|During half a century of communist rule, China has been transformed from a relatively closed, predominantly rural and agricultural society into one in which modern industry and international trade and capital play major and increasing roles in the economy. In the process, it has experienced one of the fastest rates of growth in the world. In contrast to the approach chosen by the countries in Eastern Europe and the former Soviet Union, China have introduced reforms gradually. Therefore, public sector enterprises have continued to play a major role in the economy. The Chinese government plans to retain some of the largest state-owned enterprises, particularly those belonging to sectors deemed to be of strategic importance. However, this fact will not differentiate China markedly from other non-socialist societies; it has indeed become a mixed economy. What is unique is the retention of political monopoly by the Chinese Communist party; in this respect too it has chosen another route than most of the other former communist countries in Europe and Asia. Even leaving aside the difficult issue of political reform, the transition to a modern economy is not complete and further policy reforms and institutional changes are necessary. Chief among these are i) improving labour productivity in agriculture through the reallocation of workers to other sectors while increasing investment; ii) continuing the restructuring and privatisation of state-owned enterprises in industry; iii) socialising the welfare system; iv) strengthening the financial sector, and v) reforming fiscal institutions.