The marketization reform of Chinese enterprises, began in the Third Plenary Session of The Eleventh Central Committee of the Communist Party of China (CPC) in December, 1978, have already walked through 24 years up to the present and can mostly be divided into three stages.

(1)The primary stage (1978-1984)

Before reformation, the Chinese enterprises were basically the highly unified whole-people-owned enterprises, namely state-owned or state-run enterprises, though a little amount of collective enterprises also existed, their management system had no substantial differences from the state-run enterprises, and enterprises of other ownerships didn’t exist at all. The state-run enterprises were in fact not true enterprises but administrative organizations under the control of CPC and the government. This kind of so-called enterprise was only a “production department”, it had no independence, let alone creativity. They received production quota from the government, their products were procured and sold by the government in unity, their profits were divided and allotted by the government in unity, and therefore they had high dependence on the government, with dull and rigid operation mechanisms and extremely low enterprise efficiency. Due to these basic facts, the government put forward the reformation thought of “Transfer rights down and Surrender part of the profits” towards state-owned enterprises.

The thought of “Transfer rights down and Surrender part of the profits” is aimed to arouse the enthusiasm of the state-owned enterprises in production and operation through extending enterprises’ decision-making right and material incentive. Its basic contents were that, On the premise of planned quota completion, enterprises could work out supplementing plans and arrange production on their own; and they could self-sold part of products according to nation-prescribed price in a certain range; the responsibility and benefits relationships between nation and enterprise were determined as economic responsibility system, and certain self-allotted financial right and economic benefits were allowed to enterprises, which established connection between the operation states of enterprises and the material benefits of workers. In May 1984, the State Council declared ten aspects of independent rights the state-owned enterprise could possess, namely planning rights in production and management, selling right of products, price determination right of products, optional shopping right of goods and materials, using right of funds, disposing right of assets, establishment right of departments, rights in personnel and labour affairs, using right of wage funds and combined using right.

(2) The exploration stage(1984-1991)

In October 1984, the Decision on Restructuring Economic System was adopted by the Third Plenary Session of the Twelfth Central Committee of CPC, which put forward "the whole people-owned, collective-owned, personal go ahead together", encouraged different types of ownership economy including the whole people-owned, collective-owned, personal, foreign trader-owned, etc to cooperate, joint, merger, and small-scale state-owned enterprises were allowed to be “rented”, “contracted” to collective enterprises or individuals. In 1987 the Thirteenth Plenary Session of CPC further put forward the share ownership system as a kind of property organization form, which could be tried out. And the property rights of small-scale state-owned enterprises could be transferred to the collective or personal with compensation. In December 1986, The Enterprise Bankruptcy Law (for Trial Implementation) was adopted by the Standing Committee of the Sixth National People’s Congress (NPC),  which stipulated that the enterprises whose assets couldn’t compensate for debts might apply for bankruptcy. In April 1988, the Enterprise law was adopted by the First Meeting of the Seventh National People’s Congress, which was the first fundamental law for state-owned enterprises since the establishment of new China and generalized the related enterprising-invigorating statutes and policies since reformation into thirteen items of rights. Besides, during this time, 《Temporary Regulation of Administration on City and Country’s Individual Industrialists and Businessmen》, 《Law for Three-Capital Enterprise》, 《Temporary Regulation of Private Enterprise》 and other statutes and policies protecting non-state-owned economy were successively put on the stage, which offered law guarantee for the development of non- state-owned economy.

The Third Plenary Session of the Twelfth Central Committee being the start point, the core of the reformation of Chinese economic system transferred from villages to cities, and reformation on state enterprises were defined as the central link. During this phase, the most prominent reformation of state enterprises were the compartition of duties of the government and enterprises, proper segregation of ownership and management right (namely separation of two kinds of rights), the specific measures were the introduction of the responsibility system of contracted management, the execution of lease system on some small-scale state enterprises.

