This monograph uses the institutional economics and transaction costs theory of R. H. Coase to explain the experience of China in economic institutional choice in her quest for economic development and modernization. The monograph focuses on changes in economic institutions of China, from the establishment of the People’s Republic of China until the reforms of the 1980s. The analysis shows that the institutional twists and turns in the history of economic development of China could be explained largely by one key factor, the constraints of incomplete information about the efficiency of different economic systems. The adoption of a market oriented reform and open door policy and the integration of China into the world economy have largely removed the constraint of incomplete information about efficiency of different economic models. Therefore, one would not expect China to experience such big swings in her economic institutional setups in the future.