The countryside and origins of Chinas reform

WANG Yuzhao() Former vice-president of Development Research Center of the State Council (DRC)

Abstract: Chinas 30 years of reform have achieved tremendous success and a transformation of the country. Amazingly, however, this grand endeavor began in an anonymous rural village in which the first breakthroughs were made. How did Chinas reform begin in the countryside? Why were the initial breakthroughs made there? What is its significance? This article elaborates on these questions, urging that we should carry out a scientific outlook on development in the spirit of the 17th Party Congress, and steadfastly deepen the rural reform. Research into these issues will help us gain a deeper understanding of the rural reform.

Key words: rural reform, scientific outlook

The initial breakthroughs of China's reform were made from the household contract responsibility system in the countryside. This marks the opening chapter of China's reform, a strategic arrangement by Deng Xiaoping, chief architect of reform and opening up. Now that 30 years have passed, taking stock of the agricultural household contract system and experiences of reform is of great significance for building socialism with Chinese characteristics and intensifying rural reform.

I. Household contract responsibility system: a great invention of Chinese farmers

(I) the provincial Party committee inaugurated the prelude of China's rural reform Reform began by correcting leftist mistakes and relaxing rural policies. In the 1970s, I was working in Chuxian Prefecture of Anhui Province. In the spring of 1977, led by the prefectural Party committee, agricultural research teams produced more than 130 investigative reports and submitted a comprehensive report to the provincial Party committee, enumerating leftist mistakes and proposals to correct and implement rural

economic policies. In June 1977, the Central Committee of the Chinese Communist Party (CPC) appointed Wan Li as the first secretary of the Anhui Provincial Party Committee. In July, after Wan read the report from the Party committee of Chuxian Prefecture, he wrote the following comments: The Party committee of Chuxian Prefecture has mobilized its personnel to investigate the situation among the masses and carefully study rural economic policies. This is a good beginning. Opinions listed in the report can be used as references at the local levels. On the basis of the report and extensive, in-depth research, the provincial Party committee formed a document called Decisions on Several Matters Concerning Current Rural Economic Policies (hereafter the Decisions). This document stressed the following six principles: 1) Agricultural work should focus on production; 2) Improve the operation and management of the people's communes, allowing production teams to organize work groups at their discretion and assign specific work to individual team members; 3) respect the autonomy of production teams; 4) alleviate the burdens of commune members and teams; 5) stick to the principle of distribution according to labor, while accommodating the interests of all sides; 6) Allow and encourage commune members to work on their own reserve land and engage in sideline production on a family scale, and open market trade, and so on. With the implementation of the Decisions and relaxation of agricultural policies, people became open minded and in some places the output contract responsibility system was practiced secretly. In fact, such developments marked the opening chapter of rural reform in Anhui Province, sounding the clarion call for changes in the rest of the country.

(II) The secret weapons: output contract responsibility In 1978, Chuxian Prefecture experienced a serious drought rarely seen in history. In early September, its Party committee held a conference among of local officials. At the conference, many commune officials raised a glaring question: why is agriculture so unproductive? It is unproductive not only for one or two communes but for over 240 communes in the region. Why? Are we commune cadres all incompetent? They strongly demanded that the prefectures Party committee emancipate the shackled mind and allow them to work in their own way to see whether this could be more productive. In response, the prefectures Party committee let them pour out what they really thought. As a result, some commune secretaries from Lai'an and Tianchang counties introduced the three

typical cases they called secret weapons. The first was the Weiying Production Team from Lai'an County. In the spring of 1978, production teams were divided into two groups to practice the contract responsibility system, which increased the grain output to 120,000kg, compared with the previous year of 80,000kg and brought a 30% income growth for the average peasant. The second case was Xinjie Commune in Tianchang County. In the spring of 1978, facing the harsh reality that cotton seedlings might be killed by the severe drought, the county decided to contract farmland output quotas to individual households, which would receive bonuses if output could be increased and were obligated to pay compensation if the output fell short of the pre-set quota. Under such a stimulus scheme, output of cotton increased by almost 90%. The third case was Guanda Commune of Lai'an County, which broke down annual production quotas of grain, rape, cotton, poultry and eggs into 100 points, based on which grass-roots officials will be awarded or punished at the year-end according to the success or failure in meeting the quotas. This also led to all-round output increases. These recourses were still forbidden at that time and were nicknamed secret weapons. Wan Li attached great importance to the three cases and approved the Chuxian Party committee to carry out pilot programs in the areas under its jurisdiction. The Party committee in Chuxian Prefecture thus issued Document No.96, asking the counties in the region to carry out pilot programs. Soon, some communes and production teams that were not included in the pilot programs started team production contracts plans on their own. By the end of March 1979, 68.3% of production teams in Chuxian area practiced the contract responsibility system in various forms. However, the contract responsibility system triggered intense controversy. On March 15, 1979, the People's Daily carried a letter from a reader named Zhang Hao as the top story on the front page, marked with an editorial note entitled Three-tier ownership and team-based production should be stabilized. It asserted that local authorities that have allocated or contracted farmland to production teams should mend their way. Such an expression of policy stance shocked the local farmers who were busy with spring farming and dampened their enthusiasm aroused by the contract scheme. At this critical juncture, the prefectures leadership telephoned various counties to clarify its stance: We are in a busy season of spring farming and sowing, and therefore various forms of contract responsibility system should be stabilized. Any swing must be avoided, as we cannot afford to lose farming time. March 16, Wan Li came to Chuxian Prefecture. He claimed that The question as to what opinions serve the fundamental and long-term interests of the people must be tested by practice. Without any increase in output, farmers will go hungry after autumn. Who will take care of them? The prefectural Party committee has done a good job by timely

