From 1978 to 1985, China's railway reform focused on alleviating its status as a “weak link” in the national economy. This initial phase was driven by a widening gap between transport capacity and national development needs. The chapter traces this reform to Deng Xiaoping's 1975 railway rectification, which stablized operations and established a foundation for future changes. Facing fiscal limitations, the sector adopted a “tapping the potential” strategy. This involved upgrading existing lines by increasing double-track mileage, modernizing hubs, and shifting from steam to electric and diesel locomotives. However, this approach failed to address deeper issues like regional network imbalance, leaving the capacity-demand gap unresolved. Complementary reforms introduced financial decentralization and autonomy for local railway administrations. While aligning with national state-owned enterprise trends, these efforts showed modest and uneven results. By 1985, structural problems persisted, setting the stage for more comprehensive reforms in the decades that followed.