History of

• Since the People's Republic of China was formed in 1949 until 1978, China had a planned socialist economy like the former Soviet Union. The government owned all factories and farms. Planning committees controlled all production. Market forces were often ignored when they conflicted with plans of the state.
  In 1978 China introduced farm reforms. Farmers could grow what they wanted and sell much of it at market prices. This greatly increased farm production. In 1984 China introduced reforms to their cities designed to create a "socialist market economic system." Many state-owned companies were privatized and trade was opened to Western companies.
  
  

Evolution

• In 1987 China's leaders set a goal to double the nation's Gross National Product from 1980. China achieved this before the end of the decade. The Chinese government then set a goal to quadruple the GNP from 1980 by the year 2000. The goal was achieved early in 1995.
  China's current goal is to raise per capita GNP to the average of all developed countries by 2050. China is trying to achieve a balance between a market-driven economy and a society that is philosophically dedicated to the common development of the people. This "socialist market economic system" strives to help all the people of China by helping some first.
  
  

Benefits

• China's economic success over the past 30 years is a testament to the effectiveness of their reforms. Their Gross Domestic Product grew an average of 9.4% per year over that time. It has the third largest GDP in the world behind only the US and Japan. In 2007 it was $3.42 trillion US dollars. China has raised the standard of living and consumption of its citizens. The per capital income increased an average of 8% a year over the past 30 years.
  
  

Risk Factors

• With rising incomes comes increase inequities. China is the most populous country in the world with 1.3 billion people. Providing for all those people is a daunting challenge. Over the past 30 years there has been a massive migration from the countryside into the cities.
  China's infrastructure is struggling to keep up. While the economic reforms made some Chinese people rich, it exacerbated the needs of China's poorest citizens. Pollution is also an issue as China makes the transition from an agrarian-based economy to an industrial one.
  
  

Effects

• China is expected to surpass both Japan and the United States and become the world's largest economy in the coming decades. China has large trade surpluses with most of its trading partners. This increases China's wealth at the same time its economy is growing from within. A burgeoning middle class is demanding more luxuries and material goods. This is driving trade even harder and making China more economically viable.