China's economy has grown rapidly over the past decade. At the same time, it has undergone a fundamental change, from complete reliance on state-owned and collective enterprise to a mixed economy where private enterprise also plays a strong role. By 1998 the domestic private sector had grown to about 27 percent of gross domestic product, making it second to the state enterprise sector in economic importance. A constitutional amendment in 1999 formally recognized this shift, thereby laying the foundation for the private sector to emerge from the shadows and play a prominent role in China's future development. This study was undertaken in partnership with the State Economic and Trade Commission (SETC) and draws on fieldwork in China in the summer of 1999, along with discussions at a conference in Beijing in April 2000. It also draws on IFC's and the World Bank Group's global experience in promoting private sector development. It offers business owners, managers, and policymakers assistance in identifying an action agenda to help reduce present constraints and enhance the available opportunities.