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Housing reforms began in China with a sizable rent increase, followed by subsidized purchases of old and new public-owned housing by its tenants. The administration of housing construction and sales was split in order to meet varying consumer demands. Current government policy categorizes housing as commodity, low-profit, cost-balance and standard. Commodity housing is generally well constructed and priced beyond average affordability. The other three categories are government-subsidized to various degrees. As an official from the Hunan Provincial Department of Land and Resources explained, " This policy confines the minority, high-income earners to the purchase of commodity housing at market prices. At the same time it enables the majority, low-and medium-income earners to buy housing in the low-profit, cost-balance and standard categories. This policy has proven decisive in propelling residential housing construction in China."

Throughout the process of commercializing housing, the Chinese government has followed the principle of " feeling the way across the river." It has accomplished this by conducting pilot experiments prior to publicly promoting and new policy and its measures. One example is the policy that allows for government-subsidized private purchases of public-owned housing. In 1982 Jiangsu's Changzhou, Jinlin's Sipping, Henan's Zhengzhou and Hubei's Shashi were pilots for trial subsidized private purchases of newly built public-owned housing. This method of private apartment purchase worked on the basis of the government's contributing one-third of relevant construction costs and the other two-thirds being shared between the individual and relevant work units. The scheme subsequently went into operation in Beijing, Tianjin, Shanghai and over 80 cities in 23 provinces and autonomous regions. It was promoted across the entire country in 1994.