Living standards rose quickly and a new middle class with access to cars and mobile phones came into its own. Jiang Zemin, party chief since 1989, consolidated his power at the 15th Communist Party congress last year where reform took a great leap forward in the shape of plans to transform the ailing state sector through mergers, acquisitions and bankruptcies. But after 20 years of tumultuous change, much of the fabric of the Mao era remains, making far-reaching reforms difficult. The distribution of resources largely remains in the hands of government departments. Information is government-controlled.
Most people still live in subsidised government housing.
Some 100 million people continue to rely on state-owned enterprises for a living. Party officials control most commercial and social life. Another obstacle to reform is the fact that modernising China's industry means layoffs and higher social tensions. Such largescale outflow could trigger a financial crisis. State-owned banks have invested huge amounts of capital, much of it from people's savings, in bad loans to enterprises, and a loss of confidence in the banking system could lead to a disastrous run on the banks.