This article adopts the point of view that China’s development policies can only be appreciated if they are considered by applying perspectives from institutional economics. This requires attention to be given to the historical, political and cultural context in which its economic development has occurred. Therefore, this article gives attention to the political events leading up to China’s decision in 1978 to begin its economic reforms and the way in which Deng Xiaoping crafted its new development path. It also discusses the subsequent extension of Deng’s development policies by more recent leaders of the Chinese Communist Party. Indicators of China’s economic progress (including its increasing economic openness) since 1978 are given, and its emerging economic issues and concerns are highlighted. The concept of ‘market socialism with Chinese characteristics” is analysed and consideration is given to the economic challenges now facing China as a result of the global economic recession and the way it is responding to these challenges. In conclusion, the article touches on China’s economic and political future and its growing international status.