The two goals of the 1998 State Council organizational streamlining were personnel reduction and a change of government functions. It is argued that the methods being used to achieve personnel reduction do not constitute a real reduction but largely involve transferring staff to other public institutions. Real personnel reduction could not be achieved without a major change of government function. Institutional reforms of both the central and local governments since the 1980s have been adaptations to the changing economic structure from a planned to a market economy. Government functions have served both existing economies. Cadres cannot be reduced unless the government function of direct management of state-enterprises is completely severed. The major contents of the 1998 institutional reform are examined and evaluated. The prospects for the success of the reform are also assessed. 1 Table, 1 Appendix. Adapted from the source document.