Many observers and researchers of China are already familiar with China’s industrialization after reform and opening in 1978. They know how China became the world’s manufacturing center through township and village enterprises, foreign investment, export processing, coastal opening, WTO accession, industrial clusters, and global supply chains.
Yet many people still treat 1978 as the starting point of China’s industrialization. In this telling, China began as a poor agrarian country in 1978 and then suddenly entered industrialization through cheap labor, foreign factories, and globalized orders.
This is a major misunderstanding.
China was of course still poor in 1978. Household consumption was low. The agricultural population was huge. Light industry and services were underdeveloped. Enterprises were inefficient. Technology remained backward. But China in 1978 was no longer an agrarian country without an industrial base. It already had steel, coal, electricity, machinery, chemicals, defense industry, aviation, heavy equipment, state-owned factories, engineering schools, technical workers, and industrial cities.
This is where the story of China’s industrialization has to be reconnected. The first thirty years and the second thirty years cannot be separated.
The first thirty years did not create an affluent society. Nor did they create an efficient economy. What they left behind was a heavy-industrial base, state engineering capacity, and the first generation of modern industrial talent. The next thirty years unleashed markets, profits, local competition, foreign capital, private business, and global demand. The first built the skeleton; the second installed the engine. Without either side, it is impossible to explain how China later industrialized with such speed, scale, and supply-chain density.
The Soviet Union’s assistance to China in building the 156 industrial projects in the 1950s was the crucial opening in China’s heavy-industrial foundation. It was also an extremely rare mechanism of accelerated industrialization in twentieth-century world history: a country that had already built heavy industry and military industry transferred, through state-to-state agreements, complete factories, equipment, blueprints, production processes, experts, training, and management systems to a backward agrarian country that had only recently completed political reconstruction.
This was not ordinary aid.
It was a system-level industrial transplant.
To understand China’s industrialization, the first thing to abandon is an overly simplified story: that China began industrializing from zero after 1978.
1978 was certainly a decisive turning point in Chinese economic history. Without reform and opening, there would have been no later Chinese manufacturing boom. The state-owned industrial system under the planning regime had serious problems. Enterprises lacked autonomy. Resource allocation was rigid. Prices were distorted. Light industry was underdeveloped. Agriculture and household consumption were long suppressed. Heavy industry emphasized output over efficiency.
But this does not mean that China’s pre-1978 industrial accumulation can be erased.
By 1978, China had already gone through nearly three decades of heavy-industry-first development. In 1952, the primary sector still accounted for 50.5 percent of GDP, while the secondary sector accounted for only 20.9 percent. By 1978, the primary sector’s share had fallen to 28.1 percent, while the secondary sector had risen to 48.2 percent. This means reform and opening did not face the China of 1952. It faced a China that had already been deeply transformed by heavy industry.
The following chart reveals a fact that is still widely underestimated. China was still poor in 1978, but its industrial structure was no longer that of a typical agrarian economy.
In 1978, China’s secondary-industry share of GDP reached 47.9 percent. This was far above today’s India and also above many current developing manufacturing economies. Today, India’s secondary-industry share is only 27.8 percent, Brazil’s is 23.4 percent, and Indonesia, Mexico, and Russia are roughly in the 31–33 percent range. Even compared with today’s South Korea and China itself, China’s 1978 secondary-industry share looks unusually high.
This shows that reform and opening did not begin with an agrarian society starting industrialization from scratch. It began with a country already deeply reshaped by the planned economy and the heavy-industry-first strategy. The problem was not the absence of an industrial base. The problem was low efficiency, structural distortion, insufficient consumption, and a lack of market incentives. What happened after reform and opening was the reconnection of this existing heavy-industrial skeleton to markets, profits, local competition, foreign capital, and global demand.
This structure matters.
