AGRICULTURAL AND RURAL

DEVELOPMENT IN CHINA

L.X. Zhang
Center for Chinese Agricultural Policy
Chinese Academy of Sciences

ABSTRACT
This chapter looks at the various reforms in China since the 1950s and their impacts on
agricultural and rural development. Among other things, this chapter discusses the major
achievements of economic developments and the changing role of agriculture in the country.
In the last section, major challenges and opportunities are identified for the further
development of the agricultural sector in China.

Historical overview of agricultural and rural production would be a way to compensate for the
development in China weakness. The initial idea was to run some kind of
cooperative services in production in which small
For a long time after the founding of the People’s households were formed to help each other during
Republic of China in 1949, China adopted the formal busy seasons. This kind of arrangement can be
Soviet model. This process of the adoption has gone categorized as “labor exchange”.
through several stages.
The second phase of the collective movement was the
Before 1949, China’s economy was no different from concentration of all the medium and large sized farm
that of any other developing country, with respect to production tolls. Individual households were provided
private ownership of properties and private run with collective services for certain farm work. Not long
businesses. However, large disparities in living after this, an even larger scale of merging took place in
standards and access to resources pervaded society. This the rural areas. All lands owned by individual
was especially true in rural areas. Agrarian reform in households were merged under a collective land
the early 1950s enabled more than 80 per cent of the ownership. All means of production also became
rural poor households to gain access to land resources, collective. The commune system was established, under
which had been previously controlled by less than 20 which the production team was the smallest production
per cent of the wealthy. Until then, agricultural unit. The production brigade was at a level above and
production had been carried out by individuals in rural the commune was at a higher level still. Such a system
China. existed for nearly 30 years, until the late 1970s, when
the economic reforms started. Although there was
The collective movements started in the 1950s. The not much change in the institutional setting in rural
basic argument for the move was that small farms areas, major changes in agricultural policies did take
and individual households would not be able to cope place. The following table is a summary of the major
with natural disasters or other kind of shocks. Thus, political as well as agricultural policy changes before
a certain level of collective management in the reform.

Agricultural and Rural Development in China 1

 Table 1. Major political events and agricultural policies in China since 1949.

Period Political events Major agricultural policies

1949-52 Socialist land reform Specialized production

(Agrarian reform)
1953-57 Cooperative movement Free market allowed

1958-62 “Great Leap Forward” movement Compulsory commandism for demand and supply
No free market
Grain self-sufficiency for major agricultural products
1963-65 Readjustment period Very low prices for agricultural products
Commune system
Policies during 1963-65 similar to those in the early reform period
1966-78 Cultural revolution

1979- Economic reforms Relatively higher prices for agricultural produce

Free market encouraged
Specialized production encouraged
Abolition of the Commune system
Various kinds of production responsibility, especially household
responsibility systems

Source: Adapted from Yao and Colman 1990

Economic reforms were introduced in China in the late Fig. 1. Changes in structure of economy – GDP Percentage.
1970s. In rural areas, the reform process started with
the introduction of the household responsibility system. 90 –
80 –
The initial aims of the reforms were to expand
70 –
agricultural production, to diversify the rural economy,
60 –
to improve the rural standard of living and to promote
50 –
the innovation and diffusion of new technologies. The 40 –
40.0
major contents of the reform included: a) institutional 30 –
30.0 27.1
reform by the introduction of the household 20 – 17.7 16.0
responsibility system; b) marketing reform that freed 10 –
most agricultural commodities from Government 0–
1970 1980 1990 1999 2000
control, and brought about huge increases in the prices
of major agricultural commodities; and c) Agriculture Ind/Service
encouragement of rural sidelines, or other non-farming
activities, and allowing for labor mobility between
regions and between rural and urban areas. This was However, the basic characteristics of agriculture still
accompanied by changes in the political system in rural remains namely farms are all small scale with
areas. individual households operating the production
system. An important structural difference between
The reform shifted the Chinese economy from a China’s agriculture sector and those from developed
planned system, to a market-oriented system and countries and many other developing countries is that
towards a more open economy. Consequently, there the agriculture sector in China is characterized by
was an overall improvement of the economy, which is an equitable distribution of cultivated land among
reflected in various indicators as shown in Table 2 and households. In essence, such a land tenure system
Fig. 1. provides rural households with a basic means of

2 Agricultural Development and the Opportunities for Aquatic Resources Research in China
Table 2. The annual growth rates (%) of China’s economy, 1970-2000.