notifying the counties to maintain the responsibility system. As long as this year has a big harvest, greater social wealth and better living conditions for the people, your scheme can go on next year and thereafter.

(III) A giant step forward: all-out household contract production practiced and recognized in Anhui Province

With the development of the contract production at team level, some production teams secretly contracted farming output to households. Among them, Xiaogang Production Team of Fengyang County in Anhui Province secretly went for all-out household contract. After its land reform, Xiaogang Production Team experienced a golden period of growing grain output and farmers enjoying better lives. The Xiaogang Team became an advanced production co-op in 1956 without experiencing a preliminary stage, but thereafter grain output decreased year by year and its people lived on relief grain. During the ten years of the Cultural Revolution (1966-76), every family went at some point to another location to beg. After the autumn of 1978, Fengyang County carried out a farmland contract system at the team level, and the Xiaogang Team was divided into four work groups, which later became eight work groups; however, neither way worked well. After discussions, the cadres decided to secretly go for all-out household contract, and in case the officials were imprisoned for doing something wrong, other people would take joint responsibility and raise their children until 18 years of age. By the end of 1978, all-out household contract responsibility system came into being in Xiaogang. Household contracting of farming output was carried out more than once, including during the boom of cooperatives in the 1950s and the three years of economic difficulties in the early 1960s. But all-out household contracting is entirely different: it is a new phenomenon that appeared in China for the first time as a great invention by farmers.

Whats the difference between output contract and all-out household contract? Under the output contract regime, quotas were set on the output, and farmers would be rewarded if they produced more than it and punished if they produced less. The grain produced by rural households should be delivered to production teams for centralized distribution, and production teams will deliver some of the grain to meet national supply quotas, and the rest will be retained for collective distribution. According to the work points calculated with the quantity collected from each household, the grain after the deductions will be allocated to farmers. Such a procedure is both complex and may lead to malpractices and corruption.

But the all-out contract responsibility system was different. After collectively owned land was contracted to farmers, production teams would sign a contract with them, according to which farmers would deliver grain to meet national supply quotas and collective reserve, and the rest would all be their own. In this way farmers were entitled to handle their own goods. Such a scheme won a lot of applause among farmers for its clearly defined responsibilities, directly distributed benefits and simple procedures. The all-out contract system separated the ownership and use of land, so that although collective ownership was maintained, farmers contracted land use rights to become independent producers. The rights and obligations between the collective and farmers were defined through contract. This fanned farmers enthusiasm to increase productivity. Undoubtedly, the scheme was a great invention of Chinese farmers, the key to the swift popularity of the all-out contract system across the country. As a result, the Xiaogang Team realized a total grain output of more than 65,000 kg in 1979, equivalent to the total grain output of the five years between 1966 and 1970. Output of rape seeds exceeded the sum of the twenty years since the introduction of production co-ops. Income of the farmers increased six-fold. For the first time in the 23 years since 1957, the Xiaogang Team met national grain and rape seeds quotas and in excess of six and 80 times respectively. At the working conference on the countryside held by the provincial Party committee in early 1980, I made a speech entitled Go along with peoples will and actively guide it, calling for the recognition of an all-out contract system to be a form of socialist production responsibility system. On January 11, Wan Li said at the conclusion of the meeting: Household output contract is not something proposed by us. It was already there. The baby is born and its mother rejoices. That day Wang Yuzhao said that the baby is good and should have the right to live on, or to be recognized to be a form of responsibility system there is nothing to fear. We have no choice but to approve it. 1 The all-out responsibility system finally became recognized in Anhui Province, but nowhere else.

