My dissertation tries to address three puzzles in China’s reform process. Why does China try to organize a reliable social welfare system, which can shake its critical ground of competitiveness, cheap labor costs? Why do its efforts to set up new social welfare system come to mainly focus on organizing a quite reliable pension system? Finally, how can we understand the efforts to organize social welfare system in terms of China's authoritarian political system? China needs to set up a reliable social welfare system to address its tough SOE reform process. SOE reform had been dragging for decades without breakthrough, because it was organized with very unique Zhigong labor system. In order to construct socialist industrial system rapidly with the extreme low wage system, the leadership arranged a comprehensive welfare system for SOE Zhigong by organizing SOEs with the Danwei system. SOE Zhigong were the permanent workers and SOEs had to employ much more personnel than they needed to realize full urban employment. With the intensified market competition after the reform, SOEs could not maintain their redundant workers, but they could not dissolve labor relations with their redundant workers. This was a main reason why China’s various efforts to reform SOE system could not making meaningful progress for decades. The success of SOE reform depended on if China set up a social condition whereby SOE Zhigong could manage their living after they left their Danwei. Indeed, the Danwei system absorbed all social functions, and there was no social system beyond Danwei in urban society for those urban citizens who did not belong to the Danwei system. In this context, the leadership tried to set up new social welfare system beyond Danwei to make SOEs dissolve labor relations with their redundant Zhigong. Interestingly, the efforts to set up new social system come to focus mainly on how to organize new socialized pension system independent from Danwei. There was hidden pact in socialist China that the state guaranteed SOE workers’ decent pension after the retirement as a return for their low-waged labor contribution for system construction, and Danwei took the responsibility to grant pension for the retired Zhigong. Yet, the Danwei system could not take the responsibility any more, as increasing numbers of SOEs underwent restructuring process. It also turned out that the very condition that redundant SOE Zhigong could accept to dissolve their labor relations was assurance of their pension entitlement even after they left their Danwei. Hence, SOE restructuring process needed to address the worries of both retired and redundant SOE Zhigong to lose their pension entitlements. Properly working market system is embedded in a certain scheme of supporting social system and China’s new reliable pension system for SOE Zhigong turns out to be the main embeddedness scheme to fashion its market transformation process. The crux of the pension reform is how to handle the Danwei system’s IPD, which is Danwei’s former pension commitment for their Zhigong. Yet, China does not devise a reliable financial ground and let the new pension system grant pension for retired Zhigong. Hence, many areas’ pension systems cannot grant full pension for their retirees. Yet, under the urgent SOE restructuring process, China comes to articulate the system’s historical debts, which confirms the Danwei system’s pension commitment as the state’s eventual liability. Hence, even if there remain many area’s pension system that do not have enough resource to grant full pension for their retired Zhigong, China can maintain SOE Zhigong’s trust of pension entitlements. This makes China complete long dragging SOE reform process including privatization, and SOEs become pure economic units with the clear ownership system. This is the process of how China realizes its system transformation based on full market system. Hence, confirming SOE Zhigong’s pension entitlement that the Danwei system promised before turns out to be the social contract that the system has to fulfill for the system transformation. Under Zhigong labor system rural peasants were blocked to enter urban society by setting up Hukou system in order to maintain the urban society’s comprehensive welfare system for Zhigong. Now China’s urban society is no more bound with Zhigong labor system, and China comes to construct full labor market system where peasant can enter. Those new peasant workers in urban labor market, however, cannot be beneficiaries of the new urban pension system, even if they participate in the system. This is a result of China’s market transformation process under the CCP leadership which formerly tried to organize socialist system. China’s market transformation process under the CCP turns out to be based on politics of confirming the state and society’s former social pact in terms of socialist accountability. Those new peasant workers, unlike SOE Zhigong, did not have social pact with the system to get pension after the retirement, so they cannot be the pension beneficiaries. China completes its system transformation by dissolving Zhigong labor system, but the process based on socialist accountability under the CCP’s authoritarian political rule turns out to be predicated on confirmation of the system and SOE Zhigong’s exclusive social pact without dissolving the former social distinction. Accordingly, the nature of socialist accountability politics has nothing to do with growing social capacities to check CCP’s authoritarian political system; it rather involves the sustained power of authoritarian CCP ruling political system that can fashion the system transformation process within the social meaning of full recognition of the former socialist system which was predicated on the system and SOE Zhigong’s special relations.