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China: Recovery from War, 1949-52
Country Study > Chapter 5 > Economic Context > Economic Policies, 1949-80 > Recovery from War, 1949-52

RECOVERY FROM WAR, 1949-52


In 1949 China's economy was suffering from the debilitating effects of decades of warfare. Many mines and factories had been damaged or destroyed. At the end of the war with Japan in 1945, Soviet troops had dismantled about half the machinery in the major industrial areas of the northeast and shipped it to the Soviet Union. Transportation, communication, and power systems had been destroyed or had deteriorated because of lack of maintenance. Agriculture was disrupted, and food production was some 30 percent below its pre-war peak level. Further, economic ills were compounded by one of the most virulent inflations in world history.

The chief goal of the government for the 1949-52 period was simply to restore the economy to normal working order. The administration moved quickly to repair transportation and communication links and revive the flow of economic activity. The banking system was nationalized and centralized under the People's Bank of China. To bring inflation under control by 1951, the government unified the monetary system, tightened credit, restricted government budgets at all levels and put them under central control, and guaranteed the value of the currency. Commerce was stimulated and partially regulated by the establishment of state trading companies (commercial departments), which competed with private traders in purchasing goods from producers and selling them to consumers or enterprises. Transformation of ownership in industry proceeded slowly. About a third of the country's enterprises had been under state control while the Guomindang government was in power (1927-49), as was much of the modernized transportation sector. The Chinese Communist Party immediately made these units state-owned enterprises upon taking power in 1949. The remaining privately owned enterprises were gradually brought under government control, but 17 percent of industrial units were still completely outside the state system in 1952.

In agriculture a major change in landownership was carried out. Under a nationwide land reform program, titles to about 45 percent of the arable land were redistributed from landlords and more prosperous farmers to the 60 to 70 percent of farm families that previously owned little or no land. Once land reform was completed in an area, farmers were encouraged to cooperate in some phases of production through the formation of small "mutual aid teams" of six or seven households each. Thirty-nine percent of all farm households belonged to mutual aid teams in 1952. By 1952 price stability had been established, commerce had been restored, and industry and agriculture had regained their previous peak levels of production. The period of recovery had achieved its goals.

Data as of July 1987




Last Updated: July 1987


Editor's Note: Country Studies included here were published between 1988 and 1998. The Country study for China was first published in 1987. Where available, the data has been updated through 2008. The date at the bottom of each section will indicate the time period of the data. Information on some countries may no longer be up to date. See the "Research Completed" date at the beginning of each study on the Title Page or the "Data as of" date at the end of each section of text. This information is included due to its comprehensiveness and for historical purposes.

Note that current information from the CIA World Factbook, U.S. Department of State Background Notes, Australia's Department of Foreign Affairs and Trade Country Briefs, the UK's Foreign and Commonwealth Office's Country Profiles, and the World Bank can be found on Factba.se.

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