Capitalist economic development has facilitated China's rapid transition from a planned economy to a market one. Nevertheless, a full-fledged market economy requires a set of economic institutions compatible with market-led economic activities. Throughout the reform period, the Chinese leadership devoted great effort to building such institutions not only to support but also to spur market growth. Economic institutional building is multifaceted. In this chapter and the next, I provide case studies to show how the leadership has restructured or rebuilt the state economic system to accommodate the market economy. My focus is on the 1990s. Economic reform in the 1980s was characterized by radical decentralization, and national institution-building was not given priority, and most institutional restructuring or rebuilding took place after Zhu Rongji assumed charge of China's overall economic reform in the early 1990s.

This chapter focuses on the restructuring of state economic bureaucracies. It first presents an overall picture of the reform to China's state economic system since the early 1980s, and discusses the failure of several waves of institutional restructuring. It then discusses in detail the building of the State Economic and Trade Commission (SETC). The SETC was set up by Zhu Rongji in early 1993, and by the late 1990s, it had become China's most important and powerful economic bureaucracy. It was regarded as the mini-State Council, in which Zhu Rongji formed and implemented economic reform policies.