Pre-reform Reform period

1970-78 1979-84 1985-95 1996-2000

Gross domestic product (GDP) 4.9 8.5 9.7 8.2

Agriculture 2.7 7.1 4.0 3.4
Industry 6.8 8.2 12.8 9.6
Service Na 11.6 9.7 8.2

Foreign Trade 20.5 14.3 15.2 9.8

Import 21.7 12.7 13.4 9.5
Export 19.4 15.9 17.2 10.0

Grain production 2.8 4.7 1.7 0.03

Oil crops 2.1 14.9 4.4 5.6
Fruits 6.6 7.2 12.7 8.6
Red meats 4.4 9.1 8.8 6.5
Fishery 5.0 7.9 13.7 10.2

Rural enterprises output value Na 12.3 24.1 14.0

Population 1.80 1.40 1.37 0.90

Per capita GDP 3.1 7.1 8.3 7.1

Note: Figure for GDP in 1970-78 is the growth rate of national income in real term. Growth rates are computed using regression
method. Growth rates of individual and groups of commodities are based on production data; sectoral growth rates refer to
value added in real terms.
Source: Adapted from CCAP working paper (Huang and Rozelle 2001).

living, and so serves as a substitute for welfare and The majority of rural farmers are semi-subsistence.
insurance systems in the rural areas. While such an Although the performance in the agricultural sector has
arrangement may reduce production efficiency, it is been well recorded, the relative role of agriculture in
an important factor contributing to rural welfare and the national economy is changing. This is discussed in
social stability. the next section.

Changing role of agriculture

Fig. 2. Growth of GDP and Aggregate GDP percentage.
China’s economic liberalization and structural change
10 – have operated for several decades. Since the economic
9– reforms were initiated in 1978, China’s economy has
8– grown substantially. For example, the annual growth
7– rate of GDP was 8.5 per cent in 1979-84 and 9.7 per
6–
cent in 1985-95 (Table 2 and Fig. 2). Moreover, despite
5–
the Asian financial crisis, China’s economy continued
4–
3– to grow at 8.2 per cent annually between 1996 and 2000.
2– Foreign trade has been expanding even more rapidly.
1– China’s trade to GDP ratio increased from 13 per cent
0– in 1980 to 44 per cent in 2000 (NSBC 2001).
1970-78 1979-84 1985-95 1995-2000

GDP Ag GDP

Agricultural and Rural Development in China 3

 Although reform has penetrated the entire economy share of cropping in total agricultural output fell from
since the early 1980s, most of the successive 82 per cent to 56 per cent. Moreover, the most
transformations began and in some way depended on significant declines in crop-specific growth rates are in
growth in the agricultural sector. After 1978, the grain sector (Table 2 and Fig. 3).
decollectivization, price increases, and the relaxation
of local trade restrictions on most agricultural products The structural changes of the economy can also be
accompanied the take-off of China’s agricultural revealed through employment data (Table 3 and
economy noted for 1978-84. Grain production Fig. 4). The transfer of the labor force (previously
increased by 4.7 per cent per year. Even higher growth employed in the agricultural sector) to the non-
was enjoyed in horticulture, livestock and aquatic agricultural sector has continued to the present.
products (Table 2 and Fig. 3). Although agricultural
growth decelerated after 1985 and the one-off efficiency In the early 1970s for example, employment in the
gains from the decollectivization, the country still agricultural sector accounted for more than 80 per cent
enjoyed agricultural growth rates that have outpaced but this number declined to 50 per cent in the year
the rise in population (Table 2). 2000. The same trends are true for the agricultural GDP
and the export sector (Table 3).

Fig. 3. Growth of agriculture percentage.

