This article attempts to describe and analyze the political change occurred as a result of economic reform in Post-Mao China. Political change within system rather than systemic change is described and analyzed from the institutional perspective. In analyzing and explaining the political changes, institutional arrangement including historical context of reform, attributes of political system, power(authority) relations and political leadership have been examined. Although economic reform has not brought substantial changes of political system, a lot of changes within system occurred. One of the major political changes appeared as a consequence of economic reform is the trend toward decentralization of power at three levels: leadership, center and province, state and society. Power diffused from the Party to the administrative institutions, center to provinces, and Party/state to society. The institutional elements inherent in state socialism made Deng’s reform within system successful. The fragmented bureaucracy appeared as a result of the Cultural Revolution, Deng’s paramount leadership, low level of institutionalization and gradual reform strategy provided the conditions of successful reform. China is at crossroad, whether it goes capitalism or develop its own model of development. Deng Xiaoping’s economic reform has been successful and yet has generated a lot of socio-economic problems such as uneven development between regions, corruption arising from the dual structure of plan and market, weakening of central control of provinces. Whether Deng’s successful economic reform will be sustained without political reform is not clear. This article suggests that institutional context be considered to analyze the changing political dynamics of economic reform. The institutional variables include historical context of reform, low level of institutionalization, patron-client relationship, composition of leadership, elite recruitment procedure, decision-making process, changing relationship between center and province and so on. Within the institutional context, whether and how the future leadership work out a mechanism of growing market economy will be important problems and challenges China faces in its modernization process. Given the changing institutional context, China is likely to take different developmental path from that of East Asian NIEs.