Although China has a civilized history and distinguished Confucian tradition of valuing education, special education as an institution was not established until the 19th century, when Western culture began to influence China. The subsequent development of special education has been slow due to adverse political and economic conditions. After the 1980s, a modern system of special education from preschool to higher education was formed, and since then, China has been moving toward the goals of effective inclusive education in response to global trends and the open-reform policy. Through analyzing the characteristics of the development of special education and the composition of the modern special education system in China, the authors reveal the critical social and cultural variables that underlie the development of special education: economic conditions, the Confucian tradition, Western cultural influences, and prevailing Socialist ideology. These factors have contributed to bringing about changes in special education in China, from no special education to special education starting at birth, from minimal to large-scale special education, and from segregation to inclusion.