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The success of China’s economic reforms in the 1980s and 1990s has challenged official development prescriptions – known as the ‘Washington Consensus’ – of multilateral institutions. The consensus suggests that developing countries should install governments that preside over systems of clear, stable property rights and do not interfere with markets but create institutions that strengthen them. Good governance – in terms of liberalisation, privatisation of state-owned assets and absence of corruption – should result in economic development. None of these conditions were present in China: property rights appeared to be neither stable nor clear, corruption was widespread, and the government was involved in all sectors of the economy. The article questions the validity of the incomplete analysis of the consensus to hint how China’s institutions learned the historical lesson of capitalism, which shows how the state can guide the capitalist transition when the patron-client framework is compatible with the costs and benefits of the rise of market activities.