The first section of this chapter provides a brief overview of the distortion and reforms of the labour market and the dramatic increase of NSEs, in contrast with the shrinkage of SOEs in China. This overview provides some insight into the issues concerning how the ownership structure has been changed during processes of de-facto privatization. The next section, in turn identifies the causes behind this change by surveying the most recently released statistical data and literature. Next, the discussion is extended to include the likely consequence of the rapid growth of NSEs and estimates the economic impact of the abolition of the household registration regime on the world economy. Finally, conclusions and policy implications are summarized in the final section.