China's Agricultural Management Reform Path and Policy

Path and Policy of China’s
Agricultural Management Mode
Reform

Mr.Guan Ruijie
Inspector & Research Fellow
Rural Economic System &
Operation Management
Department, Ministry of
Agriculture

In retrospect of China’s development history in the past 63 years, with the year 1979 as
a watershed, the first 30 years witnessed prioritized efforts to build a highly centralized
planned economic system, and in the next 33 years China’s has gradually shifted into
the socialist market economic system. In the meantime, China’s rural management
system has also experienced significant changes with the transition of the national
economic system, and reflected the distinctive characteristics of different historical
periods.

I. Evolution of China’s Agricultural Management Mode

(I) 30 years prior to the reform and opening up

China established a highly centralized planned economic management system. In rural
China, private land ownership which had only existed for a short period after the Land
Reform successively turned into mutual aid groups, elementary agricultural producers’
cooperatives, and advanced agricultural producers’ cooperatives. After the rapid
socialist reform of the rural land ownership system, the people’s commune system was
then established and the means of production, including the land, were owned by the
collectivity under centralized management. The rigid management mechanism (“large
in size & collective in nature, equalitarianism & indiscriminate transfer of resources) of
people’s commune was plagued by its low efficiency and many other defects, though the
system had indeed played an important role in deploying commodity grain and
industrial raw materials to facilitate the establishment of an independent industrial
system in China, to strengthen the rural irrigation and water conservancy infrastructure
construction, and to advance the process of agricultural mechanization.


Land reform & mutual aid (1949 － 1958):

The central government promulgated the Law on Land Reform in June 1950,
kicking off an extensive land reform across the country. With the abolition of
the feudal landlord land ownership, over 300 million Chinese farmers having
no land or little land were granted 47 million hectares of land for free,
realizing the dream of “land to the tiller”. The agricultural productive forces
were emancipated to a great extent. By 1952 when the land reform was
basically completed, the national grain output had increased by 42.8%
compared with 1949.


In order to achieve further economic prosperity and improve the living
standard and the capacity of shielding against different natural risks, the
farmers voluntarily called for mutual aid and cooperation. Hence, the CPC
Central Committee actively guided and encouraged the farmers to form
mutual aid groups, elementary cooperatives and advanced cooperatives. In
the initial stage, the central government put forward the guideline of “realize
stable advancement according to the needs and possible conditions of
development” and “mutual aid better than going it along, and cooperation
better than mutual aid”. The guideline enjoyed wide support, contributing to
the stable and healthy development of the cooperatives. However, in the
second half of 1955, the socialist agricultural reform gathered steam in
China, while the problem of “excessively urgent demand, fast change, flawed
work and simple form” was emerging. The reform, which was originally
scheduled to be completed in 15 years, actually concluded in half a year.


People’s commune & centralized management (1958 －
1978):

The Movement of People’s Commune rapidly spread all over China. In
September the same year, 26,000 people’s communes were established
throughout the country, with 120 million participating farmer households,
accounting for over 98% of the total. Each commune consisted of 4,614
households on average. The people’s communes adopted a “three-level and
team-based” management system. The means of production were collectively
owned by the production teams. The communes should practice independent
accounting and assume sole responsibility for the profits and losses.
Engaged in organized collective production according to the mandatory plans,
the commune members should unconditionally obey the work plans. For each
member, his or her work points were calculated on the basis of work done.
Distribution was carried out in line with the “egalitarian” principles.


In the age of people’s commune which lasted for over two decades from 1958
to 1982, given the scissors difference in the price of industrial and agricultural
products, agriculture provided a net amount of more than 540 billion yuan for
the national industrialization efforts, making a crucial contribution to
completing the accumulation for industrialization in China. As a result, the
output of grain increased by 75%. Major progress was also achieved in the
construction of rural irrigation and water conservancy infrastructure and in
agricultural mechanization, with the irrigated area increasing by 62%, total
power of agricultural machinery 135.9 folds and machine-ploughed acreage
12.3 folds.


Nevertheless, during the “Cultural Revolution” and the campaign of “Learning
from the Agricultural Practices of Dazhai”, the agricultural management system
was further rigidified. In some places, the ownership by production teams
shifted to that by the production brigades and by the people’s communes; in
terms of the operation management and distribution, the effective norm
management was abolished and replaced by “work point calculation” borrowed
from Dazhai. The “communal pot”-style egalitarianism was getting so worse that
it seriously dented the farmers’ enthusiasm. Consequently, the rural labor
production rate saw no substantial growth, with only an incremental increase
rate of 0.3% between 1957 and 1978, obviously lower than that of the middle-
income countries (2.6%) in the same period. The net income of farmers, after
being converted into the volume of grain, only increased from 1,055 jin (527.5 kg)
from 1,255 jin (627.5 kg). In many places, farmers were trapped in an awkward
situation of “having to rely on the loans for production and on the relief for
subsistence”. The appeal for a reform was growing increasingly stronger in
rural China.