(IV) Deng Xiaopings talks urged all-out contract system to forge ahead amid controversies In late February 1980, Wan Li was transferred from Anhui Province to work in the central authorities. As he left, debate about the all-out household contract responsibility system erupted. From the end of March 1980 to mid-August, the provincial Party committee held enlarged meetings. At these sessions, a few officials in the provincial Party committee
1

Wan Li on Rural Reform and Development, China Democracy and Rule of Law Press, page 81 and 82.

criticized the household contract scheme as economism, opportunism and unionism. Although the scheme is able to increase output, it is not the direction we should head for, they argued. Going for such schemes is forgivable for the masses, but officials above county level should remain sober-minded and not commit committing opportunist or revisionist mistakes for the sake of short term benefits. Such officials were especially against the all-out household contract, and even threatened that those who went for it would be punished someday. Under the influence of these conferences, some counties hurried to ban household contracts. At that moment, only Chuxian Prefecture persisted. It actually became an isolated island. At that critical juncture, a provincial leader showed me the record of an internal talk of Deng Xiaoping, entitled Matters Concerning Countryside Policies. The talk unequivocally supported the household contract in Feixi County and all-out contract in Fengyang County. He said that most production teams in Feixi went for the household contract and saw a significant increase in output. In Fengyang, most production teams went for the all-out contract system. They brought about a production upswing in one year and the area took on a new look. 2 His talk at the critical juncture cleared doubts and showed the way for the future of agriculture in China. Upon reading it, I delivered the message to all county Party secretaries in Chuxian Prefecture. The all-out contract responsibility system in the area began to develop dramatically. On September 14, 1980, the Central Party Committee held a meeting attended by first Party secretaries of provinces, municipalities and autonomous regions to discuss the agricultural contract responsibility system. The meeting was intensely divided and neither side agreed with one another. Thanks to Deng Xiaopings speeches, a consensus was forged on the basis of a draft worked out by the National Agricultural Commission entrusted by the Party Central Committee. On September 27, 1980, the Central Party Committee issued a circular, Several Matters Concerning the Further Enhancement and Improvement of Agricultural Contract Responsibility System, which pointed out that the household contract is a necessary step to increase production and provide adequate food. As for the countrythere is no danger of restoring capitalism and therefore nothing to fear. 3 On August 19, 1981, the National Agricultural Commission held a meeting to draft documents for the central authorities. At the meeting, I called for the recognition of an all-out contract system. Since 1982, the central authorities had issued the No.1 Central Document on agriculture and the countryside every year for five years on end, defining various forms of household contract as a production responsibility system of socialist
2 3

Selected Works of Deng Xiaoping, Volume II, Peoples Press, 1994 edition, page 315. Compendium of Important Literature since the Third Plenum, Peoples Press, 1982 edition, page 667 and 668.

collective economy and component of socialist agricultural economy. This marked the first breakthroughs of Chinas reform in the countryside. Once the breakthroughs were made, it swept over the whole nation. By 1983, over 95% of production teams nationwide went for all-out household contract. In 1991, the Eighth Plenum of the 12th Central Party Committee stressed that the household contract system 4 should be maintained as a basic system of Chinas countryside collective economic organizations over the long run, and should be improved continually. In March 1993, the National Peoples Congress adopted a resolution to write household contract responsibility system into Chinas constitution.

II. Why reform started in the countryside

Farmers are the fundamental impetus behind the first breakthroughs of reform in the countryside. Peoples communes proved to be untenable and intense wishes for change were brewing. Farmers in Xiaogang, Anhui Province, are the creators of all-out agricultural contract system. Like other parts of Chinas countryside, Xiaogang village realized the dream of land to the tillers during the land in the early 1950s. Before the introduction of cooperatives, the village could harvest more than 90,000 kg of grain in an average year and as much as 100,000 kg in a bumper year. After 1956, when Xiaogang had become an advanced co-op, output declined year by year. In 1958, it entered into the period of peoples commune. In the three years of economic difficulties since 1960, the village had 60 abnormal deaths and 78 villagers fleeing to the village and went begging. During the ten years of the Cultural Revolution, the government sent various teams to stir class struggle, claiming that they would hold a sword in one hand and a whip in another to rush Xiaogang people into socialism. After becoming an advanced co-op, the village received 15,632 yuan in state loans and 2,925 yuan in free investment. From 1966 to 1978, the village had to apply for 57,000 kg of relief grain from state reserve, accounting for 65% of the teams total grain output of 13 years, and the state bought ten plow-drawing bulls for the village. When team contracting was carried out in 1978, it did not work well, so the villagers ventured for all-out household contract and even signed a secret agreement. Finally, Xiaogang village broke the leftist fetters and became masters of their own, taking the initiatives in creating history. After the fall of the Gang of Four, many officials felt the need for change and followed the will of the people. Reform entailed sharp debates and struggles. Indeed, reform was obstructed by
4

