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Today, China stands among the most powerful nations in the world. It is the second-largest economy, a manufacturing giant, a technological contender, and a geopolitical force. But this reality would have seemed almost impossible just four decades ago. In the late 1970s, more than 90% of China’s population lived in poverty. Starvation was widespread, productivity was low, and the country remained largely isolated from the global economy. In 1978, China contributed only 2% to global GDP. Today, that figure exceeds 18%, while extreme poverty has fallen to less than 1%.
How did such a dramatic transformation occur within a single generation?
What policies reshaped the destiny of nearly 1.4 billion people? To understand modern China, we must first understand its past.
China’s Long History and a Painful Century
The name “China” is believed to come from the Qin dynasty, which unified the region over 2,000 years ago. Interestingly, Chinese people do not call their country “China” at all. They call it Zhongguo, meaning “The Middle Kingdom” a reflection of its ancient belief that China was the center of civilization.
For centuries, China was one of the world’s most advanced societies. But the 19th and early 20th centuries marked a sharp decline. From 1839 to 1949, a period remembered as the Century of Humiliation, China suffered foreign exploitation, internal rebellion, and invasion. The British opium trade devastated Chinese society. Unequal treaties stripped China of sovereignty over its ports and territory. The Taiping Rebellion killed millions. The Sino-Japanese War and later the Japanese invasion during World War II caused unimaginable destruction. Around 30 million Chinese died during WWII alone. By the time the war ended, China was exhausted and broken.
Revolution and the Rise of Mao Zedong
After decades of civil war between the Communist Party and the Nationalists (KMT), the Communists emerged victorious in 1949, led by Mao Zedong. The People’s Republic of China was born. Mao sought rapid transformation. In 1958, he launched the Great Leap Forward, aiming to collectivize agriculture and industrialize the country at breakneck speed. Private land ownership was abolished. Farmers were forced into collectives. Small backyard steel furnaces were encouraged nationwide. The result was catastrophic.
Agricultural productivity collapsed, resources were wasted, and poor planning, combined with bad weather led to one of the deadliest famines in history. Between 20 and 40 million people died. Ecological misjudgments, such as the Sparrow Extermination Campaign, further worsened food shortages by destroying natural pest control systems.
The Cultural Revolution: Chaos in the Name of Control
Instead of correcting course, Mao launched the Cultural Revolution in 1966. Under the banner of ideological purity, students were mobilized as Red Guards to attack intellectuals, officials, and anyone deemed disloyal. Schools and universities were shut. Historical sites were destroyed. Families were torn apart. Fear dominated everyday life.
Estimates suggest that hundreds of thousands to over two million people died during this period. By the time Mao died in 1976, China remained poor, traumatized, and economically stagnant. Yet Mao’s era was not without achievements. Literacy improved dramatically. Public education expanded. Women gained legal rights, including the right to divorce. These foundations would later play a crucial role in China’s recovery.
Deng Xiaoping and the Turning Point
After Mao’s death, Deng Xiaoping emerged as China’s most influential leader. Unlike Mao, Deng was a pragmatist. He believed ideology mattered less than results. His guiding philosophy became famous:
“It doesn’t matter whether a cat is black or white, as long as it catches mice.”
Deng concluded that excessive state control had crippled China. The solution, he believed, was economic freedom without political liberalization, an approach later called “Socialism with Chinese Characteristics.”
Reforming Agriculture: Incentives Matter
One of Deng’s first reforms was the Household Responsibility System. Land ownership remained with the state, but families were given long-term leases. Farmers could choose what to grow and sell surplus produce after meeting government quotas. For the first time in decades, farmers had incentives to increase productivity. Between 1978 and 1984, agricultural output grew at an average rate of 7.4%, and grain production doubled within a few years.
Decentralizing Industry
Deng applied similar reforms to factories through the Factory Manager Responsibility System. Instead of political appointees controlling production, managers and workers gained autonomy over output, pricing, and wages. This shift created accountability, ownership, and motivation. Productivity surged as workers began to benefit directly from their efforts.
Education as a National Priority
Deng understood that long-term growth depended on human capital. In 1986, China introduced nine years of free and compulsory education nationwide. Government spending on education steadily increased, from about 2% of GDP in 1980 to over 4% by 2010. Technical and vocational training received special attention, ensuring that workers had practical, job-ready skills. As a result, China’s literacy rate rose from 65% in 1982 to over 95% by 2012.
Township and Village Enterprises: Rural Growth Engines
Another breakthrough came through Township and Village Enterprises (TVEs). Owned by local governments, these enterprises operated across manufacturing, services, electronics, and textiles.
TVEs created jobs outside major cities, reducing the rural-urban income gap. By the early 1990s, they employed around 100 million people and produced about 20% of China’s industrial output. Some globally known companies, including Huawei, trace their roots to this system.
Opening to the World: Special Economic Zones
In 1980, China established Special Economic Zones (SEZs) to attract foreign investment. These zones offered tax incentives, fewer regulations, and efficient bureaucracy. Shenzhen, once a fishing village, became the most famous example. Its GDP grew from $0.3 billion in 1980 to over $420 billion by 2020.
China’s foreign direct investment rose from $0.06 billion in 1980 to over $333 billion in 2021. Global companies like Apple, Nike, and Volkswagen made China a manufacturing hub.
Infrastructure, Science, and Technology
The government invested heavily in transport, energy, and urban infrastructure, while also prioritizing scientific research. Massive funding was directed toward physics, space technology, computers, biotechnology, and energy. By 2020, China’s spending on research and development exceeded $500 billion. Innovation hubs like Zhongguancun Science Park became symbols of China’s technological ambition.
Results That Changed the World
In 1990, India and China had similar GDP per capita levels. Today, China’s GDP per capita is more than three times higher. Hundreds of millions were lifted out of poverty. Living standards rose dramatically. China integrated itself into the global economy at a scale never seen before. Deng described his approach as “crossing the river by feeling the stones” testing reforms step by step, adjusting policies when needed.
The Unresolved Contradictions
Deng Xiaoping’s reforms delivered prosperity but political authoritarianism remained. The Tiananmen Square massacre of 1989 exposed the limits of reform. Environmental damage was largely ignored. Democratic transition never came. These unresolved issues continue to shape China today under Xi Jinping, with increasing state control and restrictions on freedom.
The True Lesson of China’s Rise
China’s rise was not magic. It was the result of:
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Incentive-based reforms
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Massive investment in education and skills
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Gradual, tested policy changes
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Openness to global markets
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Long-term state planning
But it also reminds us that economic growth without political accountability comes at a cost. China’s story is one of extraordinary achievement and enduring contradictions. Understanding both is essential to understanding the world we live in today.
