PREFACE
The Green Book Series is the outcome of collaboration between the Rural Development Institute of the Chinese Academy of Social Sciences and the Rural Social and Economic Survey Department of the Statistics Bureau of China, and this edition is the 13th Green Book on China’s Rural Economy．This book objectively and systematically reviews the operation and development of China’s agriculture and rural economy in 2004, makes some predictions on the trend of development for China’s rural economy in 2005, including the added value of agricultural production, and growth rate of farmers’per capita net income and grain prices，and ventures some related policy suggestions．
As a volume of the yearly series of the Green Book on China’s Rural Economy ,this book maintains the series continuity in statistics and analytical methods．However, more emphasis is put on prediction，which has materialized to some extent．For example，the results of the actual operation of China’s rural economy in 2004 were pretty close to what we had projected， particularly in the total output of grain．Also，a new chapter about progress in rural marketization has been added．The book’s theoretical and methodological preparation was supported by the Key Subject Research Team of the Rural Development Institute under the Chinese Academy of Social Sciences．The calculation results show that in 2003 the marketization level of rural China’s means of production was 62 percent, exceeding the critical level of 60 percent necessary for market economy countries, of which the level of marketization of operational entities in the rural economy reached 86．6 percent, and that for rural labor reached 75．3 percent, both exceeding the critical level．The level of marketization for rural capital was 52．5 percent, and that for rural land was 48 percent, both falling short of the critical level．
In 2004, governments at all levels paid much greater attention to the problems of agriculture, farmers and rural areas．A series of financial transfer payment policies were enacted，and achieved the desired results，as seen in increased agricultural output，increased income for farmers and development of the rural areas．Notable achievements were also made in the market-oriented reform of the grain circulation system．In 2004，the grain market matured further, and grain-producing and grain-consuming areas successfully shifted to market practices in buying and selling grain by signing agreements，without the state spending one single cent extra． Farmers benefited greatly from the state’s “two exemptions or reductions and three subsidies”(exemption or reduction of agricultural tax payment，exemption of special agricultural products except tobacco，direct subsidies to grain producers，subsidies to farmers for buying fine crop seeds and subsidies to farmers for buying large agricultural machines and tools—ed )．And we should point out that more benefits came from raising the grain prices indicating the importance of and irreplaceable role played by market development in the solution of rural problems．
Despite the great progress made in tackling rural problems in2004，a long-term effective mechanism is still required for their fundamental solution．
Thanks to development over the years and the continuous rises in income for rural people，the adverse impact generated by raising the price of grain on price rises of other products has been mitigated，as has the possibility for social unrest caused by such price rises．Yet，such a zero-sum game is not the best or even the second-best choice，because it is detrimental to enhancing the competitive power of China’s agriculture．If farmers gain more income by producing the same amount of agricultural products，they are likely to rely more and more on the government’s transfer payments．Such a policy may even dull the farmers’enthusiasm for creating social wealth．Subsidies have a short-lived effect in increasing output，but generate along-term negative effect in distorting the market．Therefore，it is necessary for us to take notice of，on the one hand，the results the current policies produce in increasing farmers’incomes, and on the other，the higher and higher policy costs if such policies are maintained for a long time to come．
Over the past two decades or so，more than 200 million rural workers have moved out of the agricultural sector．But，the micro foundation and competitive power of agricultural production have not shown any marked improvement．There are many examples of farmers getting rich by engaging in non-agricultural trades and in the
process of urbanization．Yet，there are not many examples of farmers getting rich by engaging in agricultural production．China is a large country with 1．3 billion people．Even if a good job is done in transferring surplus rural labor to other industries and in urban areas，the nation’s development will not be complete if agriculture lacks competitive power and farmers cannot become prosperous by doing agricultural work．
For the government, there are three goals for rural development．The first involves improving the policy environment for the flow of rural labor and the movement of the rural population，making full use of the comparative advantage in low-cost labor and doing whatever is possible to prolong the stage of low-cost development．The second involves raising the competitive power of China’s agriculture by improving the rural infrastructure and expanding the scale of operation of farm households．The third involves adopting flexible policies to protect the farmers’enthusiasm for grain production and ensure the country’s grain security while there still exists an over-supply of grain．
Logically speaking，in a situation where both good cards(increased capacity of transfer payment as a result of the enhanced comprehensive strength of the country) and bad cards(institutional obstacles formed under the planned economy system that restrict the development of the productive forces)are in the hand，the difficulties