The changes in expression from output contract responsibility system into household output contract system and later household contract system marks the steps of getting closer to reality.

some officials who were deeply influenced by leftist mentality or the idea of two whatevers. 5 Although they knew household contracting could increase output and improve peoples lives, they persisted in what they called the grand direction and set up numerous barriers to reform, standing in the way between the Central Party Committee and the masses and grassroots organizations. But we should see that a great number of officials at all levels shared the same ideas as the people and resisted leftist tendencies. As a result, they were publicly condemned and some of them were labeled as rightists and anti-socialism elements. Over the years, officials in charge of agricultural work began to feel that the countryside could not be run in this way and turned in support of rural reform. The fall of the Gang of Four declared the bankruptcy of leftist mentality. As the Third Plenum of the 11th Party Central Committee of CPC re-established the ideological line of seeking truth from facts and shifted the focus of work to economic development from class struggle, peoples mind became gradually liberated from leftist fetters, and a great number of officials enthusiastically supported peoples initiative and practical choice. As in the words of Deng Xiaoping, The success of our reform is not because of dogma but because of practice and seeking truth from facts. The household contract system in the countryside is an invention of farmers, and a great deal of positive attempts was made at the grassroots level. We simply processed their experiences and made them national guidelines. 6 The countryside is the focus of various contradictions and is the weakest link in the planned economy. It is an important reason why the first breakthroughs of reform were made in the countryside. Agriculture, the countryside and farmers were constrained by the system of peoples communes and suffered from the dual structure of urban and rural areas. Cities enjoy priority in national resources distribution and farmers cannot freely migrate to seek jobs due to the dual structure; therefore, more and more surplus labor stayed in the countryside, giving rise to land shortages. This was something both inevitable and reasonable at the beginning of industrialization, but as an independent industrial system took shape, the system prevented farmers from working in cities, which would take its toll on agricultural and rural development. As farmers lost their iron-rice bowl and were vulnerable to the harms of unreasonable systems at the macro and micro levels, agriculture and the countryside had become a focus of various contradictions, and farmers themselves were crying out for institutional reforms. Against this backdrop, reform started from poverty-stricken areas that suffered the most from leftism. The
5

The two whatevers were: to resolutely uphold whatever policy decisions Chairman Mao made, and unswervingly follow whatever instructions Chairman Mao gave. 6 Selected Works of Deng Xiaoping, Volume III, Peoples Press, 1993 edition, page 382.

countryside was the weakest link under the planned economy, and it was thus natural for reform breakthroughs to be made there. In the final analysis, the countryside breakthroughs are consistent with productivity laws and peoples wishes, and served to overcome basic contradictions in socialist advances. Deng Xiaoping remarked that, The key is to develop productive forces. 7 Now, it can be clearly seen that as the theoretical basis for reform, productive forces are the decisive power for social progress. All social phenomena in history and their evolution can only be explained from the perspective of productive forces. In a socialist society, the maladies should and can be addressed through reform. That means to make self-improvement and development of socialism in a step-by-step way under the guidance of the Party and the government, so as to blaze new paths to advance productivity. In a word, reform aims to release and develop productive forces and is tantamount to a revolution. In reform, what farmers must get rid of is not socialism but unproductive ways of work and extreme equalitarianism that calls for equal shares for everyone. As a specific form of productive relations, the household contract responsibility system is suitable for the present productivity in Chinas countryside and has unleashed the enthusiasm and creativity of 800 million farmers, bringing about tremendous progress in Chinas rural economy.

III. Great significance of countryside breakthroughs

(I) Spearheaded by the countryside, reform swept across cities and all aspects of the economic system, opening a new chapter in its process We have accrued a wealth of experience from 30 years of reform, and the basic line of centering on economic development, and sticking to socialism with the Partys leadership was formulated. In practice, the path of socialism with Chinese characteristics has been explored, with a whole set of ideologies, theories and principles established. Deng Xiaoping Theory, the important Three Represents, and the goals for a harmonious and well-off society have taken root. Thirty years of reform have ushered in rapid and sustained growth in the national economy, bolstering national strength, improving peoples living standards and in general resulting in tremendous achievements in socialist modernization. In the future, we should continue to free the mind and keep
7

Selected Works of Deng Xiaoping, Volume II, Peoples Press, 1994 edition, page 315

pace with the changing times to steadfastly advance reform and opening-up.

