At the time of its founding in 1949, the People's Republic of China (PRC) was one of the poorest countries in the world. In the early 1950s, its industry developed rapidly through a state-led process heavily influenced by the Soviet experience. Aiming to close the gap between its political ambitions and its phase of development, China began the Great Leap Forward, which sought to even more rapidly industrialize the country. The effort largely failed, and its policies contributed to famine.
Until the middle of the 1960s, industry was largely concentrated in northeast China. Following the Sino-Soviet split, Chinese leadership increasingly feared invasion from the Soviet Union or the United States. During the Third Five-Year Plan period, China instituted the Third Front Campaign to develop national defense and industrial infrastructure in the country's interior. The campaign further developed China's poorer regions. In developing infrastructure and human talent in these areas, the campaign also provided the conditions favorable for the Reform era's market-oriented development.
In 2015, China announced its Made in China 2025 initiative to accelerate domestic innovation in areas deemed crucial for the future of the world economy. China also seeks to increase both domestic innovation and domestic consumption through its economic strategy of dual circulation.
Overview
Promoted industrial construction when the government was established in 1950
In the first half of the 20th century, approaches to developing industry differed significantly by region.[1]:13 In coastal areas, most industry was privately owned and focused on consumer goods.[1]:13 Under both Chinese administration and Japanese colonization, Manchuria's industrial development was state-led.[1]:13 At a smaller scale than development in Manchuria, industrial development in China's northwest and southwest were also state-led.[1]:13
The experience of the Second Sino-Japanese War had convinced Communist Party leadership that industrialization was the ultimate source of military strength.[1]:104 According to Mao Zedong, "Japanese imperialism bullies China in this way because of our backwardness. Therefore, it is the entire nation's mission to eradicate this backwardness."[1]:104
In September 1947, the Communist Party issued its first economic plan for industry, the Northeast Administrative Commission's Outline of the Plan for Economic Construction of 1948.[1]:107
Early PRC
When the PRC was founded in 1949, the country was one of the poorest in the world.[2]:147 Most of its industry was labor-intensive light industry like textiles and other consumer goods.[1]:7
Throughout the 1950s, China gradually restructured its industries under state ownership.[1]:7 China's state-led industrialization in the early 1950s was heavily influenced by the Soviet experience.[2]:154 During the 1950s, the Soviet Union was the largest supplier of machinery to Chinese industries.[1]:137
During China's First Five-Year Period (1953–1957), industrial development was the primary goal.[4]:67 The First Five-Year Plan's highest industrial sector priorities included: power plants, steel, mining, machinery, chemicals, and national defense,[4]:18 centered on steel and coal.[3]:289 To support these priorities, transportation, communication, and mining surveys also received significant state support.[4]:18 With Soviet assistance in the form of both funds and experts, China began to develop industries from scratch. Consistent with the focus on developing industry, northeast China was the region which received the greatest share of state funds during the Plan.[4]:39
During that First Five-Year Period, agricultural and industrial production increased at double digit rates and the plan's production goals were fulfilled ahead of schedule.[2]:158 This contributed to the too-ambitious goals of the Great Leap Forward.[2]:158Classical Marxist theory had hypothesized a relatively linear progression of development and a worldwide revolution beginning with the most developed countries, which did not occur.[2]:145 The Great Leap Forward attempted to defy the conventional understanding of the time required for economic development and, through rapid industrialization, it aimed to close the gap between China's developmental stage and its political aspirations.[2]:146 The Great Leap Forward failed to rapidly industrialize China.[3]:84 The allocation of agricultural workers to industrial work also had a negative impact on crop yields. Coupled with erroneous reports of surplus and weather conditions, famine resulted. Industrial successes included construction of the Daqing oil field, which was promoted as an example during subsequent industrialization campaigns.[5]:52–54
Until the middle of the 1960s, China's industry was largely found in northeast China.[3]:316 Some resource extraction ministries were located elsewhere, for example oil and mining in Xinjiang and a large steel complex at Baotou.[3]:316
From the 1960s through the conclusion of the Mao era, more than half of China's industrial output came from its heavy industry.[1]:7
During the Third Five-Year Plan period, the Chinese government instituted the Third Front campaign to develop industrial and military facilities in the country's interior in preparation for defending against the risk of invasion by the Soviet Union or the United States.[6]:41–44 Through its distribution of infrastructure, industry, and human capital around the country, the Third Front created favorable conditions for subsequent market development and private enterprise,[6]:177 and the development of township and village enterprises.[7]:298
Through the campaigns of the Great Leap Forward, the Third Front, and the Cultural Revolution, Mao advocated for a method of socialist industrialization which differed from the Soviet model.[1]:230 Although development in these eras continued to focus on heavy industry, unlike the First Five-Year Plan period, these later periods had a greater focus on decentralization of SOEs and regional projects.[1]:231
