentation, opulence and individual enrichment. (Rocca 1992). Such extension or hybridization of guanxi may result in the primacy of means-end feature of such an instrumental web of personal connection. Alan Smart however correctly observes that the instrumental features of guanxi need not be overemphasized at the expense of ignoring the involvement of long-term trust and emotional attachment in such relations. He writes "manipulation and exploitative use of gift exchange is made possible only by the existence of forms of gift exchange that attach priority to the relationship as opposed to the immediate instrumental objectives." (Van 1996: 24). Reconfigured or new routes to establish guanxi networks thus provides the possibility of blurring or extending the meaning of primary form of guanxi itself. But in both forms, its role in subverting the formal or state structure cannot be denied.

The imperative for the use of guanxi in both its primary and extended form emanated from the post-Mao institutional changes which vigorously promoted industrialization and marketization. In the Maoist period of collectivization, Anagnost notes, "the village resembled, in certain striking ways, the closed corporate communities of the Latin American highlands. With the recent policies, hfJNever, the avenues to wealth within the village have become increasingly dependent on the individual connections that extend outside the local community." (Anagnost 19849: 214). During the era of communes, production brigades, and production teams, collectives controlled almost all means of production. No independent production function was alloted to the peasant households. Moreover, the state’s policy of socialist egalitarianism promoted "the big iron rice bowl" and discouraged individual differences in talent, knowledge and experience replacing the principle of "to each according to his work" in income distribution. In this context, the post-Mao decollectivization and the contract responsibility system provide peasant households autonomy over their production activities making them independent commodity producers. Yet, the new ethic of entrepreneurship or the policy of "getting rich first" within a socio-political structure characterized by the control of the bureaucratic party-state over the essential resources requires full play of guanxi for its efficient access for income generation.

In the particular context of the growth of rural enterprises of China, the play of guanxi networks in both its primary and extended forms may be observed in interpenetrating and diffusing the boundaries between the state, capital and labour. We therefore use the distinction between the primary and extended forms of guanxi, as suggested by Van, with possibilities of overlapping between them, in explaining their respective roles in the reproduction and expansion of local enterprises.

 

Guanxi In Its Primary form and Its Impact on Rural Enterprises

Guanxi based on horizontal family, clan and communal networks accounts for multiple arrangements necessary for the rise of local wisdom and entrepreneurial spirit or ethic. Its imperatives rise not because local governments have lost their leading role in the countryside as a consequence of the post-Mao reform but because peasant households have emerged as independent production units -contesting and encroaching socio-political and economic resources controlled by the state. Relative autonomy to their process of production and distribution facilitated their use of multiple socio-economic arrangements available to them to coopt, incorporate or control the local bureaucracy. Clan and lineage networks thus have sprouted in the post-Mao era to fill the void vacated by the state. One thus, witnesses, restoration of clan/lineage/community temples and ancestral halls, dormant after the Communist Revolution and often destroyed during the Cultural Revolution. The ubiquitous clan registers -which traditionally established rights and privileges of a household within social, cultural and territorial boundaries of clans, have resurfaced. The local peasants often pay between 10 to 30 yuan per male in each household for registration. A family with many children even contribute more than 100 yuan for this. The role of clans in local feuds and conflicts as well as mutual assistance in production have increased. It is said that during hardships in their daily lives, peasants now mostly turn to clansmen for help and security. A study notes that "with the founding of new China, the power of clans came under destructive attack and disappeared from the scene for a time. In recent years, however, clan power has once again raised its head in rural communities, and is continuing to grow." (JPRS 14 January 1992: 79). It laments the rise of such potentially damaging force as a feudal remnant in rural communities. The study report, however, notes that "we must realize clearly that the resurgence of clan power in China’s rural communities at the present stage is the resuscitation of an old force in the process of rural economic system reform. To a certain extent, it temporarily meets certain needs of rural residents by arousing once again the clan kinship feelings that were suppressed in the past. In some aspects of production and daily life, this fills a void left in the collective economic organization." (Ibid: 82).

