Introduction This paper examines changes in firm ownership since Chinese government implemented its policy in 1978. Most significant among these is relative decline in state-owned enterprises (SOEs) and marked increase in numbers of small business. By 1999, there were 10 million registered small businesses in China. We first discuss background change and review changes in legislation that have allowed different forms of ownership; then we show how changes in ownership forms have affected industrial output and employment. We conclude, with some caveats, that these changes offer opportunities pursue an exciting research agenda. Since China implemented its open-door policy in 1978 and moved toward a socialist market economy, it has experienced rapid economic growth. One characteristic of this change has been relative decline of large SOEs and expansion of number of small enterprises. Although role of small businesses in creating economic in advanced economies is well documented, exploration of extraordinary growth of small business in transition economy of China is less understood. From a position of no privately owned small businesses in 1979, by 1999 there were more than 10 million small medium-sized enterprises (SMEs) registered in China (Chinese Statistics Bureau 1999), representing some 90 percent of all firms. These small firms made an increasingly important contribution national income and employment at a time of relative decline of contribution of larger firms. Moreover, these changes have be set in context of an extremely turbulent and uncertain political environment. The purpose of this paper is demonstrate expanding role of small firms within changing sociopolitical context of China. Economic Tranformation China is world's oldest state (Tam and Redding 1993), with a traceable history of over 3,000 years. Recently, there have been radical ideological and practical changes in state attitudes enterprise and ownership. The year 1978 marked beginning of a series of radical changes from state-controlled centralist command economy that previously had followed Soviet model of central planning based on control of inputs and outputs. China implemented major economic reforms create an open-door policy (Davies 1995). This represented a shift from a centralist-planned economy a new market-based socialist economy. In long run, this was intended prepare China for entering global market (Tseng, Ip, and Ng 1999), a reflection of commitment admit China World Trade Organization. Since that period, country has experienced rapid growth. The World Bank reports gross domestic product (GDP) growth rates approaching 10 percent per annum, albeit from a very low base. Peng et al. (2001) note increasing academic interest in China, reflecting dramatic rise in Chinese economy. Indeed it is argued that GDP of Greater China--China, Hong Kong, Taiwan, and Macao--may be on par with that of United States and Greater Europe in early part of this century (Lardy 1994; Overholt 1993). Buck et al. (2000) argue that China adopted a gradualist path, whereby incremental, partial reforms started as localized experiments that spread inexorably gradually replace central planning. These reforms crossing river by feeling stones were initiated by Deng Xioping in period 1979-1990. The era of 1990-1997 was a time of rapid economic growth, which was characterized by Deng's Southern Tour when he voiced epoch change with to get rich is glorious. Schell (1994) compares Deng's appearance in south the shock value of U.S. president showing up in Las Vegas proclaim its glittering strip of hotels and gambling casinos was new American prototype of urban development (p. 342). Tan (1996) shows how new environment has introduced a new class of private and collective firms, which are radically different from SOEs and are characterized as being more entrepreneurial. …