do not lie in playing the good cards，such as increasing the farmers’income by directly issuing transfer payments to them but in dealing with the bad cards through deepening reform and continuously improving the macroeconomic environment for agricultural production，farmers and rural areas．
Regarding the rights and interests of urban and rural residents, there are huge gaps caused by institutional arrangements：Millions of farmers engaged in non-agricultural work have not been urbanized, millions of surplus rural laborers still remain in the countryside, and the process of eliminating the dualistic economic structure is far from being completed．Therefore, removal of the institutional obstacles formed under the planned economy system still remains an important task for future rural reform，as the broad masses of farmers are still an important force propelling China’s economic growth，and the first and foremost goal of rural policies is still to mobilize farmers’capacity for creating wealth．
To give more power to farmers is an effective way to bring the farmers’wealth-creating capacity into better play；it is also a basic experience gained in the development of the country and the rural areas since the launch of the reform drive．The rapid growth of agricultural output in the early stage of reform was the result of giving farmers the right to operate land；the rapid development of non-agricultural trades in both urban and rural areas in the mid-1 980s was the result of giving farmers the right to choose their own employment；and improvement in the relations between villagers and the village committees in the l 990s was the result of giving farmers the rights to elect the village leaders．The task of empowering
farmers has not completed yet．Therefore，empowering farmers is the basis for deepening the rural reform, because it is conducive to enhancing the complementarity between the goals of governments at all levels and the goals of farm households, and encouraging farmers to support governments in attaining the goals of the latter,
To establish a long-term effective mechanism for increasing farmers’ income by empowering farmers，the following two aspects should be stressed：
(1)Giving farmers the right to migrate freely．In fact，migrant rural laborers(or“farmer-workers”) have already become a major component of China’s industrial workforce．Yet, as they and their families do not enjoy full rights to merge into urban communities, only a very tiny number has actually become urban citizens．It is necessary to grant farmers the same rights as enjoyed by urban residents and truly bring about equality between the two，thus gradually establishing a mechanism that combines a continuous reduction in the rural population and 1abor with a gradual expansion of the average scale of operation of farm households．This will put the growth of farmers’income onto a more solid basis comprising more elastic and sustainable factors，such as higher returns from production factors，better structure of employment and enhanced competitive power of agriculture，and is much better than giving subsidies and enacting favorable policies．Thus．this aspect may be critical to the solution of the problem of the rural areas．agricultural production and farmers．
(2)Giving farmers the right of association to reduce trading costs and learning costs．and increase their opportunities to obtain loans．The development of farmers’organizations is conducive to improving the structure of rural governance，reforming the functions of governments at the grass-roots level and maintaining social stability．In recent years，some progress has been seen in the development of rural economic cooperative organizations．These organizations have made indirect contributions to increasing farmers’ income by enlarging the scale of trade．improving technical services to reduce the farmers’ trading and learning costs，and playing a role in maintaining the stability of rural society and reducing frictions within the rural communities．But．there is still a huge gap between the farmers’ degree of organization and their actual need for organization．Therefore，
it is necessary to grant farmers more fight of association and，at the same time，take various steps to standardize and guide the development of farmers’economic cooperative organizations．For instance，farmers should be given the right to establish small local banks on a cooperative basis．
Since the launching of the reform and opening-up drive some two decades ago, great changes have taken place in the outlook for both urban and rural areas．But the gap between the urban and rural areas seems to be widening．Such a situation is detrimental to social harmony and stability．and so it is necessary for the government to improve the pattern of national income distribution by making use of its redistribution function．The major responsibility of the government is to provide public goods．Now，the problem of electricity supply to rural areas has been basically solved, but more and continuous efforts are called for in road construction and supply of safe drinking water．In terms of road construction，the focus should be shifted from the construction of county and township roads to the construction of all-weather roads at the village level．It is particularly important to increase the input into rural education and public health，so as to improve compulsory education，skill training and public health services in the countryside．At the same time, it is necessary to increase investment in the rural social security system, and solve the problem of minimum subsistence guarantee for rural families whose members have lost the ability to work．
