China's Economic Rise & Its Political Implications

Chinese Political History II: Reform, Opening & the Rise of Modern China

Chapter 5 · China's Economic Rise & Its Political Implications

Chapters 1 to 4 described how the leadership opened the economy and kept the political system under party control. This chapter asks what the economic results did to that political bargain. It follows the 2001 entry into the World Trade Organization, summarizes the scale of growth, and then turns to the central question of the reform era: how far does the party's claim to rule depend on economic performance? The figures below come from a small number of reference sources and are marked where they are single-source or contested.

Joining the WTO

China became a member of the World Trade Organization on 11 December 2001, after a long process that dates to 1986, when it first sought observer status in the GATT, the WTO's predecessor. The steps that followed included a US–China agreement on terms reached in Beijing in November 1999, the US House passing permanent normal trade relations in May 2000, and the final approval at the Doha ministerial conference in November 2001. One source names President Bill Clinton, Jiang Zemin and Premier Zhu Rongji as the leaders whose decade-long efforts made it possible.

The terms

China accepted "considerably harsher conditions than other developing countries," including tariff cuts, market opening, industrial policy reform, intellectual property protection and services liberalization.

Why accept them

Accession locked in access to export markets and gave reformers an outside deadline for restructuring. Whether that was the leaders' motive is my inference; the sources here describe the terms and the negotiators, not their reasoning.

After 2001

China became the world's largest exporter in 2009, and one source says its economy was 11 times its 2001 size by 2025.

Effects Abroad Are Contested The same source reports that Chinese imports lowered US manufactured-goods prices by an estimated 7.6 percent from 2000 to 2006, and that about a million US manufacturing jobs were lost to import competition between 1999 and 2011. Economics Fundamentals 9 covers the research behind such estimates and how the authors later revised the net picture. Treat these as estimates from one summary, not settled totals. A 2024 WTO statement also flagged a lack of transparency about Chinese subsidies to some industrial sectors.

The Scale of Growth

Measure	Reported figure	Caution
Average GDP growth after the 1978 reforms	About 10 percent a year for 30 years	A summary figure; growth was uneven year to year.
Extreme poverty	88.1 percent (1981) to 0.2 percent (2019); another source: 67 percent (1990) to under 1 percent (2015)	Different years and poverty lines, so the two series are not comparable. Both point the same way.
People lifted out of extreme poverty	About 800 million, 1978–2018	A single-source claim.
State-owned enterprises	About 40 percent of GDP, private firms about 60 percent	In 2025, private firms are 40 percent of the top-100 listed companies and SOEs 45 percent.

The Statistics Question Data reliability is disputed. Former Premier Li Keqiang is reported to have called GDP estimates "man-made" and unreliable. A 2025 Federal Reserve analysis, on the other hand, found the official figures aligned closely with alternative indicators. Both claims should be held together: the numbers are questioned, and they have also been checked and found broadly consistent.

What Growth Did to the Political Bargain

1. Performance legitimacy

Scholars describe the party's approach since the reforms as "performance legitimacy": ruling authority resting on delivering concrete results such as growth, stability, national strength and good governance. It has a history: Dingxin Zhao links it to the traditional Mandate of Heaven (see Chinese Political History I Chapter 10 for the imperial version). Zhao also argues it is intrinsically unstable, because it carries concrete promises and so triggers political crisis when they go unmet.

A Common Overstatement "The party rules because it delivers growth" is a popular summary, and the research is more mixed. One review found no strong evidence that economic performance is the sole, or even the principal, pillar of legitimacy, and scholar Heike Holbig is reported to have noted an impression that growth alone no longer generates a high degree of public consent. Performance matters; it is not the whole story.

2. A wider party

The Three Represents (Chapter 4) legitimized private business owners inside the party. That connects the economy and the political system directly: the groups the reforms enriched were invited into, not set against, the ruling organization.

3. The state stays large

State-owned enterprises still account for roughly 40 percent of GDP, and the leadership kept the top posts in party hands (Chapter 2). The reforms shifted economic decisions toward firms and markets without moving political authority.

4. Problems that growth created

The Jiang-era reforms produced regional disparities, and Hu Jintao's "harmonious society" (Chapter 4) was aimed at inequality. The recent property-sector crisis is one source's example of a current strain on growth.

Looking Ahead If legitimacy rests partly on performance, slower growth becomes a political question and not only an economic one. Chapter 6 asks how Xi Jinping's rule responded to that pressure.

Hands-On Exercises

Exercise 1

Two sources give different extreme-poverty figures (88.1 to 0.2 percent for 1981–2019, and 67 to under 1 percent for 1990–2015). Explain why they cannot be combined into one series and what conclusion is still safe.

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Exercise 2

Summarize Dingxin Zhao's argument that performance legitimacy is unstable, and say what evidence in this chapter would count for or against it.

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Exercise 3

A headline says "WTO entry cost the US a million jobs." Rewrite it as an accurate, sourced statement using the chapter's wording and cautions.

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Quick Reference

1986: China seeks GATT observer status; Nov 1999: US–China terms agreed; 11 December 2001: WTO membership
2009: largest exporter; economy 11 times its 2001 size by 2025 (single source)
Growth: about 10 percent a year for 30 years after 1978
Poverty: two series, not comparable; both show a steep fall
SOEs: about 40 percent of GDP; private about 60 percent
Data: Li Keqiang reportedly called GDP figures "man-made"; a 2025 Fed analysis found them close to alternatives
Performance legitimacy: Zhao says it is unstable; other work says growth is not the only pillar