by commands from the government. The “permanent employment” system also existed. Wages were decided centrally by the government by a unified wage table.

With the advancement of reforms, enterprises got more autonomy. A unified wage system became an obstacle to enterprise management. In 1980, a new labor distribution policy was published. In 1986, the contract employment $ ^{77} $ system widely introduced $ ^{78} $ (Since then, new employees are hired on a contract basis). Distribution of employment -- which concentrated on the heavy industries under the old system -- widened to the third industries.

An employment-adjusting system was also established. “Labor service companies” $ ^{79} $ have been established since 1978. New employment become contract-based. Even for permanent workers, a competition system like “excellent labor group” $ ^{80} $ and many kinds of labor contract system like “whole worker contract systems” were carried out on an experimented basis. At many enterprises, surplus workers were moved to new businesses.

Between contract workers and permanent workers, treatment regarding wages and welfare systems are different. Coexistence of both types of workers at the same place caused many problems. In some cases, contract workers and permanent workers were treated similarly. $ ^{81} $ In the future, all workers will be transferred to the contract employment system in the flow of a transition to the market economy. $ ^{82} $

The wage system has already changed. With the empowering of enterprise autonomy, wages are distributed according to the judgement of enterprises based on results. Wages are decided at each company; the state only controls the total amount of wages. $ ^{83} $ Wage reform is deeply connected to price reform.

## 2 -3-3 Welfare and Housing System Reform

Until now, in most cases, “Units” $ ^{84} $ pay and burden the responsibilities of the social safety net and housing. These excessive burdens have been obstacles to SOEs’ reform and performance. $ ^{85} $

As reforms in employment like the contract worker system were introduced, workers appear who have no “permanent unit.” A social safety net and other welfare have become impossible to burden only to “units” because of the appearance of those contract workers. Since the introduction of the contract worker system, many kinds of funds and insurance systems, including unemployment insurance and pension systems, were initiated and established by local and central governments. In accordance with the advancement in SOEs’ reform, these social safety net systems become more important as the saucer of SOEs’ bankrupt. $ ^{86} $ Recognition of the importance of housing reform established the “Notice of housing system reform” in 1991, and future commercialization of housing was clarified.

The social welfare system needs rapid development. Recently, the many gaps in the social safety net system put limitations on urban reform.

## 2 -4 Price Reform

By 1978, the price system in China was a centrally planned system. All prices were decided by the central or local government. Enterprises that produced goods did not have any power to decide prices. Agricultural products and industrial materials for production were politically priced at cheaper rates compared with international relative prices. The market