Expanding the scope of villagers’ direct elections．The institutional arrangement for villagers to elect their leaders directly has helped improve the relations between the villagers and the village committees．At present，it is necessary to expand the scope of such direct elections to see if this is an effective Wav to improve the relations between the villagers and the township(town)governments．In 2004，the Honghe Hani-Yi Autonomous Prefecture experimented with villagers’direct elections in choosing the town(township)heads in a number of pilot counties under its jurisdiction．The results were affirmative．More efforts should be made to grant farmers the right to get involved in making important decisions in rural areas．
The things farmers complain about most are officials’abuse of public rights and sluggishness in the performance of their duties．They are the major causes for conflicts between villagers and cadres．If such abuses are not done away with，the combination of some individuals’“heroism”with the masses’aversion to“inequality”will give rise to some“right-protecting” organizations and lead to more conflicts between grass．root governments and village cadres on the one hand and the villagers on the other．In this respect，it is necessary to codify the rights and responsibilities of the officials and establish codes of conduct for them，so as to make sure that the basic functions of government，including protecting the people’s legitimate rights，maintaining a fair order for competition，providing public goods and aiding the disadvantaged, are implemented in full．
The authors would like to express their sincere gratitude to the Social Sciences Academic Press(CHINA)for their support and help in publishing the Green Book Series and for this new edition．Criticisms，comments and suggestions from readers will be greatly appreciated．
Also．we would like to express our special thanks to the Bureau of International Cooperation of Chinese Academy of Social Sciences for its consent for the publication of this book．
Li Zhou
Deputy Director, Rural Development Institute
March 20，2005
CONTRIBUTORS
Chapter 1 Li Guoxiang
Chapter 2 Dang Guoying
Chapter 3 Zhang Yuanhong
Chapter 4 Bai Xianhong
Chapter 5 Zhang Mingmei
Chapter 6 Li Jing
Chapter 7 Li Guoxiang
Chapter 8 Weng Ming
Chapter 9 Yang Junxiong
Chapter 10 Li Renyuan
Chapter 11 Sun Mejun，Bai Xianhong
Chapter 12 Bao Xiaobin
Research Program Directed by:
Zhang Xiaoshan，Director
Rural Development Institute，Chinese Academy of Social Sciences
Xian Zude, Director
Rural Survey Organization, National Bureau of Statistics of
Li Zhou，Deputy Director
Rural Development Institute,
Editors：
Li Zhou，Zhu Gang
Contents
Preface 1
CHAPTER 1 SITUATION OF AGRICULTURAL AND RURAL ECONOMY
IN 2004 AND FORECAST FOR 2005 7
I．Main Characteristics of Agricultural and Rural Economy
in 2004 8
II．Major External Factors Affecting Agriculture and Rural
Economy 20
III．Agriculture and Rural Economy：Prospects and Forecasts
of 2005 26
CHAPTER 2 RURAL POLICY IN 2004：REVIEW AND COMMENT 38
I．Rural Policy：Change in Guiding Thought and Background 38
II．Major Rural Policies in 2004 42
III．Comments on Rural Policies in 2004 57
CHAPTER 3 AGRICUIJURE, RURAL ECONOMY AND THE NATIONAL ECONOMY 64
I．Contribution of Rural Industries to Domestic Production 66
II．Gaps in Income and Consumption between Urban and
Rural Residents 70
III．Rural Development and Changes of China’s
Socio-Economic Structure 73
IV．Striving for Balanced Development between Urban and
Rural Areas 76
CHAPTER 4 AGRICULTURAL INPUT AND OUTPUT 79
I．Agricultural Input 79
II．Agricultural Output 81
III．Major Characteristics of Agricultural Production 82
IV．Returns of Agricultural Production 84
V. Factors Accounting for Growth in Agricultural Production 85
VI．Changing Trends of Agricultural Input 89
CHAPTER 5 RURAL INDUSTRIAL STURCTURE 93
I．Change of Rural Industrial Structure and Major Characteristics 93
II．Deviations in Rural Industrial Structure and
Rural Employment Structure 99
III．11ends of Rural Industrial Structure Adjustment and the
Influencing Factors 102
CHAPTER 6 RURAL PRODUCTION FACTORS MARKET
AND DEGREE OF MARKETIZAION 105
I．Marketization of Management Entities in Rural Economy l06
II．Marketization of Rural Labor ll2
III．Marketization of Rural Land 116
IV. Marketization of Rural Capital 122
V．Marketization of Rural Production Factors and Its Trends 124
CHAPTER 7 MARKET SUPPLY AND DEMAND AND
PRICES OF MAJOR AGRICULTURAL PRODUCTS l30
I．General Situation l31
II．Grain 135
III．Cash Crops 139
IV Major Livestock Products 143
V．Aquatic Products 145
CHAPTER 8 INTERNATIONAL TRADE AND COMPETITIVENESS OF
AGRICULTURAL PRODUCTS l48
I．General Situation of Imports and Exports of Agricultural
Products 148
II．Major Factors Affecting the Import and Export of
Agricultural Products l52
III．Competitiveness of Agricultural Products in
International Market 154
I V-Comments and Prospects of Foreign Trade in
Agricultural Products l62
CHAPTER 9 INCOME AND LIVELIHOOD OF RURAL RESIDENTS 166
I．Income 166
II．Farmers’ Livelihood l76
CHAPTER 10 REGIONAL RURAL ECONOMIC DEVELOPMENT 182
I．Major Policies Influencing Regional Rural Economic
Development in Retrospect l82
II．Characteristics of Regional Rural Economic Development
in 2004 and Changes in Recent Years 184
CHAPTER 11 PROGRESS OF BUILDING MODERATELY WELL-OFF
RURAL SOCIETY IN AN ALL-ROUND WAY 191
I．Progress Attained Nationwide in Building a Moderately
Well-off Rural Society in an All-round Way by 2003 191
II．Progress Made by Various Regions in Building a
Moderately Well-off Rural Society in an All-round Way 196
III．Progress Made by Various Provinces in Building a
Moderately Well-off Rural Society in an All-round Way 199
CHAPTER 12 RURAL ECO-ENVIRONMENT AND SUSTAINABLE DEVELOPMENT 202
I．Improvement of Rural Eco-Environment 202
II．Change in rural Ecological Resources 211
III．Sustainable Management of Rural Eco-Environment 216