The rise of guanxi networks based on clan and other horizontal social institutions thus provide an alternative means to carry out production and fulfill other local socio-economic needs. As such, it subverts constraints imposed by the state and opens avenues for the growth of local enterprises. It interferes in the state’s collection of taxes, control of resources, and transmission of information. Describing the rampant phenomena of "petticoat influence" and "relationship networks" in rural communities, Chen Youngping notes that now:

"When township and town leaders select cadres, they appoint only relatives; when they appoint or nominate village organization cadres, they favor fellow clansmen; they place trusted followers in important agencies or in positions where a profit is to be made; and whenever a clansman or his children break the law, they intercede on their behalf Because an overwhelming majority of township and town cadres are villagers from certain natural village who grew up locally, they have thousand and one tie to the clan groupings in the natural villages and a strong clan consciousness… As a result, clan power, as well as the strengthening of the patriarchal clan system concept that stems from it, has permeated government agencies. Thus the corrosive influence of cadres on clan powers and the clan system concept intensifies the corruption of Party style and the social atmosphere." (Chen 1992: 81).

It is therefore not surprising when a town cadre in the township government remarks that presently in the appointment or nomination of a rural organization cadre, not only is it necessary to take into consideration whether a person’s work performance is adequate, but one must also take into account whether the clan he represents is influential; otherwise it will be impossible to move ahead with work. (Chen 1992:81). 

In rural economic life also, the clan power have permeated the rural collective economy. Clan takeovers of rural enterprise, or the clear trend towards such clan takeovers are becoming frequent. Chen’s (1992) survey of five villages found that between 1986 and 1987 several small collective enterprises were established with antiquated equipment thrown out by the larger an industries. Each had not more than 15 workers. In all, the plant personnel were appointed jointly by the higher authority and village organizations. All these enterprises, however, soon lost money. In 1988, the plant manager contract responsibility system was introduced with the right of appointment to village organizations. Managers were granted autonomy in hiring staff and workers. They in all cases hired their relatives or clansmen, managed their enterprises in patriarchal fashion, and turned these ventures into profitable income generating activities inspite of the general slump in the economy.

For example, the Maotao Village Plastics Plant produced plastic packing boxes for food products with an output value of 50,000 yuan per year. This plant, it is noted, had only seven staff members and workers, four of whom were directly related to the plant manager, including a daughter, a younger sister, the younger sister’s husband, and a niece. The other three staff members and workers were fellow villagers that the plant manager trusted. The plant manager said: "Members of one’s own family are easy to get along with. They have a family feeling about the plant, and they do not quibble about how much money they make." That such family style village enterprise is able to succeed so well in prevailing economic slump makes people treat him with increased respect. (Chen 1992: 82).

Small and medium size enterprises in rural China are usually embedded in the local kinship system. "Even in enterprises where production socialization is advanced," a study notes, "the family style mode of production is still widely followed. In such activities as pulling together optimum work team and project contracting, the hiring of relatives and contracting of family members are extremely common." (Yang 1991: 80). According to Yang, reasons for this "clannishness" in enterprises lie in its capacity to recruit and retain labour. In remote areas, enterprises have no recourse to recruit outside workers and their own workers have problems finding marriage partners. The survival and expansion of enterprises thus require hiring children of its own workers, most of whom are married within the locality itself. Poorer enterprises as well as those with low status and hard work, e.g., welfare, environmental, public health, and construction enterprises, are also forced to look inward for recruiting workers for the above reasons. On the other hand, better endowed enterprises like those of high-tech, "three capital sources", foreign trade, and high status, naturally attract a large number of workers with those already having "connections" there succeeding. In both types of enterprise, "clannishness" thus tends to increase. Such clannishness help enterprises recruit labour and thrive. But it also results in the abnormal movement of labour, weakening labour market, promoting dependency, and discouraging talent, education and experience. 

The play of inter and intra family cooperation, its capacity to control the self consumption, its abilities to provide access to opportunities and resources, and its subsumption of exploitative labour relationship or hostilities within bonds of complicity indicate the myriad ways in which guanxi networks promote income generation and expansion of informal sector. Yet, these also account for the rise of local protectionism, parochialism or creation of what Chinese call "kingdoms", factional hostilities and exploitation. 

 

Extended Guanxi and Its Impact on Local Enterprises

In the second instance, guanxi in its extended form relates to instrumental-personal ties which often manifests itself in corruption. As such, the guanxi networks facilitate informal sectors to bypass formal rules and regulations to gain access to essential resources, subsidized credit, state-contracts, tax benefits to keep its price advantages and maintain its income generation activities. They create the basis for the informalization of privilege or the bureaucratic corruption, and more broadly informalization of social, political, and economic norms.

