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The establishment of the republic of China harnessed all the critical sectors under one rule. Economy, enterprise and land was bought under the control of the government and a campaign called The Great Leap Forward (GLF) initiated in 1958 aimed at industrialization at a very large scale. Industries were set up in the backyards of houses. A system called the Commune system was started wherin people collectively cultivated land. By 1958, the whole farm population was covered under 26,000 communes.

GLF met with a lot of problems. A drought killed more than 30 million people. Because of China's conflicts with Russia, Russia withdrew professional who had been sent to help the industrialization process. Great Proletarian Cultural Revolution was introduced in 1965 by Mao under which professional and students were sent to the countryside to work and learn.

The reforms introduced in 1978 are responsible for the present day industrial growth of China. There were many phases in which the reforms were introduced. To start with, reforms were introduced in agriculture, trade and investment. In agriculture, the communes were divided into small plot and given to individual household who were allowed to keep the income from it after paying all the taxes. In the next phase, reforms were introduced in the industrial sector. Private firms and enterprises owned and operated by local collectives were allowed to produce goods. During this stage, enterprises owned by the government called State Owned Enterprise (SOEs) were made to face competition. The reform process also introduced dual pricing. The prices were fixed in two ways: industrialists and farmers were stipulated to buy and sell a certain quantity of inputs and outputs at the price fixed by the government. The rest were bought and sold at market prices. As the years rolled by, the goods sold in the markets increased as the production increased. Special economic zones were set up to attract foreign investors.

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