The transformation of China can be understood as a process of interaction between economic growth and national governance. Given that scientific technology and transaction costs are dominant factors affecting wealth accumulation, the control of transaction costs was the focus of China’s national governance in the premodern history of an agrarian-dominated economy with slow technological progress. China was the world’s most prosperous country thanks to the reduction of transaction costs through a family-based economy lacking property rights, a political structure of the family state, and an ethics-based social governance without law and jurisprudence. However, breakthroughs and progress in science and technology from Western countries brought subversive changes to the comprehensive strength of China. China was forced to transform. To take advantage of advances in science and technology and rapidly accumulate wealth, China moved from delineating human rights to delineating property rights as the main competition-restricting mechanism. The former hierarchical system and its ethics were replaced by a legal system that treated all people fundamentally equally. The revolution accelerated this change by abolishing inelastic customs and ethics that hindered modernization. Paradoxically, the Chinese Communist Party, as the main group that led the revolution, created a functioning system with a human rights structure of horizontal equality and vertical hierarchy for organization and mobilization that has allowed contemporary China to balance reform, development and stability.