Guanxi in the specific context of the informalization of privileges, Lee writes, "refers to informal relationships among official and cadres. Such guanxi operates outside the formal structure of1he Party-state. Guanxi is concerned with an expectation of reciprocity on a face to face setting. It carries some pejorative meaning in the sense that it may not be legally acceptable, or It least is not regarded as proper." (Lee 1990: 35). It accords preferential treatment as against established conventional norms to those "outsiders" who come into its networks. It creates spaces in normal formal channels, opens so called "back doors", and accommodates the "other" into the threshold of dominant interests. One of the factors accounting for the growth of local enterprises, Oi notes, is the privileged access to selective allocation through connections and "going through the back door." (Oi 1995: 1142). A report on the problem of enterprises thus similarly notes that as the government directly controls enterprises through measures such as directive planning, materials distribution, and pricing control, enterprises are forced to look for ways out of their production operation difficulties through asking help from "mayors" instead of seeking markets. (JPRS 20 March 1992: 28).

The practice of the gift-giving or money transactions without establishing personal relationship (i.e., "as established in the norms of the person or office) for exclusive one time economic benefits may be called institutionalized corruption. Their descriptions in the Chinese press, however, reflects the thin boundary between the un-institutionalized and institutionalized corruption and its heterogeneous forms. For example, one of the economic crimes of local enterprises was noted to be "seeking opportunities to make a fortune by holding dinner parties and giving gifts." It explains that "some people in rural enterprises profit themselves under the name of holding dinner parties and giving gifts. To link up with a large factory, a small town factory of 40 employees spent 23,000 yuan on gifts, about 40 percent had nonstandard receipts." It was less the custom of gift giving for the enterprise benefits than the one time collective swindling of money to make personal fortunes which was more objected to. Similarly, a 1996 report finds public funded entertainment doing far greater harm than public funded wining and dining, and notes that in spite of the state regulations against it the practice has continued in many overt and covert ways. (FBIS-CHI-96-021 31 January 1996: 17).

A study of economic crimes of rural enterprises notes its most serious manifestation in "the unlawful possession, embezzlement, diversion and waste of collective property by employees through the use of power and position." (JPRS-CAR- 92-00222 January 1992: 81). It raises objection to the personal swindling of money by the managers of enterprises but remains mum on the swindling by the collective. On the other hand, a provincial report from Shandong lamented excessive corrupt practices by the collective enterprises. Its four month audit unearthed financial irregularities of 510 million yuan in the form of tax evasion and breaching of provincial regulations; the total amounted to 8 percent of the national fund in question. It informs that "in the industrial and commercial circles, and in some administrative institution, the phenomenon of fiddling around with the books, retaining sales income and profits that should be handed over to the government, issuing lavish bonuses in cash or in kind, giving gifts or dinners, and giving and taking bribes are widespread." (SWB 11 January 1989).

Another document on "unhealthy tendencies" details "evil practices of using certain loopholes or weak links in reform to seek personal gains or selfish interests for a certain unit." For example, state organizations, functionaries, and enterprises illegally buying up state materials in order to resell them at a profit to the benefit of individuals but to the detriment of the public, the reform, and the state construction plan. Listed in corruption are also cases of giving unauthorized promotion in work or grade in a haste to disrupt the wage reform and cadre system of state functionaries; using one’s position and powers to accept bribes, extort money from other people, smuggle or trade smuggled goods, illegally remit or withhold foreign exchange, evade taxes, and embezzle state financial and material resources in violation of law and so on. (Quoted in Myers 1989: 195).

Such list may go on longer and longer. References of the stupendous growth of corruption abound in the current official reports. Scholars have noted its multiple forms and variety (Ostergard and Petersen 1991; Oi 1989; Myers 1989; Sands 1989). Without digressing into a discussion of corruption, it may be noted that precise demarcation between guanxi and corruption, because of its thin boundaries, requires examination of particular local contexts.

In fact, multiple forms and ways of gift giving and bribery make the distinction between the two difficult. They are extended under the names which are perfectly legitimate and have the sanction of both state and society. It is reported that bribes are now offered under more than thirty names, such as letter of appreciation, information charges, rebates, handling charges, fees for hard work, etc. All these are permitted by the state in the economic sphere. The bribes are also offered as gifts in the name of celebrating a festival, marriage, funeral, moving to a new house, loans, and various other occasions of life-cycles which have traditional social sanctions and are part of the normative social order. Informalization of such formal channel of state legitimated fee-payment and socially sanctioned gift-giving lead to the ambivalent meaning of such practices. Its ambivalence makes the prosecution difficult. The Chinese Law Newspaper thus laments that people and enterprises do not inform authorities of offences that take place.