If a country has no steel, no electricity, no coal, no machinery, no machine tools, no chemicals, no engineers, no industrial workers, and no heavy-industrial cities, market reform alone will not automatically create industrialization. Markets can release demand. Profits can change incentives. Foreign investment can bring orders and management. But all of these need an industrial base capable of absorbing the opportunity.
One reason China moved so quickly after 1978 is that it was not starting from empty ground.
Reform and opening released the energy of Chinese society and Chinese enterprises. But what it released was not the potential of a purely agrarian society. It released a country that had already accumulated a large stock of industrial assets, engineering talent, and organizational capability.
This judgment does not romanticize the first thirty years.
The costs of those decades were extremely high. Agriculture was long extracted from. The urban-rural divide became institutionalized. Consumer goods were in chronic shortage. Enterprises were inefficient. Plan targets overrode market signals. Many of these problems later had to be corrected through reform and opening.
But historical judgment cannot look only at efficiency, and it cannot look only at consumption. The hardest task in early industrialization is to push a country, in a very short period of time, from an agrarian production structure into modern large-scale industry. That task requires steel, energy, machinery, chemicals, transport, defense industry, and engineering education. The Soviet-backed 156 projects of the 1950s changed China’s historical starting point at exactly this level.
The “156 projects” were never an absolutely fixed statistical category.
In the official Chinese historical account, the number comes from 50 projects identified in 1950, 91 projects included in the 1953 Sino-Soviet agreement, and 15 additional projects added in 1954, for a total of 156. The list was later adjusted to 154 projects, with 150 actually put under construction. But the term “156 projects” became fixed as the classic label in the history of China’s industrialization.
Recent economic-history research using archival project-level records identifies 139 approved projects between 1952 and 1957. This difference does not change the historical meaning. The real significance of the so-called 156 projects is not the exact arithmetic. It is that they represented a group of complete Soviet-backed heavy-industrial projects.
They were concentrated in electricity, coal, steel, machinery, chemicals, nonferrous metals, and defense industry. Light industry was almost absent from the center. Under the recent project-level research classification, among 139 approved projects, electricity accounted for 23.0 percent, machinery 21.6 percent, coal 20.1 percent, steel 14.4 percent, and light industry only 1.4 percent. In terms of investment, steel alone accounted for about 45 percent of total spending.
This shows that the 156 projects were not ordinary industrial aid.
They were a heavy-industrial menu.
Coal supplied energy. Electricity powered factories. Steel and nonferrous metals supplied materials. Machinery built machine tools, bearings, automobiles, tractors, and heavy equipment. Chemicals supplied synthetic ammonia, calcium carbide, dyes, rubber, and basic chemical inputs. Defense projects built aviation, engines, tanks, radar, and electronics.
Only when these projects are seen together does the meaning of “industrial system” become clear.
A country can import machines. It can buy steel. It can assemble consumer goods. But without mutual support among energy, materials, equipment manufacturing, chemicals, and engineering talent, it still cannot form complete industrial capability. The significance of the 156 projects lies here: they did not merely help China build a few more factories. They built a heavy-industrial loop on Chinese soil.
The 156 projects had another major consequence:
They rewrote China’s industrial geography.
Modern industry in old China had been concentrated mainly in coastal, riverine, and treaty-port cities. Shanghai, Tianjin, Qingdao, Guangzhou, Wuhan, and a few others had some industrial base, but most inland regions lacked a modern industrial system. China’s industrial distribution was not only small in scale; it was also deeply uneven.
The heavy-industrial layout of the 1950s changed this.
Of the 150 projects actually put under construction, 56 were in the Northeast, accounting for 37.3 percent; 33 were in the Northwest, or 22.0 percent; 27 were in North China, or 18.0 percent; 18 were in Central South China, or 12.0 percent; 11 were in the Southwest, or 7.3 percent; and only 5 were in East China, or 3.4 percent. This meant that the 156 projects did not simply reinforce the old coastal industrial pattern of pre-1949 China. They pushed heavy industry, energy, defense industry, machinery, and chemicals into the Northeast, North China, the Northwest, and selected inland cities.
