In October 1949 the CCP proclaimed the establishment of the PRC. Mao felt the best way to finance industrialization was for the government to take control of agriculture, thereby establishing a monopoly over grain distribution and supply. This would allow the state to buy at a low price and sell much higher, thus raising the capital necessary for the industrialization of the country. In 1954, peasants were encouraged to form and join collectives, which would supposedly increase efficiency without robbing them of their land or restricting their livelihoods. Internal passports (called the 戶口hukou system) were introduced in 1956, forbidding travel without appropriate authorization. One’s allotment of rice was available only through one’s hukou. Highest priority was given to the urban proletariat for whom a welfare state was created.

In 1957 Mao responded to tensions in the Party by promoting free speech and criticism during the Hundred Flowers Campaign (“Let a hundred flowers bloom; let a hundred schools contend.”). Asked repeatedly to give their honest assessment of Party policies, and promised freedom from reprisal, many Party cadres did so, but were more critical than Mao had expected. Stung by criticism, Mao went back on his word and purged at least half a million people in his Anti-Rightist campaign, which effectively silenced any opposition from within the Party to Mao’s plans. There is still debate over whether Mao was sincere initially.