Abstract
Institutional change in the context of gradualist reforms has stimulated economic growth without causing serious social instability in China. Nevertheless, institutional uncertainty has been brought about by the long continuous transition. Institutional uncertainty in the domain of rural collectives compromises the state governance. While the effective state governance over rapid urbanization is absent, and public goods are inadequate in the periurban areas as a result, private governance arises spontaneously in the form of gated supercommunities in the far suburbs. Though it has met the aspiration of a rising middle-income class for a decent living environment, social segregation and urban sprawl emerge and become serious challenges to society.
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