During this phase non-state-owned economy had realized breakthrough development。From 1984 to 1991, the average incremental rate of the output value of state industry enterprises was only 8.3%, while the average increment speed of the output value of non-state-owned industry enterprises reached as high as 23.9%, among which the average of collective industry was only 19.7%, while the average of individual industry of villages and cities was 45.4%, and the average of industry of other economic types of industry were 47.3%. In 1991, the ratio of non-state-owned industry enterprises’ output value in gross industry output value reached 43.8%, which was 12.9% higher than the 30.9% in 1984 and increased 5.1% per year. This reflected that the efficiency that market adoption had brought for non-state-owned industry enterprises was far away higher than that of state enterprises basically still under control of government. Compared with state enterprises, non-state-owned enterprises were basically independent market main body, possessed fairly independent market rights, pursued fairly independent economic benefits, and their behaviors already possessed typical market features.

(3) The normalized development stage (1992-today)

From January to February of 1992, a series of talks by Deng Xiaoping in the process of his southern inspects set the keynote for the marketization development of Chinese economy. In July of the same year, the State Council issued and implemented Regulations on the Whole People-owned Industry Enterprises’ Changing Management Mechanism, which further specified the enterprises’ thirteen items of rights, which was defined in the Enterprise Law, into fourteenth items of rights, namely decision-making right in production and management, pricing right for products and labor services, right in products selling, right in material procurement, right in export and import, decision-making right in investment, allocation right on retained bonus, disposal right on assets, right in affiliation and incorporation, right in labor using, right in personnel management, right in allotting wage and bonus, right in establishing internal organization, and right in refusing apportion, with its aim to transform enterprises into commodity producer and manager that could adapt to market requirements, conduct autonomous management in accordance with the law, assume sole responsibility for their profits and losses, develop on their own, and self-restrain. In October, socialism market economic system was defined as the goal of Chinese economic reformation in the CPC’s Fourteenth Plenary Session, which put forward that state enterprises, collective enterprises and other types of enterprises all should access to markets and conduct competition according to survival of the fittest, and state enterprises shall play the dominating roles through equal market competition; considering the roles of shareholding system in promoting separation between government and enterprises, transforming enterprises’ management mechanism and accumulating funds, it is urgent to work out and implement the relevant laws and regulations and prompt the shareholding-system reformation in order and in a healthy way. Thus, the position of Chinese enterprises as the main body in the market was confirmed formally and Chinese enterprises stepped into the normalized development stage.

In November 1993, Decisions on some problems in establishment of socialism market economic system by the Chinese Communist Party Central Committee was adopted in the CPC’s Third Plenary Session of The fourteenth Central Committee, which put forward that “in the process of macro-economic control, the market must be given full play in resources allocation”, “The nation should create conditions for all kinds of ownership economy to equally participate in market competition, treat them equally without discriminations”, state enterprises should adapt to the requirements of market economic system and establish modern enterprise system characterized by “clear in property right, definite in right and duty, separating in government and enterprises, scientific in management”. Henceforth, the state enterprises’ reformation shifted from the focus of “transferring rights down and surrendering part of the profits” to market-adopted enterprise system innovation. In December of the same year, the Company Law was adopted by National People's Congress (NPC), which put forward that the legal positions of companies invested from different main bodies of property right were all equal. In 1997, the CPC’s Fifteenth Plenary Session further put forward that, “non-public owned economy is an important component of the national socialism market economy”, which was further written into Constitution revised in 1999. From then on, the positions and roles of non-public ownership economy, especially private economy, were confirmed formally.

In September 1999, Decisions on Some Important Problems in State Enterprises’ Reformation and Development by the Chinese Communist Party Central Committee in the CPC’s Fourth Plenary Session of the fifteenth Central Committee, which put forward that state enterprises should try to realize the diversity of shareholding, develop multi-invested companies in order to realize the normalization of company system reformation. In April 2001, Suggestions on Deepening Internal Reformation of Personal, Labour and Allocation System in State Enterprises was promulgated by the State Economic and Trade Commission, the Personnel Ministry and the Ministry of Labour and Social Security, which put forward that administrative hierarchy in enterprises should be cancelled, managerial staff shouldn’t possess administrative hierarchy treatment that national government functionary had any more. And besides enterprise managerial staff that should be managed by share-holders and produced or replaced according to legal procedure, all managerial staff could be hired through open competition and optimization, or be employed from the society.

