There has been significant development in the Chinese economy since 1997: a period of rapid growth with high inflation was replaced by slower growth with deflation resulting from decreasing external demand due to the Asian financial crisis, and insufficient domestic demand partly due to the restructuring of the economy and substantial laying-off of state workers. The government has adopted a series of macroeconomic polices aiming at stimulating domestic demand. In the meantime, it also carried out significant structural reforms in the social welfare system, state enterprises, and the financial sector. The purpose of this chapter is to provide updated information in China’s macroeconomic development and structural reforms during the last three years. Using updated information, it will continue to test the main hypothesis of this book: that the progress in the financial sector reform depend on the progress in the state enterprise reform, which depends on the progress in the reform of the social welfare system.