Chapter 2 investigates the ascent of technocrats to key roles in defining the technological foundations of the hydropower nation. The wartime crisis and the active involvement of the state in hydropower development and the training of engineers deepened the connection between hydropower and the Chinese nation. Before the Second Sino-Japanese War (1937–1945), the National Resources Commission of the Nationalist government conducted studies on China’s hydropower potential. During the war it began constructing hydropower projects in the southwest to mitigate the energy shortage the war produced. By uncovering the many interactions between American and Chinese institutions and individuals, this chapter explores the importance of transnational exchange in strengthening the technological foundations of the hydropower nation. It also delves into the early social and environmental impacts of the nascent hydropower nation. Despite being limited in scale, social and environmental disturbances in the 1940s foreshadowed the significant human toll and ecological changes that would occur in later decades in a fully realized hydropower nation.

The first half of the twentieth century witnessed the rise of the state sector of the Chinese economy. The rise of the state sector manifested in the development and expansion of central state enterprises and regional state enterprises and resulted from the ideology and policy of the developmental state. This chapter traces the emergence and evolution of the ideology and policy of the developmental state, describes the development and expansion of central state enterprises and regional state enterprises, and addresses the issue of change and continuity across the 1949 divide.