CHINA: REFORMING AGRICULTURE WITH THE RESPONSIBILITY SYSTEM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00928R000200040004-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 22, 2016
• Document Release Date: January 20, 2011
• Sequence Number: 4
• Publication Date: December 1, 1983
• Content Type: REPORT

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Directorate-of ---________ Rtt-
Intelligence
the Responsibility System
China:
Reforming Agriculture With
-s,
EA 83-10241
December 15'83
coPY 2 2 6
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Directorate of Secret
Intelligence
the Responsibility System
China:
Reforming Agriculture With
Domestic Policy Branch, O ice o ast Asian
Analysis. Comments and queries are welcome and
may be directed to the Chief, China Division, OEA,
This paper was prepared b China
Secret
EA 83-10241
December 1983
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China:
Reforming Agriculture With
the Responsibility System F
Key Judgments China's peasant responsibility system, the cornerstone of Deng Xiaoping's
Information available pragmatic agricultural policies, has been transforming agriculture by
as of 1 December 1983 increasing material incentives for production. The system attempts to link
was used in this report.
peasant income directly to production and gives peasants more voice in
production and marketing decisions. Under the most liberal and popular
type of responsibility system, the land is divided into what amounts to
small family farms, with the state receiving part of the production in
payment for the right to use the land.
The responsibility system has been the most successful of the leadership's
reforms-agricultural productivity has increased and so has rural support
for Deng and his policies. The Chinese press gives the system, most of the
credit for the bumper harvests of the past five years. We believe, however,
that a combination of good weather, increased use of fertilizer and
equipment, and other related reforms, such as a more rational state pricing
system, probably account for at least as much of the increase.
Despite strong support among the top leadership, the rural reform program
has many critics within the bureaucracy. Some have attacked the responsi-
bility system on ideological grounds, claiming it promotes capitalism and
weakens collectivism. Others have pointed to more practical problems:
? The state's increasing difficulty in maintaining order in rural areas.
? The unresolved role of cadre in the new system.
? Rising birth rates and lower school enrollment and military recruitment
as peasants demand more labor for family operations.
? The government's inability to plan and control production of certain
commodities.
? Increasing rural inflation and greater income disparities among peasant
families.
Despite these problem areas, we believe the responsibility system will
continue for the near future, albeit with periodic modifications. We believe
there is consensus within the leadership that rural reforms, whatever their
ideological faults and practical shortcomings, have played a major role in
alleviating China's food problem and strengthening peasant support for the
party. Party leaders probably fear that any sharp shift away from the
responsibility system risks widespread peasant disaffection and damage to
critical farmland. Indeed, Beijing has been at pains to reassure peasants
that their worries about the durability of rural reforms are unfounded.
Secret
EA 83-10241'
December 1983
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Over the long term, we believe that the responsibility system could help
Beijing further increase agricultural production, but much of the one-time
gain obtainable from institutional changes has already occurred. Future
increases in output and productivity will depend upon Beijing's ability to
encourage private investment, control inflation, and promote the adoption
of new agricultural technologies.
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Key Judgments
iii
The Responsibility System
1
Laying the Base
1
How the System Works
3
The System's Performance
4
Ideological Objections
6
Loosening Authority
6
Economic Planning and Control
8
Land Ownership
10
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Figure 1. Small, more inten-
sively cultivated private plots in
contrast to the large collective
ric elds in theforeground.F-
Figure 2. Under the new poli-
cies, peasants are allowed to
sell their produce in urban free
markets that until recently
were nonexistent in China.F_
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China:
Reforming Agriculture With
the Responsibility System F
The Responsibility System
In late 1978 China's leadership introduced a series of
pragmatic economic policies that are gradually trans-
forming the country's entire economy. Agriculture
has been the testing ground for the most important of
the reformist policies-linking income to decision-
making responsibility and labor productivity, known
generically as the production responsibility system
(see box).
Several factors probably led to the new, more prag-
matic policies. In the mid-1970s food production was
barely keeping pace with increases in population, and
leaders acknowledged that 100 million Chinese suf-
fered from malnutrition. Nearly all the effort in
agriculture was centered on grain production to the
detriment of other crops. Production costs had risen,
and, in the absence of price increases, farm incomes
had stagnated.