"Concern about good-will" maintaining guanxi, a report says, "is becoming more and more intense in China’s cities and countryside nowadays, and the giving of ‘good-will gifts’ is also getting worse." (JPRS-CAR-90-027 13 April 1990).

2.  Its survey in 1988 of the Viyang prefecture, Hunan province, reflects that peasants spent 170 yuan per person per year or close to one third of their earning for good-will gifts. In Shenyang, city residents paid close to one fourth of their income for the gi1t-giving.

3. Van’s study of the cost of cultivating guanxi in Xijia village, Heilongjiang province found that the majority of peasarlts there spent more than 20 per cent of their household income for gift giving. Of the families surveyed, 31 per cent of them spent between 301 to 500 yuan, and another 31 per cent between 501 to 700 yuan per year for gifts with the average cash income per household in 1990 being around 2,500 yuan. 21 percent of families even spent more than 701 yuan and only 17 per cent extended less than 300 yuan as gifts. (Van 1996: 11). Such astronomical proportion of the household budget going for the cost of cultivating guanx; not only reflects its necessity and importance for a peasant household but also its increasingly extended uses. Under such circumstances, it is indeed difficult to detennine when and at what point this practice left the threshold of gift-giving and turned to bribery.

Noting this phenomenon, a report indicates that formerly, when relatives or friends married in a rural village, the well- wishers coming to the wedding brought with them several jin of rice or noodles, or they carried a basket of eggs, melons, or fruit, or possibly even a chicken in order to partake of the wedding meal. Later on, this "escalated" to where sending 5 or 10 yuan was considered "generous". By 1987, a peasant in the Zhujiang delta region of Guangdong province had to send a gift worth at least 20 yuan, and "during the past two years, the price of the gift has ‘gone up’ tremendously." (JPRS-CAR-90-027 13 April 1990: 57). The Rural Socio-Economic Survey Team of Jiangling County in Hubei province notes that within a year, from 1988 to 1989, the cost of "red expenses" (i.e., wedding expenses) have registered a 40 per cent rise from 6,368 to 8,964 yuan. According to the Beijing Municipal Statistical Bureau survey, the average cost of marriage in 1989 was found to be around 12,000 yuan, increasing 2.06 time from over 5,948 yuan spent in 1986. In Shanghai, and richer areas like Wuxi and Wenzhou, the wedding cost have crossed 10,000 yuan long back.

4. Marriages are also getting marked by ostentious display of wealth. Unti11988, colour television sets, refrigerators and tape recorders were the only luxury items that a young couple in the countryside desired as the wedding gifts. Now, "these three luxury items have become ‘necessities’ at marriage time, ‘otherwise the marriage is off" How shameful when other people see that there is not even a television set, refrigerator, and such for the wedding"’ (Ibid: 55).

5. Gold has become popular and is used for rings, earrings, necklaces, and brooches. At wedding feast, large denomination bank-notes are used to make tiny boats in the shape of gold ignots to float on the soup served with each guest receiving one as a gift. Or, notes are used to form "Double Happiness" character suspending in the main room as a mark of honour. Some couples get their nuptial chamber decorated in a style which is neither Chinese nor western but costs more than 30,000 yuan. Not unlike marriages, funeral ceremonies and other ritual too are marked by conspicuous consumptioo. For example, a young entrepreneur in Nanxi zhen, Siu notes "singlehandedly financed the funeral of his grand father, providing 40 banquet tables for the mourners. According to friends, this generation skipping in funeral finance was brash and unconventional act, but good for business all the same." (Siu 1989: 201).

As far as marriages are concerned, it is reported that more than 50 per cent of the wedding expenses in Beijing and Wuhan comes from parents and relatives’ gifts. In Hubei, a survey reflects that 77 percent of expenses were borne through assistance from parents or gifts from friends and relatives.

6. Poor or less influential households, not able to afford such "red expenses", raise the money by taking loans from everywhere. It is noted that 23 per cent of rural wedding preparations are now paid for with loans and the situation is no better in cities. Gifts and loans from relatives (near and/or extended) and friends indicate occasions when money tranactions may facilitate building up of guanx; and may in many instances cross the fringes of gift-giving to acquire the status of bribery.