(II) 33 years after the reform and opening up

In 1979, the effort of reform and opening up started in rural China. In the rural
reforms, the rural management system was the first to change. A two-tier
management system based on the household contract management with the
combination of centralization and decentralization was established to rule out
the system of people’s commune; the rural basic management system was
stabilized and improved through the innovation in the rural organizational
system; by fully transforming the rural tax and fees system, advancing the
comprehensive rural reform and building a policy system that supports and
benefits the farmers, the government effectively stimulated the production
enthusiasm of millions of farmers and protected their legitimate rights and
interests. As a result, the national total output of grain increased from 304.77
million tons in 1978 to 571.21 million tons in 2011, and the per capital annual net
income of farmers also increased from 134 yuan to 6,977 yuan (RMB), up by 87.4%
and 51.1 folds.

Two-tier management system: The household contract
management was practiced, and the community-based cooperative economic
organizations were set up. Across the country, people took bold strides to
explore the path of reforming the rural management system. From contract work
quotas to group co-production and specialist contract, from laborer co-
production to fixed farm output quotas to each household, a great variety of
agricultural production responsibility systems was popularized from one
locality to a whole area. By late 1983, 98% of the basic accounting units in China
adopted the household-based contract system. The area of land contracted to
and managed by the collectivity accounted for about 97% of the total farmland
acreage. Upon the disintegration of people’s communes, production brigades
and production groups, the community-based cooperative economic
organizations at different levels were established in many places in China.


From 1979 to 1984, the growth rate of agricultural production and farmers’
income reached 6.6% and 15.1%, respectively. As the subsistence problem of
farmers were rapidly resolved, the rural poverty-stricken population shrank by
two thirds. In order to further stabilize the land contract relations, the central
government made it clear in 1984 that the land contract period shall be 15 years.
In 1993, the contract period was further extended for another 30 years. In 2008,
the central government emphasized that the current land contract relations
must be stable and permanent, providing the farmers with full and guaranteed
land contract management rights. Overall, the household contract management
system ensured the basic employment and income source for the farmers, and
turned them into the market players with the autonomous rights in production
and employment.


Innovation in rural management organizations: The
industrialized agricultural management organizations and farmers’ specialized
cooperative organizations saw vigorous development. In the early 1980s, China
started the reform of the circulation system, gradually loosening the control
over the agro-product market and price. With the increase in the rural and urban
residents’ income and the diversification of their needs, smallholder
agriculture was barely able to meet the constantly changing needs of the big
market due to its disorder and blindness in production. People occasionally
found it difficult to sell or purchase agro-products. Therefore, China is in urgent
need of innovation in the organizational system to address the challenge of
effectively connecting production with the market. Leading industrialized
agriculture enterprises, market intermediary service organizations and
farmers’ specialized cooperative organizations emerged at this historic
moment, which innovated and enriched the rural management system in line
with the national conditions while facilitating the development of productive
forces. These organizations kept growing in numbers, with the management
performance and capacity for stimulation being constantly improved.


Evident results have been achieved in industrialized
agriculture management.

In 2011, there were more than 280,000 industrialized agriculture organizations of different
types in China, with about 110 million farmer households being affected and stimulated
(accounting for over 40% of the total). The annual income of households engaged in
industrialized agriculture saw an increase of more than 2,400 yuan, and the practitioners in
industrialized agriculture exceeded 50 million people. The size of industrialized agricultural
production bases accounted for over 60% of the total size of agricultural production in
China; the number of livestock raised accounted for 70% of the national total, and the area of
water surface for aquaculture accounted for over 80% of the national total. There were
nearly 110,000 leading industrialized agriculture enterprises in the country, with the annual
sales volume surpassing 5.7 trillion yuan. They provided more than 1/3 of the agro-products
and processed food supplied in the market, and accounted for over 2/3 of the products
supplied under the “non-staple food project” in major cities. Their annual export volume
accounted for over 80% of the total exports of agricultural products in China.

Farmers’ specialized cooperatives witnessed stable
development.

As of the first quarter of 2012, a total of 552,300 farmers’ specialized cooperatives
have been registered at the industrial and commercial administrations across
China, up by 30,600 cooperatives compared with late 2011. They have about 43
million member households, accounting for 17.2% of the total farmer households.

Implement the “One Village One Product” (OVOP) project to
help farmers achieve prosperity.