Reformers recognized that the collective work struc-
ture failed to reward more diligent labor. The basic
accounting unit-the production team-consisted of
20 to 30 families, or more than 100 people, and each
laborer was awarded workpoints depending on the
type of work done; the laborer's sex, age, and fitness;
the number of days worked; and sometimes political
reliability. At the end of the year, team income was
distributed according to workpoints earned. This
meant that a peasant's income was only indirectly
linked with the actual amount of work done or
commodities produced. Peasants also had little or no
voice in the collective's production and marketing
decisions
The main thrust of the responsibility system is to
make peasants more responsible for their own produc-
tion by increasing their role in decisionmaking and
linking remuneration to output. It also is intended to
input levels and marketing incentives., rather than by
relying on ideological haranguing. The ideologists are
struggling to reconcile material incentives to Mao's
brand of socialism. China's 800 million peasants, after
decades of collective, politically motivated production,
are having to learn to deal with the new freedom to
make decisions on investment, cost, and profit. The
transition is not always easy, as ignorance and skepti-
cism abound in the countryside.
Laying the Base
The new strategy for economic development became
official in December 1978 during the party's Third
Plenary Session of the 11th Central Committee. The
meeting studied the experiences of teams that had
transferred production responsibility to smaller ac-
counting units and individuals, including experiments
conducted in Sichuan under the direction of Zhao
Ziyang and in Anhui under Wan Li. The experiments
resembled the short-lived policies of the early 1960s
supported by Liu Shaoqi and Chen Yun after the
Great Leap Forward.
reduce bureaucratic impediments.
This simple shift in philosophy has produced profound
effects. Beijing's economists now approach the basic
question of how to increase production by considering
Shortly after the plenum, some rural :reforms were
implemented. Procurement prices were adjusted up-
ward for the 1979 harvests, and larger price increases
were made for above-quota sales, increasing the eco-
nomic incentive to raise production. Price increases
were also announced for industrial crops such as
oilseeds and cotton. These adjustments represented an
initial attempt to control production with market
forces, rather than with state-imposed. acreage and
production quotas. The increase in industrial crop
prices also reversed Mao's overemphasis on grain
production and his directives that each area should be
self-sufficient in grain. Areas were to begin specializ-
ing in the crops most suited to that particular region,
the eventual goal being the establishment of stable,
productive "base areas" for key commodities. F_
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The Chinese generally classify the responsibility sys-
tem into six forms, although actual contract work-
ings vary within each category. Of the six forms, the
most popular are the two based on the household-
one contracting for land and the other for output. F
Contracting With Households for Land. This is the
most popular and widely publicized form. At the
beginning of 1983 it had been adopted by more than
70 percent of China's households. Also called house-
holds assuming full responsibility for task comple-
tion (baogan daohu), this form divides the collective's
land, livestock, and farm implements among the
peasant families. The state retains ownership of the
land, which is allocated on the basis of the size of the
household and/or its labor force. The contracting
parties are the peasant household and the production
team.
The land contract to households stipulates the
amount of product that must be returned to meet the
production team's state procurement quota and to
cover any team collective expenses. In addition, the
households must perform a stipulated amount of
compulsory labor, usually for capital construction or
maintenance of irrigation works within the collective.
The team may still manage irrigation works, large
tractors, and other expensive inputs. Peasants are
charged for shortfalls in the products or labor agreed
upon in the contract, but quotas are lowered in cases
of natural disasters.
The most significant feature of this form is that,
except for land and labor quotas, the peasant makes
nearly all production and marketing decisions. More-
over, the collective plays no role in distributing the
team member's income. A peasant can purchase any
additional inputs that are available, such as fertilizer
or a walking tractor. Except for cotton and tobacco,
he also can dispose of any surplus as he chooses
including sales through the expanded free market
system.
Contracting With Households for Output. This form
(baochan daohu) varies widely in the degree of collec-
tive involvement. As under the land contracting
system, the land is divided among the peasant house-
holds, but the collective accounting and workpoint
systems are retained. The work team still makes all
leadership, planning, and accounting decisions with
households working independently on assigned plots.
The households must return a fixed amount of their
production to meet the team's state procurement
quota and collective costs. The team retains control
of any above-quota production and rewards members
according to workpoints earned.
