Over the past 40 years, China has worked hard to make the market mechanism play a decisive role in resource allocation under the conditions of adhering to the basic socialist economic system. The unique connotation of the China model determines that we cannot find the answer in the traditional political economic logic or in the western mainstream institutional change theory. Only by adhering to the realistic analysis method, testing and developing existing theories through the deepening of the phenomenon analyze, can we actively promote the innovation of Chinas economic research paradigm. This paper puts forward the threestage conversion hypothesis of Chinas institutional change mode. That is, the realistic path that a centralized plan economy country can successfully transition to a market economy is the supplyled system at the beginning of reform. The change mode gradually changed to the middle diffusion type system, and with the gradual establishment of exclusive property rights, it finally transitioned to the demandinduced system change mode, thus completing the transition to the socialist market economy system. This proves that Chinas great practice of reform and opening up has presented unprecedented opportunities and challenges for the development of economic theory. The China model is the source of innovation for Chinese economics.