Surplus Seeking and Rent Seeking Through Back‐Door Deals in Mainland China Price Control and Central Planning Fix Prices Below Market Clearance, Creating a Contrived Surplus

. When the selling price is set below the market‐clearing level through government price control, the price gap represents a contrived surplus transferred from the producer to the buyer. But, due to incomplete assignment of property rights to this contrived surplus and/or high enforcement costs, contrived surplus is often a non exclusive income subject to competitive capture. Exchange of favors between buyers and sellers to gain preferential access to rationed goods has become a dominant method of surplus seeking (cf. rent seeking) in the People's Republic of China. But since only well‐placed individuals in the distribution channels for such goods and officials who control access to positional goods have favors to exchange, these exchanges sabotage government efforts to achieve fairer access to scarce goods. And since favors involve illegally diverted resources, such back‐door deals threaten the integrity of government. Furthermore, exchange of favors fosters particularistic values which hinder modern economic development.