1.

WHAT WERE THE CHINESE FARMERS MOST EFFECTIVE INNOVATIONS THAT (1)
DRAMATICALLY DEVELOPED AGRICULTURE AND (2) FACILITATED RURAL
INDUSTRIALISATION, RESPECTIVELY SINCE 1978?

In the rural collectives, all production factors were significantly growth at the enormous
scales. The farmers have good relations in the rural areas and compulsorily became the
collective members as the workers at the basic accounting. Their incomes were shared
equally based on their hard work or distribution. The agricultural products sold to state at
state price and help the growth of rural areas. The farmers were influenced by the
Household Contracted Responsibility System in developed agriculture and TVEs to facilitate
the rural industrialisation.

Household Contracted Responsibility System

During the system the land was publicly owned, but farmer households still have the right to
work on the land, but need to take responsible for their own production decisions and
benefits/costs when they have contract with the system. As the households, they can extend
the time- limit of contracts in the long period like from 1 until 30 years to indefinite long
term. This contract helps the farmer to encourage the investment sector.

As the result, the farmers have become more incentive on the production and the grain
output grew higher around 1/3 in 1984 than in 1978. Because of the effectiveness, HRS
replaced the commune in two years. Because of the system, the farmer started to become
independent on the agriculture sector and greatly increase their incentive to work and help
the investment.

Township-Village Enterprises
During this system, the collective enterprises were owned by township and based on the
village authority and community. It means the local government taking controls the
enterprises in the rural areas as the owner and have the motives, power and knowledge of
rural industrialisation to get the benefits from TVEs and make it successful.

Because of TVEs system, over 15 million of their enterprises help to employ 80 million labour
and increase the GDP in the significant years. The unemployment started to reduce along
with the increase of TVEs and has creating 126 million local non-farm jobs in 1998. As the
result, it gives an effectiveness to promote the rural industrialisation and reducing the
worker-farmer differentials. Until now the TVEs has helped the collective enterprises for
farmers into powerful company.

2. WHAT WERE “SAN-NONG PROBLEM” AND ITS CAUSES? WHAT ARE THE KEY GOVERNMENT
ACTIONS TO TACKLE THE PROBLEMS?

The San-Nong problems has caused the several impacts on the farmers, countryside and
agriculture sectors. The tragedy was occurred in the early 1950s when the Big Push
Development Strategy aggressively push the high investment into heavy industry. Because of
the lack of resources, China need to give up the agriculture sector in order to focus towards
on the cities and industry. In that time, China need learned by doing the implementation
first without any signs which affect the greater risk during that time. The cities and industry
are greatly developed from the strategy, but the agriculture was left behind. When
 government implemented taxation in fiscal reform in 1994, the problem started to rise
because of the reform affect the rural local government to left behind in bad financial
situation and forced to use unauthorised taxes, fees and sub-charges to fill the gap but only
cause the worse effect.

As the result the farmland and crop production were declined year by year and the land
becomes limited in China. After the booming years, the problem was solved but the reform
still focuses to shift towards cities & industries and impact the traditional and margin sector
agriculture received little input and also need to fulfil the heavy local taxes & fees. Even after
the fiscal-taxation reform, the agriculture production cost rose by 34 % and the output
prices fell by 22.6%. While some facilities like schools and clinics need to be close down and
the others like public transport, water irrigation and social welfare are collapsed because of
the reform.

To solve the issues, the government implemented Rural Fee and Tax Reform in middle of
2000. But the impact has caused the farmer burden become increased and give a slow
growth to their income, so the government abolished the reform and lower the tax on
agriculture sector. After that time, the local government has no issue on the local taxes or
any charges. China also input the financial input to the countryside when they already have
significant resources to tackle the problem by 600 billion yuan in 2008. The action was to rise
the agricultural sector and as the result, the agriculture sector rise by 38%.

3. WHAT ARE THE RECENT CHALLENGES TO CHINA RURAL ECONOMY?

1. Land ownership reform (‘Land finance’)

The local government usually (with the claim they represent local people) sign contracts to give
access to the developer to use the land for a certain time. In return, the local government gets an
immediate huge income.
 The chart shows that local government revenue trend by giving developer access to the land is
increasing. This condition causes the local government to rely on renting the land to developers and
no longer pay attention to improve local business (create innovation, promote local enterprise, set
up the business). However, this situation makes them vulnerable to corruption and nepotism.
Therefore, the challenges are: Who belongs to the land? Who has the right to sell it? How to handle
it?

2. Economy of scale (vs technology and productivity)

The economy of scale in China for the agriculture sector is considered a small scale because of
the household base, low division of labor, low access to modern technology, low productivity. Their
landscape is also a challenge because rugged plateaus, foothills, and mountains, they occupy nearly
two-thirds of the land. On the other hand, productivity, technology, capital, and investment demand
a big economy of scale to access advanced technology.

3. The city-countryside dual-structure

Due to the differences in structure in the city and the countryside, many people (farmers) from
the countryside choose to work and move to the city. They want to gain a better opportunity, to get
a better job, to increase their life. As the statistic shows, the migration from the countryside to the
city in China increasing. Young farmers choose to move and left behind their “old People” parent to
work in the city as a labor in the factory or even in construction building.

However, because many farmers choose to work and live in the city, there are fewer people who
work on the land as a farmer in the countryside. Moreover, because of the hukou system “‘Farmer’
is not a profession or based on where you live but a fixed social status of the lower class by birth.”
Immigrant farmer workers did not get equal treatment from society, justice, and even politics.

4. Surplus labour: rural industrialization vs urbanization

Rural industrialization that happened should reduce the social and economic gap in China, but it did
not happen because some reason (example: san-nong problem), the countryside or rural side of
China still far less behind. Moreover, the land finance that happened in the countryside (the local
government gives access to the developer to use the land) make farmers cannot work in the land
again. There are the reasons why farmers move to the city. If the rural industrial and this condition
keeps happening, the agricultural sector in China can become a problem.

– 2016: 57.4% of the population already stay in cities/towns. There are needs of a balance between
rural development and urbanization

– can China get a soft-landing again in case of crisis?