Abstract: The economic development under the dominance of Nanjing KMT Government has some features of compulsory institutional evolution; it is also a continuous breakthrough of China’s two-thousand-year route of “encouraging agriculture while restraining business”. Through the safeguard of system and legislation and the state capitalist policies, the government constructed a modern financial system, strengthened the control of national key resources management, promoted the protection of free contract, property rights and free enterprises, activated factor markets and product markets, and promoted the development of new industries and commerce and the revitalization of the traditional agriculture. The openness and freedom made the financial markets, commodity markets and land markets more active; the rural revival turned the traditional agriculture to the modern transformation; the non-government economic organizations, such as chamber of commerce, peasant unions and guilds, together with free opinions protected the economic development, and helped the optimization of the government’s decision-making. The two-way interaction between the government and the market ushered in the second Golden Age in the economic development of Modern China. All the measures taken by the Nanjing KMT Government during that period left us with significant historical enlightenment: the reconstitution of government authority and the timely and effective intervention to economic development, the formation of the double driving-force in the economic and social development by the government and the market, the participation of a large number of experts and elites in the system designing and decision-making which reduced trial and error costs, and so on.

Key words: the period of Nanjing KMT Government; dominated by government; market adjustment; economic development