Whether China's housing reform can be carried out successfully will have a profound bearing on the future of the reform of State-owned enterprises. Although China's housing reform registered impressive 1 progress in the past 10 years, it has still been fettered by its old-fashioned housing distribution system. Under this system, most employees of state enterprises can still get apartments to their employers, and this practice has 2 turned to be a heavy burden upon the State firms and a obstacle to 3 their reform. To clear the runway of the reform, those enterprises should establish a special shareholding firm in the charge of housing. 4 This firm would be held responsible at its own gains and losses. 5 Second, State-own enterprises must draw a clear line 6 between housing investment and production investment. In other words, enterprises should replace the old housing distribution system to generous housing subsidies under a system 7 which encourages employees to buy a home in the market. Besides, China should beef its efforts to improve its social 8 security system and establish public funds for housing as a way to address urban residents' housing problems. The government has options to provide houses with those 9 who cannot afford a home. One of them is to take a part of the pubic funds to build a batch of cheap houses; the other is redistributing the old houses. 10