This study makes use of the framework of social capital to explain the post-socialist governance model and characteristics of local governments in contemporary China. The incident of Tieben in April 2004 is selected as an example to explain how the local government developed social capital using informal mechanism and policy networks to facilitate economic development and to enhance government performance, thereby forming the so-called post-socialist local regime. During the incident of Tieben, the local government collaborated with real estate developers and financial institutions. Farmers were excluded from this plan and their interests were sacrificed. This study uses the concept of bonding social capital to explain this model. The model worked on the basis of the close relationship between specific groups rather than general trust and public participation. The majority of relevant studies, on the other hand, show that instead of bonding social capital, bridging social capital is a better means to resolve the conflicts among numerous sub-groups with vested interests, and to facilitate favorable economic and social performance. This paper hence contends that, although a local government may stimulate the development of social capital, the use of this governance model excludes the participation and deprives the rights of some groups such as farmers, thereby negating the positive results of social capital development. Consequently, such model cannot provide a useful guide for optimizing local government performance.