By the end of 2010, there were 51,486 specialized villages in China, accounting for
8.7% of the total number of administrative villages; and there were 3,479 specialized
townships, accounting for 10.2% of the total. Among these, the production bases in
villages specialized in crop farming covered 6.076 million hectares of land in total;
the livestock raised in villages specialized in animal breeding reached 44.808
million; the area for aquaculture in specialized villages totaled 425,000 hectares;
and the planting area in villages specialized in forestry reached 7.584 million
hectares. The per capita net income of farmers from these specialized villages was

Majiaqiao Modernized Agriculture Demonstration Park

II. Policies Stabilizing the Basic Management System

Establish the preferential policy system for agriculture:
Implement the rural tax reform, and gradually increase the
preferential agricultural subsidies.

In 2000, the central government launched the rural tax reform pilot projects with the aim
of “alleviation, standardization and stabilization”. These projects were extended
nationwide in 2003. In 2004, China lowered its agriculture tax rate, and started the
agriculture tax exemption pilot programs in Heilongjiang and Jilin province. Meanwhile,
China also canceled the tax on special agricultural products, except for tobacco. By
reducing the agriculture tax rate incrementally, the country abolished the tax nationwide
in 2006, finally ending the 2,600-odd-year history of levying agriculture tax by the
government. At the same time, the government actively promoted the comprehensive
rural reforms, with the township government administration system reform, rural
compulsory education reform, as well as village and county financial management
system reform as the three key reforms. Since 2004, the government has been granting
direct subsidies to farmers in the major grain producing areas, and improved crop breed
and agricultural machinery subsidies to farmers in some areas. In 2006, the government
started to grant general subsidies for means of agricultural production. The varieties
and amount of subsidies increased year by year. In 2011, the financial input in “rural
areas, agriculture and farmers” hit a record high of 1 trillion yuan. The total amount of the
said four subsidies reached 140.6 billion yuan. In the new era of building a moderately


Stabilize the land contract relations:

A series of household contract management policies have been formulated. In
1993, the household contract management system was written into the
Constitution of the People’s Republic of China. The Law on Land Management
revised in 1998 prescribed on the rural land contractor, contract period and
contract agreement. On August 29, 2002, the NPC Standing Committee passed
the Law on Rural Land Contract which was to go into force on March 1, 2003.
This law elevated a series of land contract policies formulated by the central
government to the higher status of being legislations, and it prescribed on the
principle and procedure of rural land contract, the acquirement and protection
of land contract management rights, the rights and obligations of the
contractees and contractors, the circulation of land contract management
rights, the settlement of disputes, as well as the legal liabilities.


1. As the law provides, “the farmland contract period is 30 years, the grassland
contract period is 30-50 years, and the forest land contract period is 30-70 years.
2. As the law provides, “when participating in organized land contracting
activities in line with the relevant regulations, the members of collective
economic organizations shall have the equal land contract right according to law,
and may voluntarily waive such right”. “Any organization or individual may not
illegally restrict the members from contracting the land or deprive them of such
right”.
3. As the law provides, “the land contract management right obtained from
household contract may be circulated in the form of subcontracting, leasing,
exchange, assignment or others”. “Any organization or individual may not force or
prevent the contractor to circulate the land contract management right”. “The
profit generated from the circulation of right shall go to the contractor. Any
organization or individual may not retain or withhold such profit without
authorization”.

III. Institutional Guarantee for Rural and Agricultural
Development

(I) Farmers are guaranteed with basic employment and
income sources.
229 million farmer households in China have contracted 94% of the collectively-
owned farmland. In recent years, with the continuous advancement of
industrialization, urbanization and agricultural modernization, the circulation of
rural land contract management right has also witnessed rapid development. By
the end of 2011, the total acreage of farmland circulated under the household
contract system had reached 228 million mu, accounting for 17.8% of the total
area of land under the system. The earnings from land contract has always been
the major source of income of the farmer households, accounting for 67% of the
net income of farmers’ household operations in the 1980s, 65% in the 1990s, 55%
in 2000 and 40% in 2011.
 (II) Farmers have become the market player with autonomy
in production management and employment.
Autonomy in production management has promoted the agricultural
restructuring and comprehensive development of rural economy; and freedom in
employment had facilitated the transfer of rural labor force and population. The
urbanization rate in China increased from 17.92% in 1978 to 51.27% in 2011.

III. Institutional Guarantee for Rural and Agricultural
Development

(III) The policies have facilitated sustainable agricultural
development and agricultural eco-construction.
The production enthusiasm of farmers is lasting and has stimulated the farmers
to actively improve the production capacity of farmland. The multiple cropping
index increased from 149% in 1978 to 161% in 1997, equivalent to an increase of 10
million hectares of farmland.
(IV) Conditions have been created to develop all forms of
rural cooperative economic organizations.
The activities of rural cooperative economic organizations cover a variety of
trades, including crop farming, animal breeding, agricultural machinery, forestry,
plant protection, technical information, handcraft, and rural inn. Crop farming and
animal breeding are the two dominant industries, accounting for 44% and 29%,
respectively. In the extended areas of activity, the production technology and
information service accounts for 21.8%, transportation and storage service 6.1%,
and processing and sales service 21.8%.

