Economic restructure is one of the most crucial elements of China's reform and opening-up policy. For the first 30 years of the PRC, the government practiced a planned economy system, whereby industrial production, agricultural production, and the stocking and selling of goods in commercial departments were all controlled by state plan. The variety, quantity and prices in every sphere of the economy were fixed by state planners. While this contributed to the planned, focused and steady development of China's economy, it also sapped its vitality and limited its growth. Economic reforms began with the rural areas in 1978, and were extended to the cities in 1984. In 1992, after some 10 years of reform in the clear direction of the establishment of a socialist market economy, the government set out the main principles of economic restructuring: encouraging the development of diversified economic elements whilst retaining the dominance of the public sector; creation of a modern enterprise system to meet the requirements of the market economy; a unified and open market system across China, linking domestic and international markets, and promoting the optimization of resources; transformation of government economic management in order to establish a complete macro-control system; encouraging certain lead groups and areas to become rich first, enabling them to help others towards prosperity too; the formulation of a China-appropriate social security system for both urban and rural residents, so as to promote overall economic development and ensure social stability. In 1997, the government stressed the importance of the non-public sector to China's national economy, in which profitability is encouraged for such essential factors of production as capital and technology, so as to further progress economic reforms.

A socialist market economic system has now taken shape, and the basic role played by the market has been improved in the sphere of resource allocation. At the same time, the macro-control system continues to be perfected. The pattern has basically been formed in which the public sector plays the main role alongside non-public sectors such as individual and private companies to achieve common development. According to the plan, China is forecast to have a relatively complete socialist market economy in place by 2010 and this will become comparatively mature by 2020.