Sharing an affection for Stevie Wonder, Steely Dan, David Bowie, and Brian Eno, Daly and Lundon played with various Knowsley post-punk groups. Daly then spent time tinkering with synthesizers and a drum machine. Along with Lundon, Daly began writing songs. The pair eventually asked drummer and percussionist Dave Reilly to join them, and in 1982 they released their debut single "African and White" as China Crisis on the independent record label, Inevitable. In June 1982 they supported the former Television guitarist, Tom Verlaine, at London's Venue.

The band was signed to Virgin Records and recorded their debut album, Difficult Shapes & Passive Rhythms: Some People Think It's Fun To Entertain, which was released in December 1982. A re-release of "African & White" became China Crisis' first hit in the UK, reaching #45 in the UK Singles Chart. When the follow-up single, "Christian" made UK #12 in early 1983, this brought them to national prominence. By this time, Reilly had left the band, but was still credited on the record sleeve as a guest on the single, along with new member Steve Levy (oboe/saxophone). The album peaked at #21 in the UK Albums Chart. During this period the band toured supporting Simple Minds (as discussed in interviews on the DVD Live in Concert at the Paul McCartney Auditorium Liverpool Institute of Performing Arts).

Adding Gazza Johnson (bass) and Kevin Wilkinson (drums) to the line-up, a second album, Working With Fire & Steel : Possible Pop Songs - Volume 2 was released in November 1983. This was regarded as a more consistent effort, with tracks including "Tragedy and Mystery" (released as a single six months earlier), "Hanna Hanna" and the title track, "Working With Fire & Steel", which became a hit single in Australia. The album was a Top 20 success in the UK, and China Crisis spent 1984 and 1985 making their biggest chart run, beginning with their only UK Top 10 hit single, "Wishful Thinking", which peaked at #9.

Their third album, Flaunt the Imperfection, was produced by Walter Becker (of Steely Dan fame) and reached #9 in the UK Albums Chart in May 1985. According to the album credits, China Crisis was now officially a quintet consisting of Daly, Lundon, Johnson, Wilkinson, and Becker. However, Becker never appeared with the band, and the subsequent tour featured new keyboardist Brian McNeil. Johnson was now credited as co-writer with Daly and Lundon.

The album was previewed by the #14 UK hit single "Black Man Ray", which also enjoyed international success. The follow-up, "King In A Catholic Style (Wake Up)" was a Top 20 UK single (#19), but it would prove to be the band's last substantial hit. A third release from the album, "You Did Cut Me", stalled at UK #54. They simultaneously released a video compilation, Showbiz Absurd.

In 1986, the band returned with the low key What Price Paradise, including "Arizona Sky" (the album's first single release and another Australian hit), "June Bride", "The Understudy" and "A Day's Work For the Dayo's Done". All the band were now credited as songwriters. A second single from the album, "Best Kept Secret", made UK #36 in early 1987. It was to be the band's final Top 40 hit single.

The five-piece band worked with Becker once more on 1989's Diary Of A Hollow Horse, which earned critical acclaim though little commercial success. It spawned the singles "St Saviour Square" and "Red Letter Day", both reaching the lower reaches of the UK Singles Chart. Becker acted as the producer of most of the album's tracks, but this time was not credited as an official band member.

The band's last studio album, Warped By Success, was released in 1994, following the band's parting of ways with the Virgin label and produced their final UK hit, "Everyday The Same". Although Johnson and Wilkinson both made small contributions, the band was now listed as comprising Daly, Lundon, producer Terry Adams and audio engineer Mark Phythian. In 1995 they released a live unplugged album and video entitled Acoustically Yours, which proved to be their recording swansong. This featured one last single, a live version of "Black Man Ray" and also saw a return for Johnson, Wilkinson and McNeil.

Sometimes misunderstood by critics, China Crisis distinguished themselves from their Liverpudlian contemporaries such as Orchestral Manoeuvres In The Dark, The Teardrop Explodes, and Echo & The Bunnymen by digesting a cornucopia of musical genres, everything from jazz to progressive rock.[citation needed] Despite the stylistic deviations, China Crisis maintained their distinctive sound through a number of albums in the 1980s and 1990s.[citation needed]

Since 1992 there have been four compilation albums of their work for the UK and U.S. markets and three live DVDs.

On 17 July 1999 drummer Kevin Wilkinson committed suicide by hanging himself at the age of 41. Wilkinson had played with a wide variety of bands including The Waterboys, Fish, The Proclaimers, Squeeze and Howard Jones. In 2000 Daly contributed a track to a tribute compilation to Wilkinson, Green Indians.