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3.Rural Economic System and Major Operators in Agriculture

DATE:2009-06-09       SOURCE:

3. Rural economic system and major operators in agriculture


3.1 Rural economic system. Before 1978, China adopted a system of the people’s commune in rural areas. Under this system, land belonged to the collectives, all commune members carried out production activities collectively; and farm produce was purchased and sold in the framework of the government monopoly system, and agricultural returns were distributed among all commune members according to his/her work. Such a system severely restrained farmers’ initiatives, leading to a very slow growth of agriculture and rural economy, poverty and backward in rural areas for a long time. Along with agricultural reform started in 1978, rural areas have put in place the household-based contract responsibility system. Given the reform, the economic system in rural China has undergone profound changes in the following five aspects: Firstly, breaking through the highly-centralized system of the people’s commune and implementing the household-based contract responsibility system have made it possible for farmers to obtain the right to use land and the power to make their own decisions in production and management on a long and stable basis. Secondly, breaking through the monoculture structure of grain production and developing diversified economic undertakings, especially township enterprises a new force emerging all of a sudden, have greatly vitalized the rural economy in every aspect. Thirdly, breaking through the state monopoly system of purchase and sales has resulted in a much stronger role of market in regulating demand and supply of agricultural products and allocation of resources, preliminarily established agricultural market systems and gradually developed rural markets of production factors. Fourthly, breaking through the single ownership structure of the collective economy has led to such a structure that takes public ownership as the main element that co-exists with diversified forms of ownership. And fifthly, breaking through the mandatory planning of agricultural production and replacing it with indicative planning have changed the way that government regulated agriculture, and contributed to the preliminary shaping of macro-regulation system of rural economy through combined use of economic, legal and administrative means.


The household-based contract responsibility system tallies with the characteristics of agricultural production, the requirements for rural productivity development and the desire of farmers. This system suits not only the traditional agriculture that mainly relies on manual operations but also the modern one that makes use of a wide range of scientific and technical achievements. Such a responsibility system that is of exuberant and lasting vitality should be kept in practice for a long period of time.


3.2 Major operators in agriculture. In 2005, China had a total of 252 million rural households. The rural working population totaled 503.87 million, of which 299.76 million were engaged in agriculture, forestry, animal husbandry and fisheries, accounting for 59.5 percent; and 204.12 million or 40.5 percent in non-agricultural sectors like industry, construction, transportation, trade and catering services. In addition to agriculture, farmers have moved to diversified operations.


3.3 Vertically integrated operation in agricultural sector. The form of vertically integrated operations in agricultural sector is an innovation in rural economic system. It is conductive to dealing with some deep-seated problems such as low effectiveness, small-scale operations, poor organized farmers and ineffective managerial system in the development process of agriculture. In recent years, the government has strengthened administration of the vertically integrated operations by establishing and improving relevant institutions, and working out development plans. Meanwhile, the government has promulgated policies for greater support for such operations in terms of finance, credit, tax and technological advancements. In general, the development of this kind of operations nationwide has maintained a good momentum. Some 135 700 vertically integrated agricultural organizations have been set up, which has involved in 87.26 million rural households or about 35.2 percent of the total. At present, contract-based farming operations have expanded from grain production to production of major cash crops, animal and aquatic products. Such kind of farming operations has played an important role in guiding farmers for restructuring and in promoting increase of farmers’ income.


There are various forms of vertically integrated operations. In terms of promoters, leading enterprises in this regard hav3 promoted about 45 percent of rural households to take part in these operations, intermediary agencies 46 percent and wholesale markets 8.5 percent. And in terms of benefit distribution mechanism, 55.3 percent of rural households are involved in contract system, 15.2 percent in cooperative shares system, and 16 percent in cooperatives. 

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