The People's Republic of China is the world's second largest economy after the United States by purchasing power parity ($8.77 trillion in 2009). China is also the second largest trading nation in the world and the largest exporter and second largest importer of goods.

China's economy is huge and expanding rapidly. In the last 30 years the rate of Chinese economic growth has been almost miraculous, averaging 8% growth in Gross Domestic Product (GDP) per annum. The economy has grown more than 10 times during that period, with Chinese GDP reaching 3.42 trillion US dollars by 2007. In per capita income terms, China stands at a lowly 107th out of 179 countries. The Purchasing Power Parity figure for China is only slightly better at 7,800 US dollars, ranking China 82nd out of 179 countries. The country's per capita income was at $6,567 (IMF, 98th) in 2009.

China's investment climate has changed dramatically with more than two decades of reform. In the early 1980s China restricted foreign investments to export-oriented operations and required foreign investors to form joint-venture partnerships with Chinese firms. The Encouraged Industry Catalogue  sets out the degree of foreign involvement allowed in various industry sectors. From the beginning of the reforms legalizing foreign investment, capital inflows expanded every year until 1999. Foreign-invested enterprises account for 58–60% of China's imports and exports.

Since the early 1980s scientific and technological modernization has been given an especially high priority. At the end of 1996, China had 5,434 state-owned independent research and development institutions at and above the county level. The Chinese government's goals are sweeping: to develop, influence or downright own the core intellectual property of the next generation of technologies that will power the global economy. To do this, the government has committed to doubling its spending on research and development so that it reaches 2.5% of China's gross domestic product by 2010, approaching $100 billion annually. China is also on track to have more research scientists and engineers than any other country by 2015. 2006 China spend more on research and development (R&D) than Japan and so became the world’s second highest investor in R&D after the United States, according to OECD.

The Medium and Long-term S&T Strategic Plan (2006-20) provides a blueprint for further developing China’s innovation capacity and for becoming an innovation oriented country by 2020. A priority is to improve the framework conditions for innovation, particularly with respect to the environment, the infrastructure for financing R&D, entrepreneurship and small and medium-sized enterprises, corporate governance, and the protection of intellectual property rights.