Many communes also assign small fields and quotas
to cadre, barefoot doctors, teachers, and other tradi-
tionally nonagricultural members of the commune.
These members must then either farm part-time, hire
laborers, or pay a penalty for failure to meet the
assigned quota.
collective system.
Under this form, the collective can delegate responsi-
bility for planting decisions, fertilization, draft
animals, tractors, irrigation, and other tasks to indi-
vidual households. Thus, contracting by output be-
comes similar to contracting land. If the team
chooses not to delegate, this form resembles the old
Specialized Contracting. This is a form designed for
highly collectivized areas wherein a group or individ-
ual contracts for a specific job such as harvesting or
driving a tractor, or for specialized subsidiary under-
takings, such as livestock or poultry raising. Special-
ized contracting tends to embody highly centralized
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planning, management, and accounting with provision
for a fixed production quota as well as rewards and
penalties for production above and below target.
Short-Term Contracting. Many small or seasonal jobs
are contracted to laborers, usually for completion within a
relatively short period of time with remuneration received
in workpoints. The contract is generally not linked to
output but stipulates a specific task to be done, such as
weeding a certain area or cleaning a portion of the
collective's irrigation canal.
Contracting With Groups for Output. The team di-
vides farmland and duties among smaller work
groups. It also assigns individuals to each group and
makes most management decisions. The group then
allocates its workpoints among its members by their
individual production. If the group exceeds or falls
short of production quotas, the team will assess
rewards or penalties to the group as a whole.
Contracting With Individuals for Output. As in
contracting output to groups, the team remains the
basic accounting unit and makes unified management
decisions. But in this form, the team contracts to
individual peasants the amount of land, labor, pro-
duction, workpoints, and inputs. Rewards and penal-
ties are given to individuals based on their actual
production.
These contracts closely resemble contracting with
households for output. But contracting with individ-
uals for output specifies a fixed period of labor,
whereas peasants determine their own level of efforts
under the household system. The household system
may also give peasants discretion for planting, using
draft animals and machinery, and distributing in-
come, all of which remain under collective control in
contracting with individuals for output.
In 1979 Beijing began encouraging collectives to
adopt the "responsibility system," especially in the
poorer areas. At about the same time, free markets
and private plots were expanded. The free markets
allowed peasants to earn money directly by selling
either their above-quota production from collective
land or produce from their private plots. Private plots,
where peasants could plant and manage what they
wanted, were to be expanded from roughly 7 to 15
percent of the commune's cultivated land.
Responsibility systems initially met fierce resistance
from officials at all levels. Practical as well as ideolog-
ical objections were raised by those who saw their
livelihoods threatened, including local cadre and peas-
ants who had limited labor, skill, initiative, or capital.
Beijing countered with a steady stream of directives,
inspection tours, and press reports citing increased
production and peasant incomes from the new system.
By the end of 1979 over 85 percent of the accounting
units reported they had adopted some form of respon-
sibility system.
How the System Works
Each form of responsibility system is designed to
increase productivity by increasing the peasant's role
in production and marketing and by linking his
income directly to production. Since 1979 when the
systems were first adopted, Beijing has stressed that
each area should adopt the form best suited to its
particular needs and desires. In fact, peasants were
encouraged to experiment with various forms or to
invent new ones to meet their needs. Some peasants
have signed different types of contracts for the pro-
duction of different commodities.
As a result, a multiplicity of forms of the responsibil-
ity system have sprung up, creating confusion both
among peasants and local cadre. This, coupled with
the desire of cadre to report the changes that higher
officials are calling for, casts some suspicion on the
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Figure 3
China: Adoption of the Responsibility System
Percent
100
Jan Dec Jun Oct
1980 1980 1981 1981
Accounting units
reporting the
adoption of a
responsibility system
Accounting units
reporting the
adoption of a
responsibility system
with income linked
to production
accuracy of the reports Beijing published on the
progress of adopting responsibility systems, summa-
rized in figure 3.
