But in the first half of the 20th century, China was beset by major famines, civil unrest, military defeats, and foreign occupation. After World War II, the Communists under MAO Zedong established a dictatorship that, while ensuring China's sovereignty, imposed strict controls over everyday life and cost the lives of tens of millions of people. After 1978, his successor DENG Xiaoping decentralized economic decision making.
Political controls remain tight even while economic controls continue to weaken.
To this end the authorities have switched to a system of household responsibility in agriculture in place of the old collectivization, increased the authority of local officials and plant managers in industry, permitted a wide variety of small-scale enterprise in services and light manufacturing, and opened the economy to increased foreign trade and investment. The result has been a quadrupling of GDP since 1978. Agricultural output doubled in the 1980s, and industry also posted major gains, especially in coastal areas near Hong Kong and opposite Taiwan, where foreign investment helped spur output of both domestic and export goods. Beijing thus has periodically backtracked, retightening central controls at intervals. In 1995-99 inflation dropped sharply, reflecting tighter monetary policies and stronger measures to control food prices.