China was one of the most advanced and powerful countries in the world for more than a thousand years before the modern era. Even in the nineteenth century it dominated the world economic landscape. According to Angus Maddison, the famous economic historian, China accounted for a third of global GDP in 1820 (Figure 1.1). But with the Industrial Revolution in the eighteenth century, the West quickly rose, and China slid. And with a weaker economy, it was defeated repeatedly by the western powers, becoming a quasicolony, ceding extraterritorial rights in treaty ports to twenty foreign countries. Its customs revenues were controlled by foreigners, and it surrendered territory to Britain, Japan, and Russia.

Since China's defeat in the Opium War in 1840, the country's elites, like those in other parts of the developing world, strived to make their motherland a powerful and respected nation again. But their efforts produced little success. China's share of global GDP shrank to about 5 percent and stayed low until 1979 (Figure 1.1).

China's economic fate then changed dramatically at the end of the 1970s when it started to implement the reform and opening strategy. Since then, its economic performance has been miraculous. Annual GDP growth averaged 9.9 percent over the next thirty years, and annual growth in international trade, 16.3 percent. In 1979 China was one of the poorest countries, with a per capita income of $210, a third of the average among the developing countries in sub-Saharan Africa, the poorest continent in the world.