A tremendous task awaited the Communist Party of China (CPC) when it came to power—or "liberated" (jiefang 解放) China— in late 1949. China had been haunted for nearly 40 years by civil war, provincial particularism, and the Japanese invasion. The dominant party of the Republican era, the Kuomindang (Guomindang, KMT) had no chance to carry out any social reforms, and when it did, it was only hesitatingly. During the year 1949 the central government totally collapsed and thus left to the Communist Party a kind of vacuum out of which to build a new state and create a new society. Yet the CPC lacked substantial experience in governance, even if it had proved to be successful in the long fight for a regime change.
At the end of the civil war, the Chinese industry was left behind in shambles, and important parts of it, in Manchuria, had been dismantled by the Soviet Army after the Anti-Japanese War. The agricultural output was also far below earlier figures. Still, 80 per cent of the population were engaged in agriculture. Long-distance transport was a problem, as railroads were sparse, and paved streets virtually non-existent. Moreover, the KMT had during its flight to Taiwan, requisitioned practically the whole fleet of commercial ships. The paper notes of the Republican currency, the Yuan, experienced hyperinflation. Finally, millions of refugees tried to escape the KMT soldiery (and the latter the CPC), tax collectors, or just hunger and unemployment.
It was therefore the first duty of the CPC to restore order, to create new administrative institutions, to care economically and mentally for the populace, and to revive the economy. In the face of all these tasks and duties, the new regime had also the chance to determine the political and economic changes of a newly unified country, and to execute the transformations the KMT had disregarded. While the latter had lacked a long-term imagination and the lack of authority, the CPC was in a position to cling to a coherent ideology with a new impetus for the whole nation. The unprecedented aim was to create a thoroughly "new China" (xin Zhongguo 新中国). Ideology, dedication, working experience, close cooperation with the common people—and thus winning their confidence—, and a solid administrative hierarchy of the party cadres were factors that facilitated this process. Even the urban bourgeoisie accepted the new regime because they did not miss the former one. As a further positive factor for the required modernization of China, the financial and technical support of the Soviet Union was at the horizon.
The basis of the Chinese economy was agriculture. It was enormously backward, with numerous peasants just working as tenant farmers or living on small plots, and with a serious lack in advanced production tools and methods. The CPC announced that the transition to socialist ways of agricultural production would be slow, probably also because it was not clear in which way agriculture could be used to modernize the whole economy and to build up an industrial sector. In the beginning, therefore, the peasant population was just step by step instructed in political matters, not the least because illiteracy was still widespread and a rural health system non-existent.