Despite the questionable accuracy of the reports, it
appears the system was adopted more rapidly than
Beijing envisioned. Although the early contracts be-
tween peasants and the collective retained the work-
point system and did not link income directly to
output, peasants demanded the more "liberal" forms
as news about them spread. Contracts gradually
included responsibility for planting, fertilizing, and all
other tasks. They also spread from cropland to include
sideline industry, forestry, and fishery production. By
February 1983 Beijing had deflated earlier estimates
and reported that 92 percent of the nearly 6 million
production teams had adopted some form of responsi-
bility system. Contracts with individual farm house-
holds were being signed within 78 percent of the
nation's teams
The System's Performance
By most measures the responsibility system in agricul-
ture has been the greatest success of the current
leadership's reform program. The most obvious meas-
urable goal was to increase agricultural production.
Beijing realized that agriculture held the key, not only
to feeding China's huge population, but also to provid-
ing the base for the rest of China's economy.
As table 1 illustrates, China's production of agricul-
tural commodities has soared under the responsibility
system. Since 1978 per capita grain output has been
at the highest level in the country's history. Grain
production has increased despite the reduction in
grain acreage caused by more cultivation of industrial
crops (see table 2). The diversification from grain has
led to successive record harvests of nearly every major
industrial crop.
Although the Chinese press has attributed the unprec-
edented growth in production to .the increased
incentives from responsibility systems, other factors
probably have contributed collectively just as much to
that growth:
? Weather. With few exceptions, weather has been
unusually favorable over agricultural areas since
1979, when the reforms were first put into effect.
? Price Subsidies. Raising procurement prices before
the 1979 harvest increased peasant enthusiasm and
helped diversify production by making industrial
crops more profitable.
? Regionalization. Peasants have been encouraged to
grow the crops most suited to their area, resulting in
higher average yields nationwide.
? Inputs. Table 3 illustrates that Chinese peasants
recently have been allocated more inputs to help
boost production. Although domestic production of
fertilizer has stagnated in recent years, the world
glut of fertilizer has allowed increased imports to
raise fertilizer consumption.
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Table 1
Production of Selected Agricultural Products
Amount
Average Annual Increase
(percent change from previous year) a
1957
1979
1980
1981
1982
1958-78
1979
1980
1981
1982
Grain
(million metric tons) b
190.7
332.1
320.5
325.0
353.4
2.1
9.0
-3.5
1.4
8.7
Cotton
(million metric tons)
1.6
2.2
2.7
Oil-bearing crops
(million metric tons)
4.2
6.4
7.7
10.2
Sugarcane
(million metric tons)
10.4
21.5
22.8
29.7
Sugar beets
(million metric tons)
1.5
3.1
6.3
Jute, ambary hemp
(million metric tons)
0.3
1.1
1.1
Silk cocoons
(thousand metric tons)
Tea
(thousand metric tons)
Aquatic products
(million metric tons)
3.1
4.3
4.5
Hogs
(million at yearend)
Sheep and goats
(million at yearend)
Large animals
(million at yearend)
Gross value of agricultural
output (billion 1970 yuan)
79.3
158.4
162.7
172.0
s Based on unrounded numbers.
b Includes potatoes converted on a grain equivalent basis of 5 to 1.
? Opening to the West. China's agroscience base has
been improved by scientific, technical, and educa-
tional exchanges with the West. Increased foreign
trade is bringing China machinery, seeds, manage-
ment techniques, and a host of other benefits that
increase production.
Aside from its obvious economic benefits, agricultural
reform has also paid noteworthy political returns.
Both Deng Xiaoping and Hu Yaobang have cited the
"improved situation in the countryside" as among the
most important of the party's accomplishments in the
past two years. Both have used the success of the rural
reforms to stimulate reforms in other areas of the
economy, government, and even the military.
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Table 2
China: Grain Area
Year
Million
Hectares
Percent Change From
Previous Year
1978
120.6
0.2
1979
119.3
- 1.1
1980
117.3
-1.7
1981
1982
Problems Arise
The adoption of the responsibility system in the
countryside is still highly controversial. Its contribu-
tion to better harvests has not prevented it from being
heavily criticized for both ideological and practical
reasons.
Ideological Objections. The obvious success of the
reforms has muted criticism, but the strength of the
ideological opposition is evident in the frequency of
articles and editorials in the party press defending
responsibility systems. For officials steeped in Maoist
egalitarianism, the responsibility system bears a great
resemblance to traditional private farming, or worse,
to "capitalism in the countryside." Early propaganda
for the reforms, which encouraged peasants to "be-
come rich," probably created considerable misunder-
standing.
