Clans for Markets: The Social Organization of Inter-Firm Trading Relations in China's Automobile Industry

Abstract

This article addresses one of the institutional elements identified as essential to modern capitalism, but which has received little research attention, that is, the “freedom of the markets.” Through an analysis of inter-firm trading ties for the procurement of intermediate products in China's automobile industry, this article demonstrates that to a significant extent the exchange structure remains bound by particularistic networks of trading between institutionally tied actors. It also shows how the resultant “dualism” in market networks, which discriminates between actors sharing particularistic ties and those that do not, is derailing the rational development of the industry by sustaining a “cellular” pattern of industrial development. The case of the auto industry suggests that it may specifically be the large-scale, modern industrial sectors – which require resources to be mobilized and actors to be co-ordinated at vast scale and scope – where the need for the “rational capitalistic establishments” are greatest, and therefore the failure to institute them may constitute a real hurdle to development.