After 1911, China entered the Warlord Era. During this time, industrialization was slow to non-existent; between the years 1920 and 1949, the industrial sector had only increased by less than three million members, mainly women and children working in cotton mills. The main changes in social structure were military.

In 1924, the Soviet Union helped Sun Zhongshan (Sun Yat-sen) rebuild the Nationalist (Guomindang, GMT, KMT) military force, most notably through the training school at Huangpu, a small town near Guangzhou. Many military leaders of the following decades were Huangpu graduateis, including Lin Biao, who later rose to fame with Mao.

During the period 1949 to 1976, Communist Party cadres became the new upper class. The misuse and manipulation of the ration system by members of the cadre class threatened to change them into a new class of privileged bureaucrats and technicians, mere descendants of the pre-revolutionary ruling class of cadre technocrats and selected representatives of the old proletariat.
In the countryside, the landlord class was eliminated during the land reform. In 1959, there were ten million state cadres, thirty-five million state workers, and two hundred million peasants.

The peasant class composed the majority of the population. Following the implementation of land reforms, Mao instituted a process of collectivization in response to the a few selling of land by peasants to the new generation of rich land owners. Afraid of creating a new landlord class, Mao instituted a system of communes where land was supposed to be worked equally by peasants.

At this time, the hukou system was implemented, which divided the population into urban and rural residents. This was done to make distribution of state services through danweis and communes easier and to better organize the population in preparation for a possible invasion from the Soviet Union.

During the Cultural Revolution, the composition of society changed again. Schools were closed and many youth were sent down to the countryside, putatively to learn from the peasants. The life expectancy of peasants increased from less than forty years before 1949 to more than sixty years in the 1970s.

After the Gaige Kaifang policy was implemented in the late 1970s, the Communist system Mao had instituted disintegrated in the face of economic development. In the countryside, communes disappeared by 1984. State-run enterprises known as danweis began to lay off workers, "smashing the iron rice bowl" because of their expense and inefficiency.

Although technically illegal under the hukou household registration system, peasants began to look for jobs in cities and TVEs in other rural areas. Although state workers and urban collective workers did not decrease absolutely, their percentage dramatically decreased within the Chinese working class. In 1991, the number of the peasant workers was 113 million, surpassing the number of state workers. In 1993, the number of peasant workers was 145 million, almost equaling the combined numbers of state workers, urban collective workers, and urban non-state workers. As of 2006, there are 150 to 220 million peasant workers, also known as migrant workers (民工, min2gong1) or the floating population. Migrant workers have become the main body of the Chinese working class.

The Chinese Communist Party has adapted to this new system. From 1979 to 1993, the number of cadres increased from 18 million to 37 million. After 1993, the cadre class increased by several million members until finally reaching a plateau of 40 million due to the central government's actions to freeze membership. Cadres, party members, and state professionals have become the main body of the capitalist class. According to official statistics, in February 2003, 29.9% of capitalists were Communist Party Members. This is interesting in light of the fact that capitalists are now involved with between 70-85% of China's GDP.

Despite this, there is tension between capitalists and the Communist state, most notably caused by taxes, lack of access to state bank loans, and the capitalist connection with the underworld. The capitalist class manages three-fourths to four-fifths of mainland China's GDP, but only pays one-third or less of aggregate taxes. The state enterprises pay the other two-thirds. Most capitalists successfully evade taxes, helped by local governments.

Access to state bank loans (Tsai, 2002). In all the annual meetings of the national congress and national political consultative conference, capitalist legislators and representatives always complain about the difficulties in getting loans from state banks. Most of them said that during the process of their development they never got one cent in loans, and complained that in their localities the standard bribe for a loan is as high as 20 to 30% of the loan.