In the late 1980s, China remained a predominantly agricultural country. As of 1985 about 63 percent of the population lived in rural areas, and nearly 63 percent of the national labor force was engaged in agriculture. Modern technology had spread slowly in the vast farm areas, and the availability of modern supplies was less than adequate, causing growth in agricultural output to lag behind production increases in the rest of the economy. The proportion of GNP produced by agriculture declined from over 43 percent in the early 1950s to about 29 percent in 1985. The low agricultural growth rate as compared with other sectors of the economy reflected the fact that the average farmer had far less machinery and electric power and fewer other modern production aids to work with than the average worker in industry. Under the responsibility system, farm households and collective organizations purchased large amounts of new machinery, particularly small tractors and trucks. The horsepower of agricultural machinery per farmer increased by almost 30 percent between 1979 and 1985 but still came to less than 1 horsepower per person.
Before the early 1980s, most of the agricultural sector was organized according to the three-tier commune system. There were over 50,000 people's communes, most containing around 30,000 members. Each commune was made up of about sixteen production brigades, and each production brigade was composed of around seven production teams. The production teams were the basic agricultural collective units. They corresponded to small villages and typically included about 30 households and 100 to 250 members. The communes, brigades, and teams owned all major rural productive assets and provided nearly all administrative, social, and commercial services in the countryside. The largest part of farm family incomes consisted of shares of net team income, distributed to members according to the amount of work each had contributed to the collective effort. Farm families also worked small private plots and were free to sell or consume their products.
By the end of 1984, approximately 98 percent of the old production teams had adopted the contract responsibility system, and all but 249 communes had been dissolved, their governmental functions passed on to 91,000 township and town governments. Production team organizations were replaced by 940,000 village committees. Under the responsibility system, farm families no longer devoted most of their efforts to collective production but instead generally signed contracts with the village or town to cultivate a given crop on a particular piece of land. After harvest a certain amount of the crop had to be sold to the unit at a predetermined price, and any output beyond that amount was the property of the family, either to be sold in the market or to be consumed. Beyond the amount contracted for delivery to the collective, farmers were allowed to determine for themselves what and how to produce.
Market activity played a central role in the rural economy of the 1980s. Farmers sold a growing share of their produce in rural or urban free markets and purchased many of the inputs that had formerly been supplied by the team or brigade. A prominent new institution that thrived in the market environment was the "specialized household." Specialized households operated in the classic pattern of the entrepreneur, buying or renting equipment to produce a good or service that was in short supply locally. Some of the most common specialties were trucking, chicken raising, pig raising, and technical agricultural services, such as irrigation and pest control. Many of the specialized households became quite wealthy relative to the average farmer.
The new economic climate and the relaxation of restrictions on the movements of rural residents gave rise to numerous opportunities for profit-making ventures in the countryside. Towns, villages, and groups of households referred to as "rural economic unions" established small factories, processing operations, construction teams, catering services, and other kinds of nonagricultural concerns. Many of these organizations had links with urban enterprises that found the services of these rural units to be less expensive and more efficient than those of their formal urban counterparts.
The growth of these nonagricultural enterprises in the countryside created a large number of new jobs, making it possible for many workers who were no longer needed in agriculture to "leave the land but stay in the country," significantly changing the structure of the rural economy and increasing rural incomes. In 1986 nonagricultural enterprises in the countryside employed 21 percent of the rural labor force and for the first time produced over half the value of rural output.
Although the chief characteristic of the new rural system was household farming for profit, collective organizations still played a major role. Agricultural land still was owned by township or town governments, which determined the crops farmers contracted to grow and the financial terms of the contracts. Many township, town, and village governments also engaged in major entrepreneurial undertakings, establishing factories, processing mills, brick works, and other large-scale enterprises. Finally, the maintenance and operation of public works, such as irrigation systems, power plants, schools, and clinics, generally still was regarded as the responsibility of the collective administrations.
Four percent of the nation's farmland was cultivated by state farms, which employed 4.9 million people in 1985. State farms were owned and operated by the government much in the same way as an industrial enterprise. Management was the responsibility of a director, and workers were paid set wages, although some elements of the responsibility system were introduced in the mid-1980s. State farms were scattered throughout China, but the largest numbers were located in frontier or remote areas, including Xinjiang-Uygur Autonomous Region in the northwest, Nei Monggol Autonomous Region, the three northeastern provinces of Heilongjiang, Jilin, and Liaoning and the southeastern provinces of Guangdong, Fujian, and Jiangxi.
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