This was resource geography. It was defense geography. It was also the use of state projects to create industrial cities.
Changchun became the starting point of China’s automobile industry because of FAW. Shenyang became an aviation and equipment-manufacturing center because of Shenyang Aircraft, machine tools, cables, and heavy equipment. Anshan reinforced its position as a steel core. Fularji built the First Heavy Machinery Works and a special-steel system. Baotou became a steel and defense-industry node in the Northwest. Luoyang was turned into a heavy-industrial city in the Central Plains through YTO, Luoyang Bearing, Luoyang Mining Machinery, copper processing, and a thermal power plant. Lanzhou developed oil refining, chemicals, and power. Jilin Chemical became a foundation of China’s basic chemical industry. Wuhan became a steel and equipment node through Wuhan Iron and Steel and Wuhan Heavy Machine Tool.
These cities did not grow like ordinary cities.
They were industrial nodes manufactured by state projects.
The 156 projects brought factories, housing, schools, hospitals, roads, thermal power plants, technical personnel, and industrial support systems into inland cities. They changed not only industrial structure, but also population flows, urban identity, local fiscal capacity, and regional development trajectories.
This is one reason China’s later industrial system had such depth. Chinese manufacturing did not later exist only as a coastal export belt. It had multiple industrial layers across the Northeast, North China, Central China, the Northwest, the Southwest, and the coast. After reform and opening, the coastal regions connected first with global markets, but the inland and old industrial bases still supplied materials, equipment, talent, energy, and engineering experience.
The macroeconomic impact of the 156 projects is clear in the data from 1952 to 1957.
In 1952, the primary sector still accounted for 50.5 percent of China’s GDP, while the secondary sector accounted for only 20.9 percent, and industry for 17.6 percent. By 1957, the primary-sector share had fallen to 40.3 percent, the secondary-sector share had risen to 29.7 percent, and industry had risen to 25.4 percent.
In five years, agriculture’s share of GDP fell by 10.2 percentage points, the secondary sector rose by 8.8 percentage points, and industry rose by 7.8 percentage points. Industrial value added increased from 11.98 billion yuan to 27.1 billion yuan, a 126 percent increase in five years.
More importantly, in the combined gross output of industry and agriculture, industry’s share rose from 43.1 percent to 56.7 percent. Within gross industrial output, heavy industry’s share rose from 26.4 percent to 48.4 percent.
These numbers show the core fact: between 1952 and 1957, China did not become rich, but it became a different economy.
It was still poor. Household consumption was still low. The agricultural population remained huge. But the center of gravity of the economy was beginning to move from land to factories, from agricultural output to industrial output, and from light industry and small-scale industry to energy, steel, machinery, chemicals, and defense industry.
This is the historical meaning of the First Five-Year Plan and the 156 projects.
They did not immediately create a consumer society. They did not create an efficient market economy. They created the basic material platform of an industrial state. Steel, coal, electricity, machinery, chemicals, and defense industry may not make ordinary people rich immediately, but they determine whether a country has the starting point for independent industrialization.
Modern industrialization is not a matter of producing a few more consumer goods. It requires upstream capability. Without steel, machinery cannot expand. Without coal and electricity, factories cannot run. Without chemicals, agriculture, defense industry, materials, and light industry all lack a foundation. Without machine tools and heavy machinery, the industrial system remains dependent on external equipment.
China in the 1950s began building capability precisely in these hardest, heaviest, longest-cycle, most capital-intensive sectors.
If one looks only at GDP structure, industrialization still feels abstract. Output data for major industrial products makes the change much more concrete.
