ABSTRACT
Institutional change has a considerable impact on the economic performance of transition economies. Following initial reforms in the agricultural sector, the Chinese leadership focussed on restructuring state and collectively owned enterprises in order to increase economic growth. Moving enterprise institutions away from central planning implied reforms for more flexible allocation and reallocation of labour. The changes in labour (market) institutions are particularly important for the success of economic reforms, since they could act as catalysts or obstacles. This proved to be all the more true as China exposed its economy to the world market.