Many lower-level officials still have vague ideological
reservations about the system and are reluctant to
implement it. Some leftists owe their career advance-
ment to past criticism of the very principles now being
promoted. Other, more cautious cadre remember the
changing political winds of the past and have been
unwilling to support a policy line which they believe
may be short lived.
Loosening Authority. The most persistent political
objections, and the greatest long-term threat to the
system, stem from the general loosening of state
authority that has come with rural reforms. Peasant
life under the collective system was highly regiment-
ed, with the state cadre making many of the daily
other areas.
work decisions. But as peasants have been given
responsibility for production and marketing decisions,
they have also taken responsibility from the state in
Beijing has encouraged communes and brigades to
adopt the new systems to their own unique needs, but
some have adopted programs that run counter to the
state constitution. In some cases peasants have under-
stated production or simply refused to deliver their
output quotas or pay taxes.
increases in crime, corruption, and more
cased peasants going to the black market to obtain
materials. last year
Fujian Province began establishing police stations at
many communes and towns because peasants refused
to obey local cadre. Press reports of a recurrence of
traditional religious rituals, gambling, and clan activi-
ties are also growing more numerous
The weakening of cadre authority may become partic-
ularly important during natural disasters when peas-
ants must be organized to provide labor and relief
supplies. We believe that crop losses from poor weath-
er may be less severe under the responsibility system
than under the old collective structure because of the
extra attention given to fields. But, if problems devel-
op in providing emergency relief, many early critics of
the system, who had been forced into silence by its
success, will renew their attacks.
Cadre. As production teams are divided into house-
holds, cadre lose their power to assign work and
penalties, making it difficult to enforce their orders.
Local cadre have come to be viewed by the peasants
as an unproductive drag on their economic activities.
The prestige and security of the cadre were further
reduced when Beijing announced campaigns against
official corruption, incompetence, and ideological im-
purity-campaigns all directed at lower-level cadre.
The party press has admitted that morale among rural
cadre has plummeted. Some cadre have tried to slow
the implementation of reforms by refusing to distrib-
ute central documents or by simply ordering that the
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Table 3
China: Agricultural Inputs
1982
Level
Percent Change From Previous Year
Chemical fertilizer a
(million metric tons)
12.78
22.6
15.7
0
3.2
Nitrogen
(million metric tons)
10.22
15.5
13.3
-1.3
3.7
Phosphate
(million metric tons)
2.54
75.9
26.9
8.7
1.2
Potash
(metric tons)
25,000
-23.8
25.0
27.5
-3.8
Chemical insecticides
(metric tons)
Conventional tractors
(units)
40,000
10.5
-22.2
-45.9
-24.5
Hand tractors
(units)
298,000
-1.9
-31.4
-8.7
49.7
Gunny bags
(million units)
500
18.6
25.9
4.4
16.6
Conventional tractors
(units)
812,000
19.7
11.7
6.3
2.5
Hand tractors
(million units)
2.29
21.7
12.2
8.7
12.3
Rural electricity
(billion kilowatt-hours)
Irrigation pumps
(million horsepower)
Chemical fertilizer a
(million metric tons)
15.13
system not be adopted. Others have tried to under-
mine the system by allowing peasants to divide collec-
tive resources for their own use, then reporting them
to higher authorities. Some cadre have manipulated
the new system to bring maximum benefits to their
own families and friends
Beijing's attitude remains ambivalent. On the one
hand, it has tried to reassure cadre that they are still
needed under the new system to guide production and
ideological education and to make sure central plans
are implemented. On the other hand, it is also clear
that the party hopes to weed out many of the older,
less experienced, and left-leaning cadre through the
current party rectification campaign.