Between 1952 and 1957, China’s raw coal output rose from 66 million tons to 131 million tons, an increase of about 99 percent. Electricity generation rose from 7.3 billion kWh to 19.3 billion kWh, an increase of 164 percent. Pig iron rose from 1.93 million tons to 5.94 million tons, up 208 percent. Steel rose from 1.35 million tons to 5.35 million tons, up 296 percent. Finished steel rose from 1.06 million tons to 4.15 million tons, up 292 percent. Chemical production also expanded rapidly. Sulfuric acid rose from 190,000 tons to 632,000 tons, up 233 percent. Fertilizer rose from 39,000 tons to 151,000 tons, up 287 percent. Machine tools rose from 13,700 units to 28,000 units, up 104 percent. Automobile production moved from almost no meaningful scale to 7,900 vehicles in 1957.
These figures are more powerful than macro shares.
They show that Chinese industrialization was not just a structural change on paper. It became coal, electricity, steel, chemicals, machine tools, and automobiles. Energy, materials, basic chemicals, and equipment capability expanded at the same time. That is the sign of an industrial system taking shape.
The key point is not how large the absolute output level was in 1957. Compared with the United States, the Soviet Union, and Western Europe, China’s industrial scale was still small, and its technology remained backward. What mattered was the direction of growth and the range of capabilities being built.
If a poor agrarian country merely produces more textiles, food, and basic consumer goods, it may improve short-term living standards, but it will struggle to become a heavy-industrial state. China in the 1950s chose a harder route: sacrificing short-term consumption and concentrating scarce capital, import capacity, engineering talent, and fiscal resources into upstream heavy industry.
That path carried a high price, but it changed China’s future possibilities.
The 156 projects are often described simply as “the Soviet Union helped China build a batch of factories.” That description is too shallow.
The crucial point is that Soviet assistance was not only machines and equipment. It included resource surveys, site selection, engineering design, complete sets of equipment, construction and installation, trial production, production processes, technical data, product design, operating procedures, quality control, on-site expert guidance, and personnel training.
This was a transfer of industrial capability.
Machines depreciate. Equipment ages. Experts leave. But blueprints, production processes, trained engineers, shop-floor systems, quality-control routines, maintenance rules, and factory training institutions remain. They enter people, organizations, and cities.
This is why the long-term impact of the 156 projects was much greater than their short-term production capacity.
Recent economic-history research provides strong evidence for this. Factories that received only Soviet equipment enjoyed a short-term production boost, but the advantage faded as the equipment aged. Factories that received both equipment and know-how saw long-term gains in output and productivity continue to expand. More importantly, they later became more capable of adopting new processes, new equipment, and new production methods.
This shows that what the 156 projects really transferred was not industrial capital, but industrial learning capacity.
Chinese engineers learned not only how to operate a machine, but how to organize a workshop, schedule production, control quality, maintain equipment, train skilled workers, record output, identify faults, and improve processes. The factory itself became a school. The shop floor was not only a production space; it was also a space of technical diffusion.
When Soviet experts withdrew in 1960, China was certainly hit hard. Some projects under construction were interrupted. Some technical materials were incomplete. Many fields had to be explored again. But China did not return to zero. The most important things had already been embedded: the people remained, the blueprints remained, the process standards remained, the maintenance systems remained, the technical schools remained, and the cities and supply chains around the factories remained.
Equipment assistance ends. Organizational capability reproduces.
This point is essential for understanding China.
Many developing countries have received external assistance, introduced factories, and bought equipment. But there is a huge distance between equipment imports and industrial capability absorption. China’s special feature was that Soviet assistance met a highly organized state system willing to concentrate resources and capable of mobilizing engineering talent and fiscal capacity nationwide.
Soviet technology entered China through state-to-state agreements. It became Chinese industrial capability through China’s own internal organizational capacity: the allocation of engineers, coastal support for inland projects, construction teams, technical schools, worker housing, hospitals, schools, transport, and local fiscal support. External technology transfer and internal state capacity combined to create real industrial sediment.
The historical significance of the 156 projects and the First Five-Year Plan was enormous. But they were not costless.
