Since the late 1970s, China has shifted from a centrally planned economy that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy. Reforms began in the agricultural, industrial, and financial sectors, and labor regulations were relaxed. The government also focused on foreign trade as a major vehicle for economic growth, and to encourage foreign investment, China created special economic zones in coastal cities.

As the result of adopting economic reforms and joining the World Trade Organization in December 2001, China's per capita income has grown at an average annual rate of more than 8% over the last three decades. While poverty has been drastically reduced, this rapid growth has been accompanied by rising income inequalities, especially between rural and urban areas.

One specific change China has been forced to embrace as a result of joining the WTO is to liberalize the movement of labor within the country. During the Maoist era of the 1950s, China instituted an inherited residency permit system that defined where its citizens could work. This system, or "hukou," made it extremely difficult for rural residents to leave their hometowns and move to cities to work. Restructuring the hukou system has been a very controversial topic even though many Community Party leaders recognize it is an impediment to economic progress. The system still exists, but enforcement of the residency permits has been relaxed in recent years. By the early 21st century an estimated 200 million Chinese lived outside their officially-registered areas. While it is easier for these migrants to work in cities than ever before, they are still unofficial residents of the cities and as a result have very limited access to education and government services. Many are forced to live a precarious existence in company dormitories or shanty towns, and in several respects occupy a social and economic status similar to illegal immigrants.

The Wide Angle film "To Have and Have Not" explores the human side of China's newly liberalized market economy. In the film, the increasing income gap between rich and poor is highlighted in vivid detail. The gated communities, luxury vehicles, and seemingly boundless consumption of China's newly rich is seen in stark contrast to the plight of migrant workers, who struggle to eke out a living and to educate their children at the margins of urban society.

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