The article discusses the application of Theory Y in the People's Republic of China. Communist China has for the past twenty-five years been engaged in an economic and social experiment involving her entire population in which tremendous efforts have been made to achieve egalitarian industrial development without dehumanization. Before 1949, the sociocultural values of China reflected a hierarchy of needs rather different from the one believed by Theory Y proponents to motivate the individual. The satisfaction of lower-level needs, such as food, shelter and security, was the main objective in the lives of the masses. Under Communist control, however, the structure of the need hierarchy in China underwent a radical transformation. Theory Y advocates assume that, human beings are by nature positively motivated. The construction of a healthy organization, according to the Theory Y formula, involves a process of organizational change, which is accomplished largely through behavioral changes in people. The basic building blocks of healthy organizations are teams and therefore the basic units of change are groups rather than individuals.