1 - Getting markets to work in the countryside

Summary

The ‘dilemma’ posed by China's agricultural reform

Why was China's agricultural reform so successful before 1985 but frequently problematic after that? In which policy direction should China proceed in the 1990s – introducing agricultural protection or internationalising agricultural production? And what is the best strategy for achieving domestic food security as well as sustaining rapid economic growth? These are questions that puzzle many Chinese policy analysts and Western economists who are closely watching China's economic reform and development.

Agricultural reform in China started at the end of 1978. Reform in the early stages, mainly the giving back of responsibility to farming households and increases in state purchase prices for agricultural products, led to large improvements in agricultural production. From 1979 to 1984, agricultural production expanded by 7.4 per cent per annum and grain output grew at an annual rate of 5 per cent. From 1982 to 1984 growth was spectacular with grain output increasing, on average, by 27 million tonnes a year (about 8 per cent of the annual output) (figure 1.1). Agricultural reform was widely regarded as being very successful, with the extraordinary growth recorded in the wake of the initial reforms being called a ‘miracle’ (Longworth 1989; Huang 1993a).

After 1985, when the government pushed forward with market reforms, problems were felt in agricultural performance. Growth rates in agriculture dropped back to less than 4 per cent. The average annual growth rate of agriculture was 3.8 per cent during the period 1984–94. Although not low by international standards, this rate of growth represented a considerable slowdown. Grain output increased by only 0.9 per cent per annum.