China has experienced tremendous economic growth since the late 1970s. In large part as a result of economic liberalization policies, the gross domestic product (GDP) increased tenfold between 1978 and 2006, and foreign investment soared during the 1990s. In 2007 China passed Germany to become the world's third-largest economy, and in 2010 it passed Japan to become the second-largest. These gains obscure, however, the fact that per capita wealth is still significantly less than that of many smaller economies. China's challenge in the early 21st cent. will be to balance its largely centralized political system with an increasingly decentralized economic system and increase domestic consumption to diminish its economy's great dependence on exports for growth.
Agriculture is by far the leading occupation, involving almost 50% of the population, although extensive rough, high terrain and large arid areas—especially in the west and north—limit cultivation to only about 15% of the land surface. Since the late 1970s, China has decollectivized agriculture, yielding tremendous gains in production. Even with these improvements, agriculture accounts for only 12% of the nation's GDP. Despite initial gains in farmers' incomes in the early 1980s, taxes and fees have increasingly made farming an unprofitable occupation, and because the state owns all land, farmers have at times been easily evicted when croplands are sought by developers. Additional land reforms adopted in 2008 allow farmers to transfer land use rights.
Except for the oasis farming in Xinjiang and Qinghai, some irrigated areas in Inner Mongolia and Gansu, and sheltered valleys in Tibet, agricultural production is restricted to the east. China is the world's largest producer of rice and wheat and a major producer of potatoes, corn, peanuts, millet, barley, apples, sweet potatoes, sorghum, and soybeans. In terms of cash crops, China ranks first in cotton and tobacco and is an important producer of tea, oilseeds, silk, ramie, jute, hemp, sugarcane, and sugar beets.
Livestock raising on a large scale is confined to the border regions and provinces in the north and west; it is mainly of the nomadic pastoral type. China ranks first in world production of red meat (including beef, veal, mutton, lamb, and pork). Sheep, cattle, and goats are the most common types of livestock. Horses, donkeys, and mules are work animals in the north, while oxen and water buffalo are used for plowing chiefly in the south. Hogs and poultry are widely raised in China, furnishing important export staples, such as leather and egg products. Fish, chicken, and pork supply most of the animal protein in the Chinese diet. Due to improved technology, the fishing industry has grown considerably since the late 1970s.
China is one of the world's major mineral-producing countries. Coal is the most abundant mineral (China ranks first in coal production). High-quality, easily mined coal is found throughout the country, but especially in the north and northeast; China nonetheless also imports a significant amount of coal to satisfy its energy needs. There are also extensive iron-ore deposits; the largest mines are at Anshan and Benxi, in Liaoning province. Oil fields discovered in the 1960s and after made China a net exporter, and by the early 1990s, China was the world's fifth-ranked oil producer. Growing domestic demand beginning in the mid-1990s, however, has forced the nation to import increasing quantities of petroleum. Offshore exploration has become important to meeting domestic needs; massive deposits off the coasts are believed to exceed all the world's known oil reserves.
China's leading export minerals are tungsten, antimony, tin, magnesium, molybdenum, mercury, manganese, barite, and salt. China is among the world's four top producers of antimony, magnesium, tin, tungsten, and zinc, and ranks second (after the United States) in the production of salt, sixth in gold, and eighth in lead ore. There are large deposits of uranium in the northwest, especially in Xinjiang; there are also mines in Jiangxi and Guangdong provs. Alumina is found in many parts of the country; China is one of world's largest producers of aluminum. There are also deposits of vanadium, magnetite, copper, fluorite, nickel, asbestos, phosphate rock, pyrite, and sulfur.
Coal is the single most important energy source; coal-fired thermal electric generators provide over 70% of the country's electric power. China also has extensive hydroelectric energy potential, notably in Yunnan, W Sichuan, and E Tibet; the Three Gorges Dam, the world's largest concrete structure and largest hydroelectric station, is on the lower Chang (Yangtze) River.
Beginning in the late 1970s, changes in economic policy, including decentralization of control and the creation of "special economic zones" to attract foreign investment, led to considerable industrial growth, especially in light industries that produce consumer goods. In the 1990s a program of shareholding and greater market orientation went into effect; however, state enterprises continue to dominate many key industries in China's "socialist market economy." In addition, implementation of some reforms was stalled by fears of social dislocation and by political opposition, but by 2007 economic changes had become so great that the Communist party added legal protection for private property rights (while preserving state ownership of all land) and passed a labor law designed to improve the protection of workers' rights (the law was passed amid a series of police raids that freed workers engaged in forced labor). The continuance of one-party rule, however, has made corruption a significant economic problem, both within the government and within state-owned corporations. China's exploitation of its high-sulfur coal resources has resulted in significant air pollution, and sewage, fertilizer runoff, and chemical releases and spills have led to significant water pollution. Major industrial products are textiles, chemicals, fertilizers, machinery (especially for agriculture), armaments, processed foods, iron and steel, building materials, plastics, toys, electronics, telecommunications equipment, automobiles, rail cars and locomotives, ships, aircraft, commercial space launch vehicles, and satellites.
Before 1945, heavy industry was concentrated in the northeast (Manchuria), but important centers were subsequently established in other parts of the country, notably in Shanghai and Wuhan. After the 1960s, the emphasis was on regional self-sufficiency, and many factories sprang up in rural areas. The iron and steel industry is organized around several major centers (including Anshan, one of the world's largest), but many smaller iron and steel plants also have been established throughout the country. Brick, tile, cement, and food-processing plants are found in almost every province. Shanghai and Guangzhou are the traditionally great textile centers, but many new mills have been built, concentrated mostly in the cotton-growing provinces of N China and along the Chang (Yangtze) River.
Coastal cities, especially in the southeast, have benefited greatly from China's increasingly open trade policies. Most of China's large cities, e.g. Shanghai, Tianjin, and Guangzhou, are also the country's main ports. Other leading ports are rail termini, such as Lüshun (formerly Port Arthur, the port of Dalian), on the South Manchuria RR; and Qingdao, on the line from Jinan. In the northeast (Manchuria) are large cities and rail centers, notably Shenyang (Mukden), Harbin, and Changchun. Great inland cities include Beijing and the river ports of Nanjing, Chongqing, and Wuhan. Taiyuan and Xi'an are important centers in the less populated interior, and Lanzhou is the key communications junction of the vast northwest. Although a British crown colony until its return to Chinese control in 1997, Hong Kong has long been a major maritime outlet of S China.
Rivers and canals (notably the Grand Canal, which connects the Huang He [Yellow] and Chang [Yangtze] rivers) remain important transportation arteries. Since the 1980s China has undertaken a major highway and paved road construction program, and more recently it has invested significantly in constructing high-speed rail lines; it now has the most extensive high-speed rail system in the world. The much of the nation, but especially the east, is now well served by railroads and highways, and there are major rail and road links with the interior. There are railroads to North Korea, Russia, Mongolia, and Vietnam, and road connections to Pakistan, India, Nepal, and Myanmar. In addition, pipelines connect China with the oil- and natural-gas-producing nations of Central Asia, where China has displaced Russia as the major foreign economic power. As part of its continuing effort to become competitive in the global marketplace, China joined the World Trade Organization in 2001. The nation became the world's largest exporter of manufactured goods in 2009; its major trade partners are the United States, Japan, Hong Kong, South Korea, and Taiwan. China's economy, though strengthened by more liberal economic policies since the 1980s, continues to have some inadequacies in transportation, communication, and energy resources.