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This paper proposes that informal institutions serve an important intermediate role in explaining the process of endogenous institutional change, which in turn, contributes to regime durability. The causal mechanism underlying the flexibility of formal institutions stems from the often informal interactions between various state and non-state actors at the local level. Formal institutions comprise a myriad of constraints and opportunities, which may motivate everyday actors to devise novel operating arrangements that are not officially sanctioned. With repetition and diffusion, these informal coping strategies may take on an institutional reality of their own. I call the resulting norms and practices adaptive informal institutions since they represent creative responses to formal institutional environments that actors find too constraining. Adaptive informal institutions may then inspire reform of the original formal institutions. This iterative logic is illustrated by three major institutional changes that have occurred in the course of China?s private sector development since the late 1970s. Taken together, the empirical cases show that even in non-democratic contexts, the etiology of formal institutional change may lie in the informal coping strategies devised by local actors to evade the restrictions of formal institutions. When viewed from this perspective, regime durability in China amidst the rise of potentially destabilizing social forces becomes less puzzling. Even though economic reforms have marginalized the original social bases of the Communist Party, ultimately, the most important formal institutions have proven to be flexible, and even responsive, to the actors driving the country?s economic growth, private entrepreneurs. [ABSTRACT FROM AUTHOR]