Three major questions are raised in this paper. First, why did the Dengist leadership pursue the ‘specific’ reform policies that ultimately proved to be successful? Second, how could the Chinese Communist party (CCP) legitimise its role in society after compromising on most of the socialist agenda? And third, why has the economic liberalisation not led to the democratic form of government in China even after more than two decades of reforms? By using Berman’s ideational approach (Berman 1998), it is found that a specific variant of socialism, which also allowed some of the capitalist tendencies, became institutionalised in the early history of the CCP. The ‘programmatic beliefs’ and ‘policy legacies’, which characterise this variant of socialism in China, constrained and guided the Dengist leadership to pursue the reforms that were compatible with Chinese conditions. As these reforms were within the framework of the ‘programmatic beliefs’ of the CCP, the party did not face legitimacy crisis in the eyes of the Chinese people, and thus retained its power after reforms.