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 framwork. 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 finacial market, improve risk-management and strengthen its competitiveness wordwide.