Establishment of modern enterprise system (share holding system as the main body) was the core of the state enterprises reformation at this stage. By the end of 1994, there were already 33,000 Joint - stock companies, 78.4% of which thought that great changes had taken place in enterprises’ operating mechanism after system reformation, and their economic performances were by far higher than the national average. Considering the success in system reformation, in November 1994, the State Department determined 100 large-scale state owned enterprises into pilot project of modern enterprise system, which began the prelude for the large-scale normalized system reformation of state owned enterprises. In pilot large-scale state enterprises, the state-authorized investment organization or state-authorized departments and other investors possessed shareholders’ rights by law according to their share holding ratios, while investors were not permitted to draw out their capitals, and enterprises’ property rights could be transferred by law; enterprises as independent market main bodies would no more depend on the government, and no more apply administrative hierarchy mechanically; inside the enterprises, company-managing organizations were established composed of boards of shareholders, boards of directors, boards of supervisors and groups of managers according to the principles of mutual independence, being definite in rights and duties, mutual confinement between decision making, execution and supervision, each do his duties, exercise rights of decision making, supervision and execution efficiently; the state cadre status of enterprises’ managerial staff were cancelled, enterprises’ managers were engaged by boards of directors, bi-directional choice system was practiced between enterprises and employees; in financial accounting system, the General Rules on Enterprise Finance and the Accounting Standards for Business Enterprises were implemented all round , which were fundamentally in conjunction with the international standards; enterprises must participate in insurance of old-age, medical attendance, unemployment and industrial accidents for employees and step by step make these managed and paid to employees by social insurance organizations. From the beginning the experimental enterprises processed on a road of normalized system reformation, so they had been fairly successful in system reformation. Based on these successful experiences, system reformation continuously developed in depth. By the end of 2001, 1,994 parent companies of 2,710 state or local experimental enterprise groups had become associated enterprises after system reformation, covering 73.6%; 430 of the state or state-holding enterprises among 520 state key enterprises also had conducted association reformation, covering 82.7%. During this period, the system reformation continuously developed in depth and expanded all round, and the withdrawal mechanisms of state enterprises were also established gradually.

With the association reformation of the state enterprises, the stock scale of company expanded continuously, the related laws and regulations were improved end to end. From 1992 to 2001, the amount of listed companies increased from 53 to 1,160; the annual sum of accumulated funds increased from 9.409 billion yuan to 125.234 billion yuan, among them in 2000 the accumulation reached as high as 210.308 billion yuan; the ratio of the gross value of their stock market price to GDP increased from 3.93% to 45.37%. During this period, the Suggested Standards for Limited Liability Companies, Interim Provisions on the Management of the Issuing and Trading of Stocks, the Securities Law of the People’s Republic of China and Guidelines for the Governance of Listed Companies were put on the stage successively, which had become the important safeguard for the normalized operation of listed companies.

Due to the state’s confirmation and protection on the market status of non-state-owned economy from policies and laws, during this period, non-state-owned economy continuously developed rapidly. This kind of development was embodied through not only incremental speed but also range. From the viewpoint of incremental speed, in 1991—2001, the average incremental speed of the output value of state and state-holding industries was 17.3%, while the average incremental speed of the output value of non-state-owned industries was 24.3%. Among them, the output value of non-public-owned industries (individual enterprises, stock enterprises, enterprises invested by foreign merchants and Hong Kong, Macao and Taiwan) increased by 35% on average. In 2001, the percentage of output value of non-state-owned industries in total industrial value reached 78.3%, 32.5% higher then the 45.8% in 1991 and increased by 5.51% per year. From the viewpoint of range, non-state-owned economy has permeated most fields of national economy, even some industries in fields of national monopoly such as banking and mailing industries has also been accessed by non-state-owned economy.

In a conclusion, through 24 years’ reformation and development, a breakthrough leap has been realized in the marketization course of Chinese enterprises. It is assertive that Chinese enterprises have already realized the transition to market economy, and the operation of Chinese enterprises has already met the criterion of marketization.