Building a Socialist Economy (1949–1955)
- China’s early years focused on restoring stability after decades of war and laying the foundations of a socialist state.
- The CCP nationalized major banks, railways and heavy industries to create a state-planned economy.
- The government introduced price controls and unified taxation to stabilize inflation after years of conflict.
- Soviet advisers arrived to assist with planning, industrial education and technological training.
- China prioritized heavy industry, believing strong industrial foundations were necessary for long-term socialist development.
- Agricultural policy shifted gradually from land redistribution toward early forms of cooperation such as Mutual Aid Teams and lower-level cooperatives.
First Five-Year Plan (1953–1957)
Industrial Expansion and Soviet Influence
- China followed a Soviet-style command model, focusing on steel, coal, machinery and energy production.
- About 88 percent of state investment went to heavy industry, accelerating urban growth and factory construction.
- With Soviet loans and technical support, China built new factories, railways and hydroelectric plants.
- Urban employment increased, and workers received welfare benefits such as housing and basic medical care.
- Industrial output grew rapidly, helping China recover from wartime destruction.
Social Achievements and Agricultural Strains
- The plan improved literacy rates and expanded technical schools to develop a skilled industrial workforce.
- Urban living standards rose, and workers enjoyed greater job security under state enterprises.
- However, agriculture developed more slowly, causing shortages of grain and food pressure in cities.
- Government encouragement of cooperatives created tension in rural areas as peasants lost control of production decisions.
- The unequal growth between industry and farming created long-term weaknesses that affected later campaigns.
Definition
State-planned economy
System where government controls production, prices and investment.
Definition
Cooperatives
Groups of peasants pooling land and tools under collective management.
Push Toward Socialist Collectivization (1955–1958)
- China moved quickly from cooperation to large-scale collectivization, believing socialism required collective ownership.
- The CCP merged small cooperatives into higher-level cooperatives, ending individual land ownership.
- By 1956, over 90 percent of rural households** belonged to cooperatives, speeding the transition toward socialism.
- Mao and Party leaders believed collectivization would increase production and free labor for industrial projects.
- Political pressure encouraged rapid change even when local conditions were unprepared.