First, heavy-industry-first development squeezed agriculture and light industry. In the 1950s, China had extremely scarce capital, limited fiscal capacity, and very little foreign exchange. Concentrating resources on steel, coal, electricity, machinery, and defense industry meant that agriculture and household consumption had to give way for a long time. The scissors gap between industry and agriculture, unified procurement and marketing, grain pressure, and consumer-goods shortages were all connected to this path.
Second, the Soviet-style planning system created long-term institutional problems. Enterprises emphasized output, not efficiency; plan completion, not cost discipline; equipment construction, not market feedback; administrative command, not enterprise autonomy. Many state-owned enterprises later had to be corrected through contracting, tax-for-profit reform, shareholding reform, bankruptcy and restructuring, and the modern enterprise system.
Third, there was technological path dependence. The Soviet Union supplied mature heavy-industrial production technology and management systems of the time, but not all of its frontier technology. Nuclear weapons, intercontinental missiles, top-tier aero engines, and other core technologies were not fully transferred. Soviet equipment and standards also created later upgrading costs.
Fourth, the speed of industrialization itself created macroeconomic imbalance. Around 1956, basic construction investment expanded too quickly, fiscal pressure rose, and agricultural and consumer-goods supply could not keep up with industrial expansion. The later Great Leap Forward pushed the heavy-industrial impulse into disaster. The industrial capacity accumulated through the 156 projects should not be conflated with subsequent policy adventurism, but the heavy-industry-first strategy did contain inherent risks.
So the argument of this essay is not that the planned economy “succeeded.” The more accurate judgment is: the planned economy imposed enormous costs in efficiency, consumption, agriculture, and enterprise incentives, but the first thirty years did leave behind the basic skeleton of a heavy-industrial state.
That skeleton was later reactivated by reform and opening.
The relationship between the 156 projects and China’s post-1978 manufacturing boom should not be understood as a straight line from Soviet aid to export success.
The real connecting mechanism was activation.
By 1978, China was no longer the agrarian economy of 1952. Decades of heavy-industrial investment had left behind steel mills, coal mines, power plants, machinery factories, chemical bases, defense plants, engineering schools, and industrial cities. This system was inefficient, distorted, consumption-poor, and excessively tilted toward heavy industry. But it existed.
Reform and opening changed the operating environment of this system.
Enterprises began to gain more autonomy. Profits, bonuses, prices, orders, and market demand began to enter the factory. Local governments gained strong incentives to develop their economies and attract investment. Township and village enterprises, collective enterprises, private firms, and foreign-invested firms grew around the state-owned industrial skeleton. Coastal regions connected China’s industrial system to global markets. After WTO accession, global demand further magnified the system.
The 1950s left a skeleton. After 1978, an ecosystem grew around it.
Large state-owned factories supplied basic materials, energy, equipment, technical personnel, and engineering experience. Collective and township enterprises entered light industry, building materials, hardware, and components. Private firms expanded rapidly in coastal supply chains. Foreign companies brought management, product standards, export channels, and global orders. Local governments built development zones, infrastructure, and industrial parks. China’s manufacturing advantage formed through this combination: upstream state-accumulated heavy-industrial capability, downstream market-oriented cost competition, order responsiveness, and rapid iteration.
This is the most important relationship between the “first thirty years” and the “second thirty years.”
The first thirty years answered the question of existence: Is there steel? Is there electricity? Are there machine tools? Are there chemicals? Are there engineers? Are there industrial cities?
The second thirty years answered the question of activation: Do enterprises have autonomy? Do local governments compete? Do products have markets? Does capital earn returns? Can factories take orders? Can supply chains iterate?
Reform and opening did not replace the industrial state. It activated the industrial state.
Connecting the 1950s with the period after 1978 helps explain why China differs from many developing countries.
Many developing countries have cheap labor. Many have received foreign investment. Many have adopted opening policies. Many have export-processing zones. But they struggle to form a China-style complete industrial system. The reason is that cheap labor alone does not create steel, electricity, machine tools, chemicals, ports, railways, engineers, supply chains, and local industrial clusters.
