In the early 1980s it dismantled collective farming and allowed private enterprise again. Now it is one of the world"s top exporters and is attracting record amounts of foreign investment. In turn, it is investing billions of dollars abroad.
As a member of the World Trade Organization, China benefits from access to foreign markets. In return it must expose itself to competition from abroad. But relations with trading partners have been strained over China"s huge trade surplus and the piracy of goods; the former has led to demands for Beijing to raise the value of its currency, which would make Chinese goods more expensive for foreign buyers and, in theory, hold back exports.
Some Chinese fear that the rise of private enterprise and the demise of state-run industries carry heavy social costs such as unemployment and instability.
Moreover, the fast-growing economy has fuelled the demand for energy. China is the largest oil consumer after the US, and the world"s biggest producer and consumer of coal. The country spends billions of dollars in pursuit of foreign energy supplies. There has been a massive investment in hydro-power, including the $25bn Three Gorges Dam project.