Economic Reform and Growth in China

Reform of Chinese state enterprises is an example of a gradual approach to economic reform through experimentation (...) The first was to give state enterprises some autonomy in production, marketing and investment decisions  (...) The experiment began in late 1978 with six pilot enterprises in Sichuan Province. By the end of June 1980, 6,600 industrial enterprises that were allowed to make such autonomous decisions produced about 45 percent of the total output of all state industrial enterprises. The second was to make them financially independent, allowing them to keep the earnings as their own profits after paying taxes to the state (...) The third was to introduce a responsibility system similar to the household responsibility system in agriculture (...) Under the responsibility system, a part of an enterprise was allowed to keep the remaining profit after surrendering a fixed amount to the enterprise controlling it. In 1987, further reform of the state enterprises was carried out under the contract responsibility system.  After paying a fixed tax to the government, each state enterprise was allowed to keep the remaining profit for distribution to its staff, workers and for capital investment. Within 1987, almost all state enterprises were under the new contract responsibility system.

Source 2004 article by Gregory C. Chow on economic reform and growth in China.
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