Three structural adjustments have been made in China's transition to market economy: political operations, private ownership, and market mechanism. As a result of these adjustments, China has developed a political sphere which is condusive to private enterprises and market coordination. To develop a market-friendly environment, china has introduced a new legal framework. Internally, China seeks to maintain the existing political system and the "Socialism with Chinese characteristies"; while externally, she seeks to maintain alignment with the world economy and to see the unification of China and Taiwan. This legislative reform has been accompanied by a restructuring of the judicial system, as well as a dramatic change in administrative guidelines. That is, traditional economic control should gradually give way to western-style government supervision. Financial reform will be critical to financing major economic initiatives in China. These initiatives are: (1) improving economic infrastructure ; (2) increasing domestic aggregative demand ; (3) improving the social security system ; (4) adjusting the economic structure and reforming state-owned enterprises ; (5) correcting the imbalances in economic development ; (6) protecting the environment ; and (7) coping with international competition. A successful financial system reform require China to build a healty financial market, improve risk-management and strengthen its competitiveness wordwide.