The Economics of China

By 1949, continuous foreign invasions, frequent revolutions and restorations, and civil wars had left the country with a fragile economy with little infrastructure. As Communist ascendancy seemed inevitable, almost all hard and foreign currency in China country were transported to Taiwan in 1948, making the war-time inflation even worse.

Since the formation of the People's Republic in 1949, an enormous effort was made towards creating economic growth and entire new industries were created. Tight control of budget and money supply reduced inflation by the end of 1950. Though most of it was done at the expense of suppressing the private sector of small to big businesses by the Three-anti/five-anti campaigns between 1951 to 1952. The campaigns were notorious for being anti-capitalist, and imposed charges that allowed the government to punish capitalists with severe fines.[23] In the beginning of the Communist party's rule, the leaders of the party had agreed that for a nation such as China, which does not have any heavy industry and minimal secondary production, capitalism is to be utilized to help the building of the "New China" and finally merged into communism.[24]

The new government nationalized the country's banking system and brought all currency and credit under centralized control. It regulated prices by establishing trade associations and boosted government revenues by collecting agricultural taxes. By the mid-1950s, the communists had ruined the country's railroad and highway systems, barely brought the agricultural and industrial production to their prewar levels, by bringing the bulk of China's industry and commerce under the direct control of the state.

Meanwhile, in fulfillment of their revolutionary promise, China's communist leaders completed land reform within two years of coming to power, eliminating landlords and redistribute their land and other possessions to peasant households.

Mao tried in 1958 to push China's economy to new heights....