Birth Rates, Education, and Recruitment. The divi-
sion of land among households, particularly on the 25X1
basis of family size (or available labor force), encour-
ages peasants to have more children. This has caused
an increase in rural birth rates at a time when Beijing
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Figure 4. Birth control poster
showing a little girl and en-
couraging peasants to marry
and give birth late in life.
is trying to reduce the population growth rate from
2.1 to 0.95 percent and to keep the population below
1.2 billion by the year 2000. The responsibility sys-
tem, with greater rewards for increased production,
has reinforced the traditional Chinese peasant belief
that large families are desirable)
To counter the lack of voluntary family planning,
Beijing has adopted a mix of incentives and punish-
ments, some stipulated in contracts with couples of
childbearing age-called, not surprisingly, the
planned parenthood responsibility system. Incentives
for single-child families include cash bonuses and
improved land allotments. Penalties vary from
involuntary abortions and sterilization to economic
sanctions. Although these measures have not been
successful in lowering rural birth rates, there are
reports they have increased tensions between peasants
and cadre. Beijing is augmenting its efforts with
education campaigns, free contraceptives, and con-
struction of communal care centers for the elderly
A related problem has been a growing incidence of
female infanticide. This past year, selected statistical
reports in the party press show the percentage of
(surviving) female children dropping in rural areas, in
one case to as low as 10 percent of reported births.
Responding to government policies, some peasants
have evidently decided that, if they are to have only
one child, a boy is preferable to assist with the
farmwork and to provide for the parents during old
age.
The increased demand for labor in family fields,
livestock herds, and sideline industries has also affect-
ed education and military recruitment. Local press
reports suggest that many peasant children are being
pulled out of school permanently to help with family
farming, some before they graduate from primary
school. According to Western press accounts, the
Army, once considered a prestigious career and a
coveted method of leaving the countryside, has had
trouble meeting recruitment quotas in some rural
areas because peasant youth want to stay and help
with family operations. In 1981 the party had to
mount an extensive propaganda campaign in the
military to overcome misunderstandings and dissatis-
faction over responsibility systems.
Economic Planning and Control. It has been difficult
to blend material incentives and peasant initiative
with the administrative habits of a command econo-
my. As illustrated by the box outlining problems with
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China's Tobacco Industry: The Best Laid Plans Go
Up in Smoke
The 1978 readjustment of procurement prices made
tobacco production relatively less profitable, and
peasants consequently reduced the acreage sown to
tobacco in both 1979 and 1980. The resultant short-
age of supplies for state-owned cigarette plants was
further aggravated in 1980 when localities estab-
lished small-scale cigarette factories and processed
their own tobacco rather than turning it over to state
plants. Expensive imports were required to satisfy the
state plants.
Tobacco procurement prices were raised in 1981 to
correct the problem, but this time the prices were set
too high. Peasants responded by increasing tobacco
acreage nearly 50 percent and selling roughly 80
percent more to the state. One press report indicated
that China may have produced as much as 250,000
tons more tobacco than needed.
In early 1982 the State Council, understandably
wary about adjusting procurement prices again, chose
to limit cigarette production by ordering all local
cigarette plants closed in favor of operating the
larger, more efficient state plants. All cigarette pro-
duction, procurement of tobacco leaf, and allocation
of both tobacco and cigarettes were to be carried out
within the state plan. Although this move reduced the
demand for tobacco leaf, it did not affect the profit-
ability of growing tobacco for peasants, who were still
paid the high state procurement prices. Production in
1982 rose to 2.2 million tons, surpassing the 1985
goal of 1.3 million tons.
Finally in late 1983 the State Council once again
reasserted total control over the industry by declaring
a state tobacco monopoly system. Peasants can no
longer plant or market tobacco without permits and
licenses showing that their activities are within the
state plan
tobacco production, not all of Beijing's efforts have
been successful, and planners have in some cases
returned to the more familiar command style of
managing agricultural resources. In many cases the
Table 4
Per Capita Peasant Income
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L~.)A I
policies adopted since late 1978 to increase the pro-
duction of industrial crops have worked all too well. In
their enthusiasm for more profitable industrial crops,
peasants have reduced the acreage sown to grain.
Some Chinese planners have written that there may
not be enough grain if bad weather hits. The state has
maintained strict control over cotton production and 25X1
marketing and closely monitors grain production.
Still, peasants often foil collective acreage and pro-
curement plans by planting their most profitable crops
on their best land and by giving the lowest quality
produce to the state while saving the best to market
themselves.
Rising inflation in rural areas has been dealt with
even less effectively. Peasant incomes have risen
dramatically while acute shortages of consumer goods
and agricultural inputs exist in rural areas (see
table 4).
