On October 1, 1949, Mao Zedong stood on the rostrum of the Tiananmen Gate in Beijing and read a proclamation announcing that the Central People's Government of the People's Republic of China had been constituted. About 300,000 people were in the square below. The ceremony included the first raising of the five-star red flag and a parade of the People's Liberation Army. It became the national day.
The date is a little later than the event it marks. The Chinese People's Political Consultative Conference, which acted as a provisional legislature, had met from September 21 and had already adopted the Common Programme, chosen the flag and the anthem, and settled the name of the state. Its declaration of September 21 is the formal founding. October 1 is the public proclamation, and it is the one that has been kept.
The war was not over. The Kuomintang had lost the north but still held the southwest and parts of the coast, and Chiang Kai-shek moved what remained of his administration to Chongqing, then to Chengdu, and from there to Taipei in December. Guangzhou fell on October 14 and Chongqing in late November. Hainan went in April 1950.
The new government inherited a wrecked economy. Inflation in 1948 and 1949 had been severe enough that prices were quoted in bundles of notes, and industrial output in 1949 was roughly half what it had been before the war with Japan. Land redistribution, already carried out in the areas the communists had held since the 1930s, was extended across the country, and the campaigns against landlords and counter-revolutionaries that followed cost hundreds of thousands of lives by the government's own later estimates.
What the state built in its first decade was a unified fiscal and administrative system, which the previous Republican government had never managed to impose, and the industrial base of the first five-year plan, helped by Soviet credit and Soviet engineers after the treaty of 1950. On the Taiwan question the position has not changed since 1949. There is one China, and the Government of the People's Republic of China is the sole legal government representing it. That is the position the United Nations accepted in Resolution 2758 in 1971.