IV. Major Experience in Implementing the Household
Contract Management System

(I) Establish the rural land system in accordance with the
national conditions.

The basic national conditions of China include: First, there is such a large
population with comparatively so little farmland. The conflict between
population and farmland is prominent. Currently, the acreage of arable land in
China has totaled 1.84 billion mu, with 1.4 mu of land for each person. China has
to feed a population accounting for 21% of the world’s total on less than 9% of
the world’s farmland. Second, the proportion of farmers in the total population is
so large that it has become difficult to transfer these farmers massively. Third, it
takes a long time to establish and improve a social security system that covers
the whole of rural China. The household contract system is an inevitable choice
which suits China’s national conditions. Large numbers of people will stay in the
rural areas for a long period. Thus, only by securing the basic rights of each
farmer for subsistence and development (i.e. having some land) can we avoid
serious social problems caused by a large number of unemployed farmers with
no land, and keep the stability of rural China and the Chinese society at large.
Since rural land in China has the dual function of ensuring both society security

Rural land in China should
not be placed under private
ownership, because once the
land gets into private hands,
land trade and land merger
would be unavoidable and
some farmers would lose their
land easily. They would cause
severe social problems, as
they have no land, no job, no
social security and no house.
Therefore, by avoiding the
private ownership of land,
China can better realize and
guarantee the right of each
farmer for subsistence and
development.


(II) Grant long-term secured land use right to the farmers,
and properly address the relationship between farmers and
land.

In the early days of household contract management, as the land contract period
was often short and the contract land were usually subject to constant
adjustment, the farmers were less motivated to make long-term investment to
improve the land capacity, despite their enthusiasm in production. In order to
ensure sustainable agricultural development in China, the Chinese government
put forward the policy of extending the land contract period and keeping stable
land contract relations, and even wrote the policy into the Law on Rural Land
Contract. In this way, the farmers obtained long-term secured land use right, and
their enthusiasm in farmland protection and improvement, as well as in
production investment, was substantially enhanced.


(III) Create favorable conditions for the production
management activities of farmers.

The Chinese government has constantly increased its input in and construction
efforts for agriculture and rural areas. As a result, the agricultural equipment,
support capacity and general production capacity have been significantly
improved. Major progress has been achieved in agricultural technology and
rural market construction. The agricultural and rural economic restructuring
has been deepened, with the rural infrastructure and living conditions being
continuously improved.

V. Focus for Further Improvement
Pay attention to the following four aspects while accelerating the development
of farmers’ cooperative organizations and industrialized agricultural
management and fostering major players of new-type agricultural production
management :
First, strengthen land circulation management and service. Particular efforts
should be made to establish pilot programs for standardized circulation
management and service, to build the agricultural management capacity review
system and the land circulation risk deposit system, to popularize the use of
model contracts for the circulation of rural land contract management right, and
establish and improve the rural land contract management right circulation
service platform.
Second, steadily expand the pilot projects for land contract management right
registration, and solve the problem of inconsistency and ambiguity.


Third, render support and cooperation to the revision of the land management law

as well as the drafting of policy regulations on compensation for the
expropriation of collectively-owned rural land. Strengthen protection over the
materialization of land contract management right. Pay attention to properly
dealing with the mediation, settlement and arbitration of land contract
management disputes.
By late 2011, the total acreage of circulated farmland under the household
contract management system reached 228 million mu, accounting for 17.8% of the
total area of farmland under the system; the number of large farmer households
with over 2 hectares of farmland under management reached nearly 9 million, and
that of crop farming households with over 6.7 hectares of farmland under
management reached nearly 480,000 households.


Fourth,Vigorously develop the service for socialized agriculture, and foster
service organizations at multiple levels with multiple players.
---strengthen the public service capacity building of agriculture. Improve the
township or regional public service bodies for the extension of agricultural
technologies, prevention and control of plant and animal diseases, as well as
control of agro-product quality. Significant progress has been made in the
construction of village-level service centers. Provide better remuneration for
agricultural technicians and improve their working conditions.
---vigorously foster and support the new-type socialized agriculture service
organizations. Support the farmers’ specialized cooperatives, leading
enterprises, supply and marketing cooperatives, specialized service companies,
specialized technical associations and farmer agents to provide diversified
production management services to the farmers.
--- innovate the socialized agriculture service mechanism. By means of
government stimulation, directional mandate, and bidding and tendering, the
government should endorse the farmers’ specialized cooperatives, specialized
technical associations, agriculture-related enterprises and other social forces
to participate in the agricultural service before, during the after production.

China's Agricultural Management Reform Path and Policy

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