Justin Lin on Initial Reform

1
Justin Lin on Initial Reform

• Chapter 2
• Success in Early Reform Setting the Stage
• In Garnaut, Shutian, and Guonan, The Third
  Revolution in the Chinese Countryside

2
Initial Success of Reforms

• 1978-1984
• Agricultural output 7.4 annually
• Grain output 4.8
• 1952-1978
• Agricultural output 2.9 annually
• Grain output 2.4

3
In 1952, China adopted a Stalin-style heavy
industry development strategy

• In order to facilitate rapid capital expansion
• Low wage for industrial workers
• Low prices for energy, transportation raw
  materials
• A food rationing system (1953)
• A compulsory grain procurement policy (1953)

4
Institution Collectivization in Agriculture

• Viewed as the institutional innovation for
  agricultural development in 1950s
• Initially cautious and gradualist
• 1955 collectivization won the debate in the party

5
Evolution of Collectivization in China

• 1952-1958 cooperatives and voluntary basis
• 1958 peoples communes
• 30 collectives of 150 households
• 753,000 collective farms gt 24,000 communes
• Average size 5000 households
• 1959-1961 Agricultural crisis
• 1962 Production teams
• 20-30 neighboring households
• Basic farming institution until 1978

6
Rural Reform in China

• By 1978, it was recognized, farmers needed
  incentives
• Price reform
• Institutional reform

7
Price Reform

• Quota and above-quota prices
• In 1979, quota prices increased 20.9 for grain,
  23.9for oil crops, 17 for cotton, 21.9 for
  sugar, 24.3 for pork. (average 17.1)
• Above-quota prices increased from 30 to 50 of
  the quota prices.
• But both output growth and higher prices resulted
  in heavy financial burden to the government.
• 1985 Quotas replaced by procurement contracts

8
Institutional Reform

• Household responsibility system (HRS)
• Initially no approval from the central government
• A household could retain any product above the
  stated obligation.
• Land use contract
• Initially 1-3 years
• 1984 15 years

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Market and Planning Reform

• Under planning grain self-sufficiency as a
  priority in every region
• Loss of efficiency
• 1978-1984 incentives
• Cropping patterns and intensity changed
  substantially
• Share of cash crops increased
• Productivity growth

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• Table 2.1

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• Table 2.3

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• Figure 2.1

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An Unfinished Agenda (by early 1990s)

• Grain production reached a peak in 1984 and then
  stagnated until 1989.
• In 1990, grain output reached a new record of 435
  million tons.
• But farmers had difficulties selling their grain
  to the state and farm incomes dropped for the
  first time.
• What to do next?

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• Question/Answer!!