——An overview of the development of China's rural areas in the 10 years after Asian financial crisis

By Han Jun, Development Research Center of the State Council

Research Report No.110, 2007

After the outbreak of Asian financial crisis, the Central Committee of the Communist Party of China and the State Council made timely arrangement to enlarge domestic demand. Since an overwhelming majority of the Chinese population lives in rural areas, the enlargement of domestic demand rests no doubt on the expansion of rural market. In the past 10 years since the outbreak of Asian financial crisis in 1997, with a purpose to get adapted to the changes in different periods of the development of agriculture and the national economy, the Chinese Government has made timely adjustments to the policy goals related to agriculture, rural areas and farmers, and promulgated a series of significant policies focusing on increasing farmers' income and boosting rural economy in an all-round way. This article gives an analysis of the background information and characteristics of the evolution of China's policies on agriculture, rural areas and farmers in the past decade, looks into the future evolution of such policies and puts forward relevant policy measures.

I. Basic Framework of the Policy on Agriculture, Rural Areas and Farmers after the Outbreak of Asian Financial Crisis

1. To make it clear that the primary goal of agricultural policy is to increase farmers' income, in order to get well adapted to the development changes at different periods of agriculture in China

At the time when Asian financial crisis broke out, China was seeing a sufficient supply of agricultural products, but the farmers could hardly increase their income. After 1995, China reaped a bumper grain crop for five consecutive years, thus having an apparent over- supply of grain. The sufficient supplies of grain and other agricultural products laid a solid foundation for market stability and advancement of the living standards of rural and urban residents and boosted in a sustainable way the speedy and healthy development of national economy. However, it was getting harder to sell agricultural products, and the prices of agricultural products remained at a low level. Besides, farmers saw their income grow rather slowly. After 1997, the growth rate of farmers' income has begun to fall down from year to year. For instance, the growth rates of the per capita net income of farmers were 9.0%, 4.6%, 4.3%, 3.8% and 2.1% in 1996, 1997, 1998, 1999 and 2000 respectively. Particularly in those major crop producing areas, a considerable number of farmers have seen their income remain unchanged and even drop down to some extent.

In early 1990s, China put forward some measures featuring "high yield, superior quality and high efficiency for agriculture", and still considered it its first and foremost task to pursue a growth of the production output of agricultural products. After late 1990s, China had largely alleviated the short supply of agricultural products; meanwhile, the slow growth of farmers' income became a major roadblock curbing the development of national economy. Hence, it appeared necessary to adjust the country's agricultural policy in pursuit of the quantity growth of grain and other major agricultural products. In addition, great changes had taken place in those major factors influencing the growth of farmers' income after late 1990s. In 1994 and 1996 respectively, the state government elevated the purchasing price dramatically (to an extent up to 102%, in total); at that time, the prices of grain and most other agricultural products already turned out higher than the prices prevalent in the international market. This indicates that the formerly workable method of increasing the farmers' income by enhancing the production output of agricultural products and elevating the purchasing prices of agricultural products had become infeasible and it was necessary to seek some new methods to increase the farmers' income. It was against such a scenario that in October 1998, the Third Plenary Session of the 15th CPC Central Committee passed the "Decision on Major Issues Regarding Agriculture and Rural Areas", which made an important judgment on the development stages of China's agriculture. It stated that past years saw a short supply of grain and other major agricultural products; nowadays, the overall supply of grain and other major agricultural products has been able to meet the demand at large, and even turn out a small surplus. It was also unambiguously pointed out that it is necessary to consider it a primary goal of agricultural development and rural economy development in the new era to increase the farmers' income, which can be regarded as an important adjustment to China's agricultural policy in the past decade.

2. In order to meet the requirements arising from the development at different stages of national economy, China clearly put forward a guiding principle of "letting industry nurture agriculture, and letting urban areas help rural areas in pursuit of development", and made it a strategic task in China's drive of building new rural areas with socialist features in the course of modernization

At the turn of the new century, China has further implemented the policy measures related to farmers, rural areas and agriculture. The report of the 16th National Congress of the Communist Party of China required a balanced economic and social development between urban and rural areas. Secretary General of CPC Central Committee Hu Jintao made a clear statement at the rural work conference held in 2003 that the Party's work of prime importance should be focused on agriculture, rural areas and farmers, thereby giving much prominence to the importance of the issues related to agriculture, rural areas and farmers in China's drive for modernization. On the basis of analyzing, in a scientific way, the main problems arising in the development of China's national economy, the 4th Plenary Session of the 16th CPC Central Committee further put forward an important judgment known as "two tendencies". Later, the Party made another judgment that "China has already entered a new development stage with the feature of letting industry nurture agriculture and letting urban areas help rural areas in pursuit of development" and made it clear that this was the principle to followed for addressing the issues related to agriculture, rural areas and farmers. This can be regarded as a major innovation for solving the above-mentioned problems. The 5th Plenary Session of the 16th CPC Central Committee put forth a strategic task of advancing the construction of new rural areas with socialist features. In view of the formulated policies, the construction of new rural areas in the new historical period echoes the objective requirements upon all-sided development of rural areas under new circumstances, and consists with the guiding thought which was put forward by the 16th CPC National Congress with regard to solving the dual economic structure contradictions between rural and urban areas and emphasizing the necessity of balanced development between rural and urban areas. These policies are concrete manifestation of the principle of letting industry nurture agriculture and letting urban areas help rural areas in pursuit of development, and significant strategic measures laid down by the central government from the perspective of the view of scientific development for building a socialist harmonious society and guiding the work with regard to agriculture, rural areas and farmers in the new historical period.

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