Evidence is given that the reforms of the 1980's in Chinese state-owned enterprises strengtheneda nascent managerial labor market by incorporating many of the incentives present in Westernmanagerial labor markets, although in other forms. Poorly performing firms were more likely tohave a new manager selected by auction; to be required to have a higher security deposit postedby the manager; and to be subject to more frequent review of the manager's contract. Managerscould be, and were,...