Similarly, the process of informalization provides avenues for hybridization or extension of guanxi networks through the recycling of available socio-cultural resources or invention or reinvention of tradition. This manifests itself in revitalization of festivals, ceremonies, religion or even creation of pseudo socio-cultural organizations. Helen Siu’s fine description of the recycling of chrysanthemum festivals in Xiaolan village in Guangdong province demonstrates the need to attract potential investors to the area resulted in staging the festival and historically such recycling facilitates the onward percolation of a state culture to make local society. In the context of post-Mao reform policies, the chrysanthemum festival, she writes, "was organized by the town government with a different order of magnitude… The cadres in Xiaolan felt that staging the chrysenthemum festival was useful and appropriate as an event to show the overseas Chinese, potential investors in the new era of economic reform, that the government was liberalizing in earnest. Addressing the festival largely to the regional and the lineage associations overseas, the organizers shrewdly played the ‘politics of native roots’. The festival was unmistakenly a local government event and to celebrate it in the traditional style, former landlords and ‘literati types’, knowing the art of cultivating chrysenthemum, were sought out to train apprentices." (Siu 1990: 785).

Rise of religion, cults, new scientific and technological organizations are all symptoms of the informalization process encroaching and subverting the formal structure for diverse needs arisen from heterogeneous activities for income generation. They point to the hybridization of guanxi networks. Noting the activity of new scientific and technological organizations at the township level, a CPC report from Jiangsu remarks that these "have arisen everywhere in response to the peasants’ quest for wealth, and their organizational pf1Ner far exceeds that of party and government organs. Nearly 100,000 associations have been established throughout the country for the study of specialized technology, and they claim over 3 million members. Now that the Party’s rural economic policies have brought further deregulation, this force will ‘sweep the plains like a praire fire’ ." (Wang Shulin, 1993: 4; see also Wang and Yang 1991: 85-90). Religion, it is noted, is gaining pf1Ner and has become a social force intervening in party and government organs. In a country in Northern Jiangsu, the number of protestant Christians has arisen from mere 1,500 in 1979 to over 20,000 in 1991 with 35 percent of members belonging to the younger generation. (Wang 1993: 4). . Negatively, there are instances of rising of gangs, cults like the temporarily expanded Mao cult in 1989 and later, and other such pseudo tradition based on associations which are still illegitimate, unaccepted, and rejected but their dangerous potentials are difficult to discount.

7. Multiple forms of arrangement evolving out of the process of informalization thus can be seen as directed towards either/ or both "diffused social ends" and "calculated economic ends", overlapping often to serve diverse needs for the reproduction and growth of local enterprise. In this sense, the phenomenal rise in gift giving, ostentatious display of wealth in marriage and other social occasions, and the resurgence and elaborate restructuring of the traditional social and cultural practices indicate the imperative of establishing guanxi. Its significance in creating informal space in pursuit of entrepreneurial spirit and attaining the objective of income-generation or profitability cannot be denied.

Finally, the resurgence of these pre-capitalist relationships need not be taken as the return to precapitalist forms of production. It should be seen more as one of the many forms of relationship in the process of production and distribution in which both new entrepreneurs and the local governments enter for their local enterprises. Old forms thus continue but acquire new meanings in a changed historical context. The post-Mao rural reform, characterized by the informal economy of growth thus do not indicate a return to pre-capitalist mode but a novel mode of production.

 

Conclusion

Seeming paradoxes and "irrationalities" evident in the growth of local enterprises in China’s rural areas thus are necessary parts of the operational logic of the process of informalization. If fact, in contemporary China, what usually appear as paradoxical or irrational in the context of accepted patterns of either socialist or capitalist economies can be better comprehended as the motor force of economic growth integrally linked with the informal economy. The contemporary assertion of entrepreneurial spirit is rooted in such factors as accretion of a strong stale with active market forces, reconfiguration of labour relations on the basis of local and personal considerations with attendant degradation and exploitation, and the rising phenomenon of "guanxi –substituting and rearranging vertical relationship of production with horizontal networks of social exchange along with "adaptive mechanism" available within a particular socio-cultural realm. Such successful instances of growth indicate that what unlocked the energies and creative potentialities of people was neither the "state getting out of economy" nor the emergence of pure market relationship but their convergence within a unique set up of history and culture to which economic activity is embedded. It is thus likely to produce a process of growth in which parochialism, protectionism, venality, new social actors divided on the basis of gender, generation, and clan or ethnic ties or their riches would be as much embedded in socio-political and economic activities as the authoritarian state interventionism, "capitalist values and market practices, and freedom for entrepreneurial initiatives.

 

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