Chinese villages Agricultural collectives Rural reforms Emergence of rural land markets

Chinese villages Agricultural collectives Rural reforms Emergence of rural land markets

Chinese village is core unit of rural society dominant form of organization as long as records exist 3.8 million villages/hamlets Vary considerably in degree of modernization and openness to outside world Those outside of coastal deltas have little modern infrastructure, e.g., 80% of rural households cook with coal/straw/twigs Chinese countryside can be loosely arranged by standard market areas a market town along with surrounding villages (Skinner, 1964/5)

Chinese Villages Village near Tangshan (Hebei Province)

Chinese Villages Market town of Yangshuo (Guangxi Province)

While Chinese villages have been around for centuries, subjected to two revolutions in the second-half of 20 th Century: (i) 1950s - collectivization of agriculture (ii) Post-1979 - dissolution of collectives and evolution of market-based rural economy Reforms have had a positive effect in terms of agricultural production, but mixed impact on other aspects of rural life, e.g., decline in health-care resources in countryside

Mid-1950s to early-1980s, collectives were dominant rural organizational structure Given central plan, objective was to get a steady supply of agricultural goods at low relative prices Collectives designed to facilitate extraction of economic surplus from countryside Chinese leaders also committed to using collectives to transform rural life, i.e., the delivery of previously unavailable goods/services, as well as political control

Features of agricultural collectives: (i) Land pooled and worked in common households retained ownership of homes, some farm animals, and control of small private plots ~ 3-10% of area (ii) Collective basic accounting unit purchased inputs, coordinated tasks, sold output, and calculated net income Varied in size/organizational structure over time (Figure 1)

Agricultural Collectives Changes in rural organization Natural Units 1956-58 1958-59 1962-81 1982-present Marketing Area Market Town Large Village Small Village APCs* (100-250 households) Team Commune* (>5,000 households) Commune (2,000 households) Brigade (200 households) Team* (30 households) Household Household Household Household Township (3,000 households) Village Household* * Basic accounting unit

(iii) Net income distributed after harvest on basis of work points total net income/total work points 1978 average collective income 88.5 RMB/person ($50), mostly in form of grain, 25.5 RMB/person ($15) in cash System gave collective significant control over distribution of income able to tax itself to finance non-productive activities, e.g., teachers assigned work points

Collectives an instrument for achieving government objectives: (i) Organizing production clear that they failed; poor incentives to work hard, no economies of scale; did augment effective land supply, e.g., building/repairing irrigation (ii) Organizing non-agricultural activities e.g., rural credit cooperatives (RCCs); provision of social services and safety net (iii) Channel for political education and indoctrination

Grain First policy slowed down agricultural growth and generated costs: (i) Grain targets ensured households could not devise maximization strategy (ii) Maximizing output did not maximize income; e.g., three rice crops in Yangtze Delta input costs > value of extra grain (iii) Areas not suited, forced to produce grain Wide range of local outcomes reverse specialization

December 1978 - Third Plenum made modest adjustments in rural policy: increased prices and right of collectives to self-manage While individual farming was explicitly condemned, some collectives began experimenting with allocation of work points based on output from specific plots of land 1981-82, household responsibility system became preferred rural organization collectives moved to long-term land contracts

Rural Reforms Sculpture of villagers signing householdbased contract in Xiaogang Village, Anhui Province, 1978

Output growth in grains, cotton, oilseeds and meat production, with shift to less-labor intensive production While property rights over land changed in 1980s, market system for agricultural output developed gradually through 1990s State maintained grain procurement system (albeit with multi-tier prices) and controlled marketing system for cotton, grains and fertilizer

Side effect of economic reforms decline in rural public services, e.g., health care and education Under collectives, paramedics compensated by tax on output of local community rudimentary system of cooperative health services 70-80% of rural population covered at end of 1970s With end of collectives, system collapsed less than 10% of rural population covered by mid-1980s into 1990s

Gradualist reforms, and ill-defined property rights slow growth in rural land markets Late-1990s, policymakers concerned about functioning of land market - 2003, adopted Rural Land Contracting Law to make property rights clearer Various forms of rights-transfer sanctioned sale, lease, and sub-contract Land markets in coastal areas developing faster than inland, e.g., land rented in Zhejiang 23% (2003) vs. Shaanxi 3% (2002)

2008, CCP announced plan to double disposable income of rural population by 2020 land reform being a means to achieve this Additional reform is minor (The Economist, October 23, 2008) farmers already granted 30 year leases/land-use rights which are transferable in principle Does not address collective ownership removing this would undermine Party s heritage Key problem - Party-approved village leaders often claim property rights for themselves