Improved relationships with the capitalist countries, which began during the later Mao Zedong period and continued during Deng's leadership, along with the policymakers' perceptions of economic stagnation, prompted China to move further from the then-conventional approach to socialist industrialization.[1]:266–267
During Reform and Opening Up, China's focus shifted from the development of heavy industry to a focus on light industry.[1]:267 In the 1980s, China developed into a major source of low-priced manufactured products.[8]:164
In the 1980s large-scale, centrally controlled plants dominated manufacturing. These large plants were supplemented with many small-scale town and township enterprises, which accounted for significant percentages of national output of coal, construction materials, and leather products.[citation needed]
The Belt and Road Initiative, including its related Digital Silk Road, are significant parts of China's industrial development strategy.[9]:71
In 2015, China launched its Made in China 2025 industrial policy.[10]:116 Its goal is to boost China's innovation in sectors deemed critical for the future of the world economy.[10]:116 Policy support for Made in China 2025 has also included government guidance funds, national laboratories, and state funded incentivization for research grants.[10]:116
Beginning in 2017, the government has designated important historical industrial sites as "national industrial heritages", stating that their preservation would "strongly support the construction of a strong nation".[1]:303
In 2017, the State Council released its artificial intelligence development blueprint, outlining the goal of making China a global leader in AI by 2030.[11]:279 China's government takes a market-oriented approach to AI, and has sought to encourage private tech companies in developing AI.[11]:281 In 2018, it designated Baidu, Alibaba, iFlytek, Tencent, and SenseTime as "AI champions".[11]:281
During the Xi Jinping administration, China has emphasized an economic strategy of dual circulation.[12]:170 First, it seeks to rely more on China's domestic consumers.[12]:160 Second, it seeks to innovate more domestically developed technology and thereby reduce China's reliance on western technology.[12]:160
A 2023 Australian Strategic Policy Institute study of what it deemed as 44 critical technologies concluded that China leads the world in 37 of them, including 5G internet, electric batteries, and hypersonic missiles.[13]:155
Manufacturing industry
China's manufacturing sector developed according to the principle of "walking on two legs," a policy of self-reliance introduced in the 1950s. In the 1980s one leg consisted of the state-funded and state-controlled large and medium-sized plants with the most qualified personnel and the most advanced equipment. The other leg was small-scale plants using inferior equipment and large amounts of local labor. Together, the two sectors produced a wide range of industrial products. In most cases the larger plants accounted for the bulk of production, but the smaller enterprises were increasing their share and producing a significant percentage of cement, fertilizers, and farm machinery.[citation needed]
When the 2008 global financial crisis resulted in decreased demand from Western markets, Chinese manufacturers re-oriented towards the domestic market.[14]:75 Many focused on domestic online marketing, either through creating their own brands or selling to other Chinese online sellers.[14]:75 In turn, this pivot by Chinese manufacturers increased the quantity and diversity of products available online, leading to a major increase in e-commerce in China.[14]:75
Beginning in 2010 and continuing through at least 2023, China has produced more industrial goods per year than any other country.[13]:1
The steel industry of the People's Republic of China, initially small and hindered by war, expanded rapidly following market reforms in 1978, eventually becoming the world's largest producer. Despite this growth, the industry faced challenges with high debt, market volatility, and environmental pressures. Rising exports from 2023-2024 led to global oversupply, price drops, and tariffs, prompting China to halt new steel mill approvals and encourage overseas investments. China's central government has also worked to phase out unprofitable "zombie" companies while pushing for stricter environmental controls on steel production.
In the 2020s, China became the largest manufacturer of LCDs and Chinese firms had a 40% share of the global market.[7]:126 Chinese firms that developed into world industry leaders included BOE Technology, TCL-CSOT, TIANMA, and Visionox.[7]:126Local governments had a significant role in this growth, including as a result of their investments in LCD manufacturers via state-owned investment companies.[7]:126 China had previously imported significant amounts of LCDs, and the growth of its LCD industry decreased prices for other consumer products that use LCDs and led to growth in other sectors like mobile phones.[7]:126 This was a factor in the growth of companies like Huawei and Xiaomi during the 2020s.[7]:126
The chemical industry in the People's Republic of China valued at around $1.44 trillion in 2014. The country is currently the largest chemicals manufacturer in the world.[17] The chemical industry is central to modern China's economy. It uses special methods to alter the structure, composition or synthesis of substances to produce new products, such as steel, plastic, and ethyl. Chemical industry provides building materials for China's infrastructure, including subway, high-speed train, and highway.
As an important part of the nationalsustainable developmentstrategy, the development of advanced materials is advancing the competitive nature and state of the art for Chinese industry. The State has put advanced materials high on its development agenda for the next decade and listed it among the key high-tech industry sectors that would be given priority for development by the State Council. At present, the pace of building China's advanced materials industry is accelerating. Advanced materials have been key fields in China's national R&D system (National High Technology Research and Development Program (863 Program) and National Basic Research Program (973 Program)).
