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 the Great Chinese 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 enhance the country's strategic depth by developing 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
In the first half of the 20th century, approaches to developing industry differed significantly by region. In coastal areas, most industry was privately owned and focused on consumer goods. Under both Chinese administration and Japanese colonization, Manchuria's industrial development was state-led. At a smaller scale than development in Manchuria, industrial development in China's northwest and southwest were also state-led.
During the Nanjing decade of 1927-1937, light industry was overwhelmingly privately owned.
The experience of the Second Sino-Japanese War convinced Chinese Communist Party (CCP) leadership that industrialization was the ultimate source of military strength. 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."
In September 1947, the CCP issued its first economic plan for industry, the Northeast Administrative Commission's Outline of the Plan for Economic Construction of 1948.
Early PRC When the PRC was founded in 1949, the country was one of the poorest in the world. Most of its industry was labor-intensive light industry like textiles and other consumer goods. The Chinese Civil War had devastated China's economy. The economy was further limited by the United States' embargo. The PRC therefore pursued a policy of rapid industrialization relying primarily on its domestic resources.
Article 35 of the 1949 Common Program adopted by the Chinese People's Political Consultative Conference emphasized the development of heavy industry, such as mining, iron and steel, power, machinery, electrical industry, and the chemical industry "in order to build a foundation for the industrialization of the nation."
To adapt to the limited resources of the early PRC, the government promoted the waste-recycling and production efficiency principle of "complete utilization". its underlying philosophy was expressed in the slogan "turning waste into treasure and harm into benefit."
Throughout the 1950s, China gradually restructured its industries under state ownership. China's state-led industrialization in the early 1950s was heavily influenced by the Soviet experience. During the 1950s, the Soviet Union was the largest supplier of machinery to Chinese industries. Publishing in 2017, academics Brandt, Ma, and Rawski contend that China's receipt of assistance from the Soviet Union and the Council for Mutual Economic Assistance (CMEA, or COMECON) was the largest technology transfer in history.
During China's First Five-Year Period (1953–1957), industrial development was the primary goal. The First Five-Year Plan's highest industrial sector priorities included: power plants, steel, mining, machinery, chemicals, and national defense, centered on steel and coal. To support these priorities, transportation, communication, and mining surveys also received significant state support. 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.
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. This contributed to the too-ambitious goals of the Great Leap Forward. Classical Marxist theory had hypothesized a relatively linear progression of development and a worldwide revolution beginning with the most developed countries, which did not occur. 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. The Great Leap Forward failed to rapidly industrialize China. 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.
Until the middle of the 1960s, China's industry was largely found in northeast China. Some resource extraction ministries were located elsewhere, for example oil and mining in Xinjiang and a large steel complex at Baotou.
From the 1960s through the conclusion of the Mao era, more than half of China's industrial output came from its heavy industry.
In the 1960s, Chen Boda advocated the strategy of "electrocentrism", through which the electronics industry should develop technological advancements and become embedded at all levels of China's economy. This included small-scale enterprises (not just large enterprises) producing electronics and that China could use the methods of a people's war to "smash electronic mysticism" and rapidly develop in the age of electronics.
During the Third Five-Year Plan period, the Chinese government instituted the Third Front campaign to enhance the country's strategic depth by developing 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. 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, and the development of Township and Village Enterprises.
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. 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.
Reform Deng Xiaoping emphasized the Four Modernizations as part of China's Reform and Opening Up. 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.
During Reform and Opening Up, China's focus shifted from the development of heavy industry to a focus on light industry. In the 1980s, China developed into a major source of low-priced manufactured products.
After the 1993 resolution on the socialist market economy, private industry began to develop quickly in east China and south China.
Contemporary China In 2006, China established the Medium to Long-Term Plan for the Development of Science and Technology. Prior national science and technology plans like the 863 Program and the Project 973 had promoted basic scientific research whereas the Medium to Long-Term Plan focused on promoting seven industries deemed strategically significant.
In 2010, the State Council issued the Decision on Accelerating the Development of Strategic Emerging Industries, which sought to support key breakthroughs in internationally competitive fields via a combination of market forces, state promotion, and state guidance. It identified key emerging industries of Energy Conservation and Environmental Protection, Next Generation Information Technology, Bioindustry, High-end Manufacturing, New Energy, New Materials, and New Energy Vehicles.
The Belt and Road Initiative, including its related Digital Silk Road, are significant parts of China's industrial development strategy.
In 2015, China launched its Made in China 2025 industrial policy. Its goal is to boost China's innovation in sectors deemed critical for the future of the world economy. Policy support for Made in China 2025 has also included government guidance funds, national laboratories, and state funded incentivization for research grants.
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".
In 2017, the State Council released its artificial intelligence development blueprint, outlining the goal of making China a global leader in AI by 2030. China's government takes a market-oriented approach to AI, and has sought to encourage private tech companies in developing AI. In 2018, it designated Baidu, Alibaba, iFlytek, Tencent, and SenseTime as "AI champions".
During the general secretaryship of Xi Jinping, China has emphasized an economic strategy of dual circulation. First, it seeks to rely more on China's domestic consumers. Second, it seeks to innovate more domestically developed technology and thereby reduce China's reliance on western technology.
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.
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.
When the 2008 financial crisis resulted in decreased demand from Western markets, Chinese manufacturers re-oriented towards the domestic market. Many focused on domestic online marketing, either through creating their own brands or selling to other Chinese online sellers. 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.