The state simply taxed enterprises, rather than directly appropriating enterprise surplus value.
The cost of this freedom from bureaucratic control was the removal of the enterprise from inside the bureaucracy, where enterprise investments and other costs were treated as a line item in the overall government budget, to outside the bureaucracy.
This phase represents the decision of the CPC leadership to replicate the corporate governance structure common to capitalist economies of Europe and Japan, with the complete autonomy of formerly state controlled enterprises, even ones with a majority of shares owned by the state. Contracts between workers and firms can be "broken and bought" (maiduan).
It has also been marked by the growing importance of share ownership, in general, with many shares of state-owned firms having been floated on financial markets and more planning to go that route.
This leadership has experienced the problems that come out of a command and control allocation system --- severe imbalances between supply and demand, lackadaisical managers, low quality output, stagnation in technological invention and innovation, low worker productivity and morale, etc.
The best way to understand the current generation of pragmatists is to recognize that they think like engineers (and in some cases were educated as engineers).
The pragmatists are aware (as was Marx himself) of the efficiency of market exchange processes in sending signals from consumers to producers, from retailers to wholesalers, from wholesalers to producers, and from producers to producers.
They understand that the relatively low cost and rapid transmission of information via the interaction of and negotiations between buyers with sellers (and the effects of failed negotiations, such as unintended inventory buildups) provide a key ingredient in improving the effectiveness of economic institutions.
Deng set the standard for today's leadership by shifting the focus of Chinese politics from the Maoist concern for building pro-communist social relationships and restraining bureaucracy (the core goals of the Maoist Left) to a pragmatic concern for flowcharting the general steps necessary to achieve Zhou enlai's "Four Modernizations." The Four Modernizations Era, which is associated with the rise to prominence of Deng Xiaoping and the pragmatists, was grounded in the idea that it was more important to innovate the most advanced technologies available to improve the efficiency of agriculture, industry, research and development, and the military than to achieve the social objectives that had been associated with the Maoist Era. This Dengist path began with agricultural reforms, including decentralization of production units, the fostering of the "individual economy" (or ancientism/productive self-employment), and free markets, which would generate the surplus necessary to subsequent phases of modernization of the transportation, energy, and education systems, upgrading of Chinese industry, and ultimately leading to the advance of China's research and development capabilities to a par with the United States.
The rural reforms were followed in the urban industrial sector by a process of gradually devolving control over surplus value from government ministries (under the command of the State Council) to enterprise managers.