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This article explores how the group identity is constructed in the process of individualization by reconstructing the public life of square‐dancing groups. The study finds that, on the one hand, groups whose members retired from the work‐unit and whose family structure is waning obtain institutional identities and group membership through external forces. On the other hand, groups play different roles, relying on three types of capital including power, ability, and relationships, and they ultimately reshape the collective identity of the groups with the internally made identity consensus and the externally assimilated identity mechanism. With the social changes in China, the groups have achieved identity construction during the interaction between the state and the individuals. The mutual influence of the reflexive actions of individuals and the support of the state system is also addressed in this paper. Thus, in the interaction between the state and the individual, the basic question of whether free individuals can achieve a universal connection that allows them to maintain public life is answered. [ABSTRACT FROM AUTHOR]