Readjusting procurement prices (prices the state pays 25X1
for agricultural products), either to stem inflation or
to help control the product mix, is not a popular
alternative. Lowering procurement prices would be
unpopular with the peasants and would damage
Beijing's attempts to portray the reform policies as
longstanding. Raising selected procurement prices to
control the product mix would draw opposition from 25X1
leaders who believe that state subsidies for agriculture
are already a strain on the state budget, accounting
for roughly one-third of total budget expenditures by
1981.
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A potentially serious problem arising from the agri-
cultural responsibility system has been the widening
gap between rich peasants and the poor peasants and
cadre. While some communes have always been
wealthier than others because of their access to
markets, transportation, or better farmland, reform
has accentuated income differences within communes
as well. Although national media have encouraged
peasants to "become rich" through their own initia-
tive, local reaction has often been negative or even
hostile. The press has carried stories of poor peasants
demanding food and money from wealthier peasants
or of cadre attempting to destroy moneymaking
schemes or extort goods or cash from the wealthier
families. Deng Xiaoping has recently criticized the
disparity of income in rural areas, according to Em-
bassy reporting.
Where the System Has Not Worked. There are some
areas where responsibility systems, at least in the
form of household production, provide fewer benefits
to the peasants than the old collective system. Many
wealthier communes near large urban centers, for
example, have large industrial enterprises and few
members involved in farming. Most of these com-
munes have found it more profitable not to divide up
the land, but to continue paying a few peasants to
manage the farmland.
On the opposite end of the spectrum, some poor
isolated communes with limited natural resources
have little chance to prosper under any system of
management. These peasants would rather have the
security of the collective and of ready state relief
supplies in case of disasters.
In the wheat-growing areas of the northeast where
agriculture is heavily mechanized, fields are larger,
and communes have less labor, peasants and cadre do
not favor dividing the land into family plots, although
the majority of teams have adopted some form of
responsibility system in 1983. Some of the contracts
cover operation and maintenance of the large imple-
ments.
Large-scale agricultural support activities have not
been done well under responsibility systems. Some
irrigation projects, for example, fell into disrepair, and
others were diverted to private use. Beijing responded
by encouraging individual contracts for the construc-
tion and maintenance of irrigation and drainage
facilities. Some contracts are for seasonal work or
specific tasks as they come up, while other peasants
and officials sign personal responsibility contracts to
work full-time managing the facilities. The overall
problem persists, however, as peasants are unwilling
to devote time or resources to collective improvement
projects.
Land Ownership
Although the state maintains ownership of the land,
the changing rights to use land are having a great
effect on China's agriculture. In the early production
contracts, peasants were not allowed to buy, sell, rent,
transfer, or leave uncultivated the land assigned to
them. To ensure equal distribution of their farmland,
communes usually divided their collective lands into
three quality grades, assigning each individual a
separate plot of each grade. Wasteland, forests, sur-
face water, and grazing lands could also be divided
among individuals.
Land-use rights are becoming controversial as many
peasants desire to give up cultivation of their land.
The formation of corporations, agricultural-industri-
al-commercial cooperatives, and the specialization in
profitable sideline enterprises are making an increas-
ing number of peasants contract their land to others,
hire laborers to work it for them, or simply leave it
idle. For many cadre, this raises concerns of a reoc-
currence of pre-1949 abuses, such as absentee land-
lords and labor exploitation. This summer Beijing
issued a statement guardedly approving the "rational-
ization" of land holdings, the right of peasants to
develop specialization off the land, and the consolida-
tion of land into more cultivable plots. The idling of
productive land, however, is still harshly criticized. F
It remains unclear how far Beijing will let land
transfer progress. The policy was justified by arguing
that the practice is already widespread and that the
system remains socialist because the land ownership is
not being transferred. But an August 1983 report in
China Peasant News indicated that the policy could
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be carried too far when cadre members in Shanxi
Province were charged with acting as middlemen for
such transfers.
One of the most serious problems relating to land use
under the responsibility system is its abuse by peas-
ants who doubt the staying power of reform policies.
Believing they would have to turn the land back in a
short time, peasants initially cut forests, used farm-
land for burial plots and houses, and made little effort
to maintain or improve farmland. Also, recent indica-
tions in the Chinese press that individual land allot-
ments may be redistributed to be more "rational"
discourage peasant investment. According to the Chi-
nese press, peasants in some areas of north China
reduced agricultural inputs and capital improvements
this year because of rumors that their initial three- or
four-year contracts would not be renewed. Officials
there have tried to allay these fears by signing new
five-year contracts. Some officials in these areas are
even considering contracts running as long as 10 to 20
years.
