Beginning in late 1978 the Chinese leadership has been moving the economy from a sluggish Soviet-style centrally planned economy to a more market-oriented economy but still within a rigid political framework of Communist Party control. 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. This has resulted in mainland China's shift from a command to a mixed economy.

The government has emphasized raising personal income and consumption and introducing new management systems to help increase productivity. The government also has focused on foreign trade as a major vehicle for economic growth, for which purpose it set up over 2000 Special Economic Zone (SEZ) where investment laws are relaxed in order to attract foreign capital. The result has been a quadrupling of GDP sine 1978. In 1999, with its 1.25 billion people and a GDP of just $3,800 per capita, the PRC became the sixth largest economy in the world by exchange rate and third largest in the world after the European Union and the US by purchasing power. The average annual income of a Chinese worker is $1,300. Chinese economic development is believed to be among the fastest in the world, about 7-8% per year according to Chinese government statistics. Mainland China is now a member of the World Trade Organization.

Mainland China has a reputation as being a low-cost manufacturer, particularly due to abundant cheap labour. A worker at a Chinese factory typically costs a company 50 cents to $1 per hour (average $0.86), compared with $2 to $2.50 per hour in Mexico and $8.50 to more than $20 for the US. By the end of 2001, the average electricity price in Guangdong Province was 0.72 yuan (9 US cents) per kilowatt hour, much higher than the average level on the Chinese mainland of 0.368 yuan (4 US cents). The PRC officially abolished direct budgetary outlays for exports on Jan. 1, 1991. Nonetheless, it is widely believed that many of mainland China's manufactured exports receive other types of export subsidies. Other forms of export subsidies involve guaranteed provision of energy, raw materials or labor supplies. Exports of some agricultural products, such as corn and cotton, still benefit from direct export subsidies. However, the PRC substantially reduced the level of corn export subsidies in 1999 and 2000. Preferential tax incentives are another example of export subsidies. China is attempting to harmonize the system of taxes and duties it imposes on enterprises, domestic and foreign alike. As a result, preferential tax and duty policies that benefit exporters in special economic zones and coastal cities have been targeted for revision. Chinese exports to the United States were $125 billion in 2002; American exports to China were $19 billion. This is believed to be partly due to an unfavorable exchange rate between the Chinese yuan and the United State dollar which is pegged to the dollar. Chinese exports to the United States are rising 20% per annum, much faster than U.S. exports to China.