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China, agriculture, Chinese economy, reforms


Economic reforms in rural development are of special significance to the future of agriculture in China and hence the Chinese economy. This paper follows the trend of changes in agricultural institutions in China, and explains the reasons why those reforms should occur and the direction they would give the Chinese economy. Unlike many articles which have described China's reforms as a process of the government's self-selection, this paper considers the variety of forces pushing Chinese reforms in agriculture forward; not only government's policies but also farmers' reactions to and their interactions with farm policy. Since 1978, many policies directed at the agricultural and rural economy have been proposed and implemented. Some have promoted formation of market mechanisms for agricultural products, and some have not. The goals of some policies seem to sometimes contradict one another. Some policies have been constantly advanced by the authority, and some were offered only as temporary expedients. For example, the "rice bag" policy, meant to enhance self-sufficiency in grain production, was proposed only when grain prices spiraled upward in 1995, as the demand for grain grew faster than supply. Some newer policies were reminiscent of the old planned economy, but it was impossible for them to be carried out as the structure that supported their implementation had disappeared. For example, the effort to maintain wholesale prices of grain at a higher level than equilibrium to cover the losses of the state-owned grain procurement firms, became fruitless during 1996-1999. State firms hoarded too much grain to resell in view of their higher procurement prices and business costs. Farmers and other firms sold grain at lower prices, and state firms even competed with one another. This paper regards the institutional arrangements of the rural land and market of agricultural products as the leading element in changing the agricultural institutions in China.


Department of Economics, South Dakota State University

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