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The Beijing Capital Group was one of the most profitable and successful state-owned enterprises (SOEs) in China. Since its foundation, the Group had been making unrelenting efforts in promoting reform, improving capital operation and capitalising on the advantages of the Group in terms of operational scale. All these had helped it achieve success. The employee turnover rate was low as the staff had a sense of pride in being part of a successful firm. For the immediate future, however, the market environment was expected to be increasingly tough. Some of the important issues that the President of the Group had to deal with included how to sustain growth and remain competitive following China''s expected accession to the World Trade Organisation. Given the structural and institutional constraints inherited from the socialist tradition, it was not easy for the Group to overcome all the limits of the system. At this point, the President wondered whether he could find a way to reform the Group''s human resources system within the limits set by the state. This case explores the human resources practices in a socialist economy. It demonstrates how a SOE in China modified its human resources practices in order to adapt to a market economy. The case also allows for a discussion of how human resources practices can serve as a driving force for change in business and management practices.