Major achievements of the economic
14 – development
12 –
10 –
Over the past two decades, China has maintained
8–
impressive rates of economic growth. Rapid economic
growth has helped to improve dramatically the standard
6–
of living of its people. This can be shown by the trend
4–
of rural per capita income increase (Fig. 5). Per capita
2–
income in rural China was extremely low prior to the
0–
1970-78 1979-84 1985-95 1996-2000 reforms. In 1978, average income per rural resident
Meat Fruit Grain Fishery was only about RMB 220 a year (US$ 150). For 29 years
from 1949 to 1978, per capita income increased by only
95 per cent, or 2.3 per cent a year. This changed
Despite the healthy expansion of agriculture, the even dramatically directly after the initiation of rural reforms
faster growth of the industrial and service sectors during in 1978. Per capita income increased to RMB 522 in
the reform era has begun to transform the rural 1984 from RMB 220 in 1978, a growth rate of 15 per
economy, from agriculture to industry and from rural cent a year. In the mid-1980s, rural income continued
to urban. During this process, the share of agriculture
in the national economy declined significantly.
Agriculture contributed more than 30 per cent of GDP Fig. 4. Change in structure of economy – employment
before 1980, but fell to 16 per cent in 2000 (Table 3 percentage.
and Fig. 2). Employment in agriculture fell from 81
per cent in 1970 to only 50 per cent in 2000. 90 –
81
80 –
70 – 69
The rapid economic growth, urbanization and food 62 60
60 –
market development have boosted demand for meats, 52 50
50 –
fruits and other non-staple foods, changes that have 40 –
stimulated sharp shifts in the structure of agriculture. 30 –
For example, the share of livestock output value more 20 –
than doubled from 14 per cent to 30 per cent in 1970 10 –
to 2000 (Table 3). Aquatic products rose at an even 0–
1970 1980 1985 1990 1995 2000
more rapid rate. One of the most significant signs of
structural changes in the agricultural sector is that the Agriculture Non-agriculture

4 Agricultural Development and the Opportunities for Aquatic Resources Research in China
 Table 3. Changes in structure percentage of China’s economy, 1970-2000.

1970 1980 1985 1990 1995 2000

Share in GDP
Agriculture 40 30 28 27 20 16
Industry 46 49 43 42 49 51
Services 13 21 29 31 31 33

Share in employment
Agriculture 81 69 62 60 52 50
Industry 10 18 21 21 23 22.5
Services 9 13 17 19 25 27.5

Share in Export
Primary Products Na 50 51 26 14 10
Foods Na 17 14 11 7 5

Share in Import
Primary Products Na 35 13 19 18 21
Foods Na 15 4 6 5 2

Share in agricultural output

Crop 82 76 69 65 58 56
Livestock 14 18 22 26 30 30
Fishery 2 2 3 5 8 11
Forestry 2 4 5 4 3 4

Share of rural population 83 81 76 74 71 64

Source: Adapted from a CCAP working paper by Jikun Huang and Scott Rozelle, 2001.

to increase, but at the much slower pace of 3 per cent a The overall achievement in the economy brought
year. This was due mainly to the stagnation of significant reduction in rural poverty. The significant
agricultural production after the reforms. With non- reduction in the number of poor people, especially
farm income as an increasingly large proportion of rural during the first decade, was a fact widely recognized
income, the increase in overall income started to both at home and abroad. In China, poverty is
accelerate from 1990 and continued throughout the considered to be primarily a rural phenomenon
subsequent decade. (Fig. 6). According to China’s official poverty lines,
China’s rural poor decreased dramatically in the past
Fig. 5. Per capita rural income change. 20 years, from 260 million in 1978 to 128 million in
1984 (Fig. 7). After slowing down in the late 1980s, the
Per Capita Income rapid fall in the poverty head count continued in the
1100 1990s, declining to 42 million in 1998 and about 30
1000 million in 2000. The incidence of rural poverty (poor
Yuan per perron (1990 prices)

900
800
as proportion of rural population) also decreased
700 sharply during the period. The incidence of poverty
600
fell from 32.9 per cent in 1978 to 15.1 per cent in 1984,
500
400 and then to 3 per cent in 2000.
300
200
100
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997

Agricultural and Rural Development in China 5

 Fig. 6. Rural poor as a percentage of rural population. Fig. 8. Per capita cultivated land (ha).

0.08
0.08 –
0.07 –
0.06 –
0.05
0.05 –
0.04 –
0.03 –
0.1 - 1.9 0.02 –
1.9 - 4.7 0.01 –
4.7 - 7.5
7.5 - 12.8 0–
12.8 - 27.4 1995 2030

Fig. 7. Rural poor as a percentage of rural population. Fig. 9. Trend of the fall in shallow groundwater tables.

