This study reviews the experience of privatization of state-owned enterprises (SOEs) in Eastern Europe since 1989, and analyses its implications for China's SOE reform. The East European experience shows that different privatization strategies have different impacts on corporate governance, unemployment, and distribution of benefits. Every strategy can achieve one or more policy goals, but at the expense of the others. The paper suggests a cautious approach for China, which means that the focus of the reform should be put on improving corporate governance and protecting employment, while the speed of reform should not be considered the first priority.