The reform of public pension institutions involves the relations among many subjects such as government, market and society. This paper studies the development process of the reform of public pension institutions in China and analyzes its effectiveness and problems by using property rights and principal-agent theory. In the context of the fact that the pension service market is fully open, this paper has an important practical significance. 1.The course of development of the reform. Taking the Urban Social Welfare Institute as the focus, this paper divides the 40-year reform process of public pension institutions since the Reform and Opening Up into four stages as follows. The first stage is the establishment of president responsibility system and the permission of the privately-run welfare institutions(1979-1986). The second stage is the establishment of the artificial person system and the socialization of social welfare(1986-1997). The third stage is the general promotion of pan-marketization and the socialization of social welfare(1997-2007). The last stage is the proposal of public welfare and the adjustment of the socialization of social welfare(2007 to date). This paper points out that we must start from the two dimensions, in which one is public institutions and another is socialization of social welfare if we study the reform of public pension institutions. 2.Review of the reform. There are three specific themes throughout the 40-year reform: the pursuit of independent institutional artificial person, the clear direction of efficiency and a socialized development mechanism. These topics refer to the nature, basic attributes and operational mechanisms of public pension institutions. However, due to insufficient theoretical preparation and insufficient research, these topics have not been completed. The main reason is the unclear boundary of responsibilities of the government and public institutions, the contradiction between public welfare properties and public institutions' goal of economic benefits, and the lack of regulation of socialization so that public welfare can hardly be realized. The essence of these reasons is the handling of the relationship between fairness and efficiency. 3.Interpretation of the reform from the perspective of property and principal-agent theory. After the reform and opening up, public pension institutions nominally became the independent artificial person, forming the second tier of commission-agency. However, under the institution management system, there are some problems such as the lack of legal validity of decentralization, the deviations of the commissioned goals and the lack of professionalism of the management team, resulting in the inefficiency or failure of the principal-agent. Afterwards, the state made adjustments, promoting the state-building and privately-run forms and formed the third tier of commission-agency. However, due to the lack of awareness and regulation of state-building and private-run forms in practice, the principal-agent relationship has been distorted. The third layer is not necessarily better than the second layer. The key is to clarity the public welfare of public pension institutions and their functions, including regulating the market and resolving the risk. 4.Deepening the reform of the target path. There are three major goals: becoming a truly independent artificial person; comprehensively strengthening the commonweal property; regulating the market and resolving risks in the development of pension services. In order to achieve these goals, we must take the construction of modern pension institutions as the focus of reform, improve the governance structure of the institutional artificial person, build the council, the management and the board of supervisors, strengthen the regulation of state-building and privately-run forms and improve the governance structure of the legal entity. At the same time, government's power should be restricted and the spirit of contract should be established.