Number of Rural Poor 74 976 978 980 982 984 986 988 990 992 994 996 998
19 1 1 1 1 1 1 1 1 1 1 1 1

meters below ground level

300 0
250 10
Million Person

200 20
150 30
100 40
50 50
0 Bailuobao Station (Feixiang Country)
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 Jiuzhou Station (Ren Country)
1979 1981 1983 1985 1987 1989 1991 1993 1995 1997
Longhua Station (Baixiang Country)

Challenges/opportunities and concluding 3) the relatively limited comparative advantage of grain

remarks production, and 4) the increasing regional disparity in
incomes (as reflected by the Gini coefficient) is also a
According to projections made by CCAP, China would course of concern (Fig. 10). All these, coupled with
need to increase food supply by 40 per cent to meet China’s entry into the World Trade Organisation
increases in demand in the year 2030. This means that (WTO), pose many questions to the Government.
the Government still needs to make continued efforts
to promote further development of agriculture and to
maintain the growth of the economy. However, Table 4. Decline of deep water table in the selected Counties
challenges associated with these targets are: 1) declining in the Fuyang River Basin (1980-98).
arable land – in 1995, per capita land area was 0.08ha
Country/City Fall Rate (m/year)
while this number is expected to reduce to 0.05 ha by
the year 2030 (Fig. 8); 2) water shortage will be one of Longrao County 2.24
the most constraining factor for the further Pingxiang County 2.18
development of the economy. According to a recent Xingtai City 1.97
empirical survey by the CCAP, the shallow groundwater Jiuzhou County 1.86
table has been declining over time since early 1974 Wuyi County 2.18
(Fig. 9) in the sample areas. This is also true for the Wuqiang County 2.20
deep water table in selected counties in the Fuyang
River Basin between 1980 and 1998 (Table 4).

6 Agricultural Development and the Opportunities for Aquatic Resources Research in China
Fig. 10. Gini coefficient. of investment in agricultural research has declined since
the early 1980s and reached the dangerously low level
of 0.44 in 1999. At the same time, the increasing
evidence of overlapping remits, inefficiency, over-
0.35
staffing, and inappropriate technology make
fundamental reform of the current research system an
0.3
essential task.
Index

0.25
Having discussed some issues and challenges above,
there are also opportunities associated with the WTO
0.2
1978 1980 1982 1984 1986 1988 1990 1992 1994 entry and development potentials with Government
1979 1981 1983 1985 1987 1989 1991 1993 1995 efforts. Studies have revealed that investment by the
Government still plays significant roles in promoting
the overall economic development. This is especially
true for investments in agricultural R&D and rural
Agricultural technology development has been education (Fig. 11). The questions related to it are how
regarded as the primary engine for economic to prioritize investment and how to encourage further
development and the major factor for poverty investment in agricultural R&D and rural education.
reduction. China has a strong agricultural research Also, various studies conclude that although grains, as
system that has generated technologies adopted by a land-intensive commodity, do not have a comparative
millions of farmers to meet the increasing demand of advantage in the world market, other commodities that
food and agricultural products in the most populous are more labor-intensive do. These commodities include
country in the world. All previous studies consistently livestock, horticultural as well as aquatic products. The
show that research-led technological change is the main key for all of these sectors is to improve the quality or the
engine of agricultural growth. Technology produced standards of the products. And the ultimate, overriding
by China’s agricultural research system accounts for question is how to balance trade-offs between growth,
most of the rise in the total factor productivity of the poverty and environment in the development process.
cropping sector between 1980 and the late-1990s.
Despite this past record, China faces considerable References
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Investments, IFPRI Research Report No.125,
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toll. Currently, there is much concern that the intensity Huang, J. and H. Ma. 2000. A Comparison of Production
Costs of Major Agricultural Products Between China and
the Main International Competitors, Chinese Rural
Economy (Chinese), No. 5 (2000): 17-21.
Fig. 11. Agricultural research investment intensity and Huang, J. and R. Hu. 2000. Agricultural R&D Investment
poverty by region in 1999. System and Pattern: Current Situation and International
Comparison, Management World (Chinese), No.3 (2000):
0.5 – –8 170-179.
▼7.3
0.45 – 0.43
–7
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0.1 –
0.05 –
1.3 –1 Property Rights in the Groundwater Irrigation System
0– –0 and Its Theoretical Explanation, Economic Research
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▼ Yao, S. and D. Colman, 1990 Oxford Agrarian Studies,
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Agricultural and Rural Development in China 7

8 Agricultural Development and the Opportunities for Aquatic Resources Research in China