Chapter 2 – Agricultural, land and the rural economy

Why Did the End of Agriculture Communes Jump-Start China’s Growth in 1980s ?
● Agriculture accounts for 9% of GDP, while industry and services each comprise more than 40 percent.
● Mid 1950s Private ownership of farmland was abolished and agriculture was owned by communes
● Late 1970s Economic reform with privatisation of farming (Land-to-tiller reform)
● End of 1980 Agricultural collectives were gone (agricultural production and income improved)
● Other benefits of agricultural reforms:
1. Greater incentives for investment (demand for basic industrial sectors eg fertilizers and farm equip)
2. Bank saving increases
3. Seek off farm wage labour to supplement their income

Why Did Rural Urban Inequality Grow after 1989?

● Reforms of 1980s disproportionately benefited the rural population
● Price of agricultural product increased quickly and increasing opportunities for the off farm wage
employment in TVEs. Therefore, income in rural areas > urban areas
● Rural focused economy 1980s  (shift)  urban focused economy 1990s
● Attracted by high living standards and greater political openness from abroad.
○ rise of food prices —> inflation
○ although urban incomes and living standards are rising, people found ti difficult to catch up with the
increase in price of goods.
● After 1989, government constructed strategy to shift the centre of reform energy back to urban area.
● However, they can’t use use the same method as they did for rural areas (increase farm prices), this will
not increase urban income, instead it will create more burden to urban households.
● should concentrate on reforms that will increase living standards in urban areas.
● 1990s government restructured SOEs and the financial system, promoted private enterprise.
● Restriction of labour mobility decreased, labour can move along cities for wage labour. However, their
families are prohibited and burden of providing social services for these migrant families
● Keep benefiting the urban by neglecting the rural areas are widening the gap of inequality between rural
and urban households

How did the Government Address the Rural-Urban Inequality Problem in the 2000s?
Hu jintao (2006-2009): Huge benefit for rural’s income and agricultural production
1. Increase grain prices and tax on agriculture product were abolished
2. Investment on infrastructure in rural areas and food processing plants provided off-farm employment
3. Rebuild rural social services network (disintegrated in last 2 decades)
4. Nine years of compulsory free education were made in rural residents
5. New rural cooperative medical system launched, providing health insurance and the minimum income
guarantee was expanded from urban to rural areas.
6. Rural pension scheme guaranteed farmers, a cash income after they were too old to farm

Agricultural and rural reforms have played an important in reducing absolute poverty. China absolute poverty
sank from 840 million to 84 million which is 84 percent of its population to 6 percent of its population.

Hu and Wen decade was more balanced, because development are not focusing on only one area.

Do Chinese Farmers Own Their Land?

No, but they have long term contractual right to use it.
Difference between rural and urban property rights is the major source of inequality in wealth and income.
● 1980s farmers hold the right to farm a specified plot of land to 1-3 yrs
● Mid 1980s extended to 15 yrs, BUT, the rights are not secure because it was still owned by the village
● Common for the village to reassign plots go land within contract period
 ○ Depends on family size.
○ If you got on the wrong side of the village, may find yourself farming a lower quality land
● 1993 the standard contract term for agriculture land extended to 30 years
● 1998 was written into the Land Management Law
● 2004 Rights are more secured since the Rural contracting law specified that village authorities cannot
arbitrarily reassign land before the end of the contract period

These improvements increase the security of ownership have brought several advantages:
● Increase the incentives for farmers to make costly, productivity-enhancing investments, such as putting
permanent greenhouses or more advanced irrigation system.
● Group neighbourhood plots and begin to develop large scale mechanised agriculture

What is Being Done to Improve Rural Land Rights?

Rural land tenure system - major 2 constraints.
1. Collective ownership of rural land remains restricted
Solution: Giving farmers the same kind of property rights as the urban households
2. “Red Line” on arable land - total amount of cultivated land in may not fall below 120 million hectares

With this system, government can create a healthier rural land economy. Stronger land rights for farmers,
promotion of mechanised large scale agriculture and townization of rural areas:

1. Improved land use rights - improve the registration of rural land and to strengthen farmers’ rights to
buy, sell and mortgage use rights for agricultural land on the open market
LIMITATIONS: not effective unless boundaries of land plots are surveyd and property owners set down
a public registry

2. Large scale agriculture - buying up the use rights to many plots of land from individual farmers and
consolidating them into one single operation similar to joint stock company

3. Townization - consolidating scattered villages into more concentrated rural towns. People move from
their original village to a higher density towns, the lands of the original village returned to cultivation
(net increase in cultivated land). Continue the gradual urbanisation of the rural populace, also maintain
or increase the supply of farm land.