Abstract
An explanation is offered for regional variations in property rights transformation by examining the institutions in which local economic activities are embedded. The author argues that state bureaucracies and market mechanisms alone are insufficient for explaining institutional change in rural China. Only by including local institutions in any analysis of relationships among state, market, and local institutions is it possible to accurately explain paths of institutional change. Data were gathered from case studies and interviews conducted in southern Fujian and southern Jiangsu. They show that Southern Fujian property rights transformation was embedded in family and clan networks, while rural enterprises in southern Jiangsu were more strongly affected by power networks among local political cadres. In terms of post-reform institutional development in the late 1990s in the same regions, the author argues that institutional transformation does not necessarily lead to a convergence of global capitalism, since regional incentive structures are shaped by local institutions that serve as informal constraints affecting transformation paths originally initiated by the state.