The Chinese mafia: Private protection in a socialist market economy

Abstract

Gambetta's theoretical framework focuses on two important aspects directly relating to the birth and development of mafias, namely a demand for private protection and a supply of the same. In the Post-Mao era, China started its transition from a centrally controlled economy to a market-directed economy by adopting reform and opening-up policies. The widespread creation of property rights has exponentially enlarged the demand for protection. However, property rights are ambiguously defined in the Chinese legal system, and the state is unable and unwilling to provide efficient and sufficient law enforcement mechanisms for needy people because of the rampant corruption of government officials and the weak judicial system. In this case, the mafia that is interested in the private provision of protection developed into an alternative enforcement mechanism for 'securing' property rights in China's economic transition. The most important service offered by the mafia in China is not only to assist business enterprises in monopolising the market, but also to assist local government in China's economic reform.