China Launches Sweeping Reform of Rural Economy

China formally kicked off the reform of the rural economy with its recent announcement to reduce agricultural output for the year, indicating an end to the decades-long policy of pushing crop production to its highest limit.

This is the first time the Chinese government has lowered its target for agricultural output since New China was founded in 1949, meaning that the government is determined to secure a wholly market-oriented rural economy, economists say.

The government hopes that the reform will enable agricultural production to meet market demand, improve the efficiency of the rural economy, and raise farmers' income enough to stimulate domestic demand, they say.

China's crop harvests for five years running have brought the country's store of grain, cotton and other key products to record highs, with the grain output standing at about 500 million tons, leading to an oversupply in the market and steadily dropping prices and slow growth of farmers' income.

Experts attribute this to the government's years of emphasis on high-yield farming without consideration of quality and market demand.

Since the founding of the People's Republic, the government, fearing a food shortage for the largest population of the world, focused almost all of its resources on boosting grain production.

In the 1980s, the government stuck to the policy of putting grain production first while developing cash crops, and this approach solved the problem of providing food and clothing for the huge population.

However with the improvement of life in China, the Chinese people have placed higher standards on the quality of the food and clothing they buy, and they refuse to purchase poor quality agricultural products that glut the market.

At first, farmers weren't worried, as the government promised to buy all the grain at a protected price, which was higher than market prices.

But the subsidies allocated to State-owned grain enterprises for purchasing the grain eventually created financial pressure. Meanwhile, the approaching date for China's entry into the World Trade Organization also reminded authorities of the competition that would come from the international market.

Against this background, the Chinese government decided to reform the rural economy under a comprehensive plan. And economists agree that the conditions for the reform are ripe.

As an important part of the reform, the government abandoned the protected price for grain purchasing and encouraged farmers to expand those products that are well received on the market by substantially raising the price for quality agricultural products.

Meanwhile, the government spent more on agro-technology and encouraged the development processing industries, hoping to benefit farmers.

The government is also fully aware of the surplus rural labor force that has emerged as a result of the reform. A recent report by a think-tank under the Ministry of Agriculture predicts that by 2005, there will be some 600 million laborers in the rural areas, but only 168 million of them will be needed in agricultural production.

To ease the pressure, the government encouraged the development of rural industries and towns, which economists say not only will absorb a considerable number of surplus farmers, but also will increase farmers' income, which will stimulate domestic demand and in turn the growth of the national economy.

The development of rural industries and towns since the late 1970s has indeed proved successful. Statistics show that some 140 million farmers are working in rural enterprises, and more than 100 million farmers live in towns.

But rural economic reform does not mean that China will loosen up on grain production. Experts predict that over the next 30 years, China's population will increase to 1.6 billion from the current 1.2 billion, which means that China has to produce 30 percent more grain to feed its people.

The Chinese government, sober on this point, has called on localities to preserve grain production capacity to prepare for emergencies. Meanwhile it has taken advantage of the opening-up of the western regions to plan environmental protection centered on returning cultivated land to forest, tree and grass planting, and soil erosion control which would ensure the sustainable development of rural economy.

Economists predict that substantial changes will take place in China's rural economy in the near future, as the reform is based on the long-term development of the rural and national economies and follows the trend of economic globalization and trade liberalization.

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