Construction
Beginning in 2010 and continuing through at least 2024, China has the world's largest construction market.[9]:112
Housing construction
Modern housing has been in chronic shortage in contemporary China. Housing conditions in 1949 were primitive and crowded, and massive population growth since then has placed great strains on the nation's building industry. According to 1985 estimates, 46 million additional units of housing, or about 2.4 billion square meters of floor space, would be needed by the year 2000 to house every urban family. Adequate housing was defined as an average of eight square meters of living space per capita. However, as of 1984, the average per capita living space was only 4.8 square meters. Housing specialists suggested that the housing construction and allocation system be reformed and that the eight-square-meter target be achieved in two stages: six square meters by 1990 and the additional two square meters between 1990 and 2000. To help relieve the situation, urban enterprises were increasing investment in housing for workers. In 1985 housing built by state and collective enterprises in cities and towns totaled 130 million square meters of floor space. In the countryside, housing built by farmers was 700 million square meters.
Capital construction
Since the 1950s, the capital construction industry has been plagued by excessive growth and compartmentalization. There were frequent cost overruns and construction delays, and resources were overtaxed. Project directors often failed to predict accurately the need for such elements as transportation, raw materials, and energy. A large number of small factories were built, providing surplus capacity at the national level but with deficient economies of scale at the plant level. Poor cooperation among ministries and provinces resulted in unnecessary duplication. Because each area strove for self-sufficiency in all phases of construction, specialization suffered. Since the early years of the People's Republic, overinvestment in construction has been a persistent problem. Fiscal reforms in 1979 and 1980 exacerbated overinvestment by allowing local governments to keep a much greater percentage of the revenue from enterprises in their respective areas. Local governments could then use the retained earnings to invest in factories in their areas. These investments, falling outside the national economic plan, interfered with the central government's control of capital investment.
In 1981 the economy underwent a period of "readjustment," during which the investment budget for capital construction was sharply reduced. This administrative solution to overinvestment proved ineffective, and later reforms concentrated on economic measures such as tax levies to discourage investment. The issuance of interest-bearing loans instead of grants was also intended to control construction growth. Despite reforms, capital construction continued at a heated pace in 1986. The majority of the new investment was unplanned, coming from loans or enterprises' internal capital.
During the Seventh Five-Year Plan, 925 medium-and large-scale projects were scheduled. The government planned to allocate ¥1.3 trillion for fixed assets, an increase of 70 percent over the Sixth Five-Year Plan. Forty percent of the funds were allocated for new projects, and the remaining 60 percent for renovation or expansion of existing facilities. Some of the projects involved were power-generating stations, coal mines, railroads, ports, airports, and raw-material production centers.
As of 2022[update], more than 200 types of minerals are actively explored or mined in the People's Republic of China (PRC). These resources are widely but not evenly distributed throughout the country. Taken as a whole, China's economy and exports do not rely on the mining industry, but the industry is critical to various subnational governments of the PRC.
Mining is extensively regulated in the PRC and involves numerous regulatory bodies. The state owns all mineral rights, regardless of the ownership of the land on which the minerals are located. Mining rights can be obtained upon government approval, and payment of mining and prospecting fees.
During the Mao Zedong era, mineral exploration and mining was limited to state-owned enterprises and collectively-owned enterprises and private exploration of mineral resources was largely prohibited. The industry was opened to private enterprises during the Chinese economic reform in the 1980s and became increasingly marketized in the 1990s. In the mid-2000s, the Chinese government sought to consolidate the industry due to concerns about underutilization of resources, workplace safety, and environmental harm. During that period, state-owned enterprises purchased smaller privately-owned mines. China's mining industry grew substantially and the period from the early 2000s to 2012 is often referred to as a "golden decade" in the mining industry.
The People's Republic of China ranks third in the world both in total nuclear power capacity installed and electricity generated, accounting for around one tenth of global nuclear power generated. As of February2023[update], China has 55 plants with 57GW in operation, 22 under construction with 24 GW and more than 70 planned with 88GW. About 5% of electricity in the country is due to nuclear energy.[20] These plants generated 417 TWh of electricity in 2022 [21] This is versus the September 2022 numbers of 53 nuclear reactors, with a total capacity of 55.6 gigawatt (GW).[22] In 2019, nuclear power had contributed 4.9% of the total Chinese electricity production, with 348.1 TWh.[23]
Nuclear power has been looked into as an alternative to coal due to increasing concerns about air quality, climate change and fossil fuel shortages.[24][25]
The People's Republic of China possesses a diversified communications system that links all parts of the country by Internet, telephone, telegraph, radio, and television. The country is served by an extensive system of automatic telephone exchanges connected by modern networks of fiber-optic cable, coaxial cable, microwave radio relay, and a domestic satellite system; cellular telephone service is widely available, expanding rapidly, and includes roaming service to foreign countries. Fiber to the x infrastructure has been expanded rapidly in recent years.
The military modernization program of the People's Liberation Army (PLA) which began in the late 1970s had three major focuses. First, under the political leadership of 3rd paramount leaderDeng Xiaoping, the military became disengaged from civilian politics and, for the most part, resumed the political quiescence that characterized its pre-Cultural Revolution role. Deng reestablished civilian control over the military by appointing his supporters to key military leadership positions, by reducing the scope of the PLA's domestic non-military role, and by revitalizing the party political structure and ideological control system within the PLA.
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