Foreign capital can bring factories. It does not automatically bring an industrial state.
If a country has labor but no energy and materials system; assembly plants but no machinery and components; export zones but no inland industrial depth; imported equipment but no engineers and maintenance capacity; trade opportunities but no state capacity to organize infrastructure and supply-chain support, it will struggle to move from processing trade to a complete industrial system.
China’s advantage was that when it obtained access to global market opportunities after 1978, it already had a relatively thick industrial base.
That base was not advanced, and it was not efficient. But it was broad. It included steel, coal, electricity, machinery, chemicals, defense industry, aviation, electronics, railways, ports, engineering colleges, technical schools, state-owned factories, industrial cities, and the engineering habits formed under the planning era.
After reform and opening, these old capabilities were recombined.
Some old state-owned enterprises became supply-chain anchors. Large numbers of engineers and technical workers moved into new firms. Local governments used existing industrial foundations to attract investment. When foreign companies entered, they could find suppliers, workers, factory sites, energy, and infrastructure. Private companies could learn, imitate, improve, and reduce costs inside an existing industrial environment. This is how the density of Chinese manufacturing formed.
This is why China is not an ordinary low-cost export platform.
China later became the world’s factory, and of course labor, foreign capital, and globalization all mattered. But the deeper condition was that China had an industrial-state platform capable of absorbing globalization.
The history of China’s industrialization is not two mutually negating stories.
One story says the first thirty years were only poverty, planning, inefficiency, and disaster, and that real development began only after 1978.
Another story says the first thirty years had already accomplished everything, and reform and opening merely continued the process.
The truth is more complicated.
The first thirty years did not create a rich China, but they created the skeleton of industrial China. The second thirty years did not begin industrialization from zero; they activated that skeleton through market mechanisms, local competition, private enterprise, foreign capital, and global demand.
This is the continuity of Chinese industrialization.
The Soviet-backed 156 projects of the 1950s were the crucial starting point within that continuity. They pushed an agrarian country onto a heavy-industrial path. They helped China systematically build steel, coal, electricity, machinery, chemicals, nonferrous metals, defense industry, and aviation for the first time. They trained the first generation of modern industrial engineers, technical workers, and factory managers. They reshaped China’s industrial geography, producing industrial nodes such as Changchun, Luoyang, Baotou, Lanzhou, and Fularji. What they left behind was not just equipment, but processes, blueprints, organizational routines, and industrial learning capacity.
Reform and opening later performed another equally decisive act: it made these capabilities face the market.
This is the core mechanism of China’s industrialization.
The 1950s left China with the hardware and engineering organization of an industrial state; after 1978, China attached to those capabilities the engine of markets, profits, local competition, and global demand.
Without the first thirty years, China would have struggled to absorb large-scale industrialization so quickly after reform and opening. Without the second thirty years, the industrial skeleton left by the first thirty years would have remained trapped in low efficiency, shortages, and plan targets.
The real competitiveness of Chinese manufacturing comes from the layering of these two historical phases.
It is not simply the result of Soviet aid. It is not simply the result of the planned economy. It is not simply the result of foreign investment and cheap labor. It is the result of state industrial investment, external technology transfer, internal organizational capability, market-oriented reform, local competition, and global demand working together.
This is why China’s industrialization is so hard to explain with a single theory.
It did not suddenly begin in 1978.
It began taking shape in the steel mills, coal mines, power plants, machinery factories, chemical bases, and defense plants of the 1950s. After 1978, it was reignited by the market. After WTO accession, it was magnified by global demand. Today, it has become the world’s most complete, dense, and iterative manufacturing system.
Only by understanding this can we understand the formation of China as an industrial state.
And only by understanding this can we understand why China is not an ordinary developing country.
The starting point of China’s industrialization was not an empty field in 1978.
It was a country already transformed by heavy industry, waiting to be activated.
Written and posted by Leon Liao (China).
