Since 1978, the policies of reform and opening to the outside world have enabled China's industry to enter a stage of great innovation and development. From 1978 to 1999, China's industry increased at an average rate of 11.1 percent every year, and the comprehensive industrial strength was remarkably enhanced. By 1999, some 3,535.7 billion Yuan of industrial added value had been attained, an increase of 10.2 times over 1978. China's industrial reform first began by giving more rights to and leaving more profits for enterprises, extending enterprises' independent operations and practicing the enterprise contract responsibility system, which fully mobilized the initiative and creativeness of enterprises and their workers and staff members, and created an excellent environment for the improvement of the operation mechanism of enterprises.

Next, China speeded up its industrialization through the introduction of foreign capital and opening to the outside world. The establishment of large numbers of Sino-foreign joint and wholly foreign-owned enterprises has not only brought more capital to enterprises, but also advanced equipment and modernized management. Through 21 years of reform, China's industry has got rid of the backwardness in which it could only make one or a few varieties of products and its technological level was low.
The reform of state industrial enterprises, especially large and medium-sized enterprises, is the constant focus of China's economic system reform. Before 1978, state-owned and collectively-owned enterprises represented 77.6 percent and 22.4 percent respectively of China's exclusively public-ownership economy. The policy of reform and opening-up has given extensive scope to the common development of various economic sectors. Individual and private industrial enterprises and enterprises with foreign, Hong Kong, Macao or Taiwan investments have mushroomed.
Reform of state-owned enterprises has always been the key link of China's economic restructuring.

The Chinese government has made various attempts to solve the problem of chronic extensive losses in this sector and by now almost every state-owned enterprise has adopted the company system. After being transformed into joint stock companies, the economic benefit of the state-owned enterprises increased steadily and their overall strength and quality were remarkably enhanced, gaining continuously in their control, influence and lead in the whole national economy. In 2004, of the industrial added value created by all state-owned industrial enterprises and non-state industrial enterprises with annual turnover exceeding five million Yuan, state-owned and state stock-holding enterprises accounted for 42.4 percent, collectively-owned enterprises 5.3 percent, the rest taken up by other non-public enterprises, including enterprises with foreign, Hong Kong, Macao or Taiwan investments, and individual and private enterprises. The result is a dynamic juxtaposition of diversified economic elements.