Policy Prospects
We expect another record grain harvest this year,
which augurs well for the continuation, and even
expansion, of agricultural responsibility systems. We
believe there is consensus within the leadership that,
whatever their ideological faults and practical short-
comings, rural responsibility systems have played a
major role in alleviating China's food problem and
expanding peasant support for the party. In our view,
party leaders also realize that any sharp shift away
from the new system risks widespread peasant disaf-
fection and damage to critical farmland.
In fact, Beijing has already drawn up plans for
expanding and adjusting the rural responsibility sys-
tems. A central directive circulated in early 1983
details the next steps in agricultural reform, some of
which are already being implemented:
? Industry and commerce are to move into rural areas
in order to diversify rural production, so peasants
will not have to move to the cities.
? Peasants are to expand their capacity for processing
agricultural produce and earning more private
income.
? The number of families engaging in specialized
production for marketing should be increased to
contribute to the development of the market 25X1
economy.
? Communes will continue to be dismantled, area by
area, and may cease to be a unit for both political
and economic administration.
? Personal employment of hired laborers is to be
permitted. However, it is not to be encouraged
officially or publicized.
? Peasants are permitted to purchase vehicles for
transportation, including large tractors and
automobiles.
? Procurement channels other than state agencies
should be created, and steps are outliined to ensure
an increased flow of commodities through free
markets.
Hindrances to Further Reform. It is not clear, howev-
er, just how much further the current leadership
intends to push responsibility systems. Conservative
party stalwarts are vigorously attacking reforms in 25X1
other sectors of the economy, in education, and in
culture on the grounds that party control and prestige
are diminished. Thus far, the backlash has not hit
agricultural policy, but we believe it could. Both Deng
and Hu seem to be carefully distancing themselves
from negative aspects of rural reform: Deng by
criticizing resultant income disparities, Hu by prais-
ing "voluntary" recollectivization in appropriate ar-
eas.
In our view, ideological considerations will continue to
act as a brake on rural reform. Chinese leaders have
doubtless been upset by Western reporters and busi-
nessmen claiming that "capitalism" is flourishing in
the countryside. We believe that the "spiritual pollu-
tion" campaign-now directed at eradicating certain
Western influences in China-reflects a heightened
sensitivity to ideological questions. In such an environ-
ment, no Chinese leader-not even Deng-can afford
to be accused of promoting capitalism. Until this
campaign is concluded, we expect further develop-
ment of rural reform to be slow.
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Criticism of responsibility systems will remain muted
as long as production continues to increase. The
system could help boost agricultural growth above the
historical average, but several economic problems
must be solved first. The biggest factor determining
future production levels is investment in agriculture;
many of the one-time gains from labor reorganization
probably already have occurred. Chinese leaders have
said publicly that they intend to concentrate state
expenditures for agriculture on large-scale projects,
such as irrigation canals, rather than on small-scale
inputs such as tractors and fertilizer. Peasant invest-
ment is increasing, but the state will have to increase
the fertilizer and equipment available for purchase,
stabilize land allotments, and promote the stability of
the new policies. In our view, further retreats toward a
planned economy, such as occurred in the tobacco
industry, will erode peasant confidence.
Rural inflation remains a serious problem, but Beijing
has apparently not designed an effective strategy to
address it. For example, two major conferences this
fall came up with different solutions. A forum of
Agricultural Bank managers agreed to lower the
amount of money in circulation by reducing loans to
farmers. The other conference on rural commercial
credit decided to make more funds available so peas-
ants would produce more foodstuffs and increase the
flow of raw materials to urban industries
The dissemination of science and technology to the
countryside must also be improved for agriculture to
continue to progress. Responsibility contracts for sci-
ence and technology have been proposed in an attempt
to disseminate information more widely, but we be-
lieve they will prove unsuccessful on a nationwide
basis. Chinese officials are studying the US federal
and state extension system, but, if copied, it will take
time and great expense for Chinese scientists to gain
the necessary credibility with most peasants.
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