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Neo-liberal observers have frequently raised the red alert over insecure property rights in developing and emerging economies. Development would be at a crossroads: either institutional structure needs changing or it risks a full-fledged collapse. Yet, instead of focusing on the enigma between economic growth versus ‘perverse’ institutions, this contribution posits a functionalist argument that the persistence of institutions points to their credibility. In other words, once institutions persist they fulfill a function for actors. Chinese institutions have been frequently criticized for lack of security, formality and transparency, yet paradoxically, these apparently ‘perverse’, inefficient institutions have sustained since the late 1970s throughout the entire economic boom. Key to understanding this might be the realization that institutional constellation stems from an endogenous, spontaneously ordered development in which the state is merely one of many actors that ultimately shape institutions into a highly complicated and intertwined whole. The argument is substantiated by reviewing the case of China's rural-urban land rights structure with particular reference to its markets, history and rights of ownership and use.