(II) Greatly unleashed farmers enthusiasm and put an end to grain shortage once and for all With the implementation of the household contract responsibility system, farmers became more enthusiastic than ever and in a short period of several years brought about unprecedented development in agriculture and the rural economy. Grain output expanded by a large margin and various agricultural and sideline products mushroomed, almost magically, and centralized national purchase and sales, together with all kinds of coupons, were abolished, putting an end to the era of dearth. By the end of 1984, more than 99% of the 5.69 million production teams nationwide adopted the household contract system, and for several years on end, agriculture output, especially grain output, witnessed dramatic growth. In 1984, grain output reached 407.3 billion kgs, with a per capita increase of 400 kgs, approaching world average and up 33.7% over 1978. Output of oil-bearing crops reached 119.1 billion tons, up 1.29 times over 1978, and cotton output reached 6.24 million tons, almost three times that of 1978. Feeding Chinas vast population has always been a top priority. And the fulfillment of this goal is of great importance to price and political stability.

(III) Township and village enterprises emerged, enabling farmers to engage in industry Household contract system has provided adequate food for farmers and released rural surplus labor from the old unproductive system. With surplus grain, capital and labor in the countryside, non-farming businesses, workshops and companies boomed, and later the rural population left farmlands for jobs and business opportunities in township enterprises. Township enterprises not only become the mainstay of the rural economy, but represent one-third of the national economy as well. By 1987, their output value surpassed agricultural output value for the first time. In 1990, added value of township enterprises in China reached 250.4 billion yuan, which surged to 2.7156 trillion yuan in 2000, which is an increase of 9.8 times in ten years with an annual average growth of 26.9%. From 2003 until now, Chinas township enterprises have entered into a boom period. In 2007, the number of individual industrial and commercial businesses increased by 650,000, the number of small-sized township enterprises launched by villagers and rural workers who returned to the countryside from cities reached 850,000. In the same year, township enterprises created a total added value of 6.962 trillion yuan, or 28% of GDP, paid 736.6 billion yuan in taxes, and employed 150 million people. Farmers

income earned from township enterprises accounted for more than 30% of rural per capita disposable income.

(IV) Farmers migration into cities The household contract responsibility system released surplus labor from the countryside, allowing people to find alternative jobs; the rise of township enterprises provided a convenient way for them to work at nearby places. Developed regions and cities in coastal areas swiftly absorbed local surplus labor and were calling for additional labor from the countryside. On the other hand, due to various unfavorable conditions in agricultural areas in central and western regions, an increasing number of farmers left their homeland for jobs in developed regions in the east and big cities, forming a splendid flow of migrant workers. With time passing, the government set up a principle of fair treatment, reasonable guidance, improved management and strengthened service for migrant workers. The number of migrant workers surged from around 2 million at the inception of reform to more than 60 million by the mid-1990s and to over 130 million in 2006. Such a surge in population flow is rarely seen in human history. This population flow has great significance. It is an important way for farmers to increase their income and for less developed regions to get rid of poverty. Chinas rural poverty-stricken population declined from 250 million in 1978 to 125 million in 1985 mainly because of agricultural all-out contract system. It further dropped to 21 million in 2006, and it is estimated that the reduction poverty-stricken population by 100 million people can be attributed to farmers migration to cities. The grand migrations of farmers represent an institutional reform: labor resources are no longer allocated by government orders, but by market forces instead. Reform in other aspects like employment, salary, education and household registration systems pressed ahead as a result, shaping and nurturing Chinas labor market. Whats more, the trend that farmers with stable jobs in cities should become citizens calls for the abolition of the urban-rural dual structure and the new pattern of their economic and social integration.

(V) Economic restructuring leads to political reform Rural reform was heralded by ideological rectification in the political sphere. With the changes in the economic foundation, the massive superstructure is experiencing a transformation as well, whether slow or fast. 8 Rural land is no longer run by the collective entities, over 200 million farming households have become independent units of the commodity economy, and tens of millions of township enterprises keep
8

Foreword of Criticism on Political Economy, Selected Works of Marx and Engels, Volume II, Peoples Press, 1995 edition, page 32.

emerging, paving the way for the establishment of socialist market economic system and scrapping of the peoples communes where politics and production were intertwined. Economic independence calls for political democracy. With the household contract responsibility system in place, villagers self-governance, grassroots elections, democratic decision-making, management and supervision began to hold sway another contribution of Chinese farmers to our countrys socialist democratic politics. In conclusion, one of the secret recipes for Chinas miraculous growth of above 9% annually over the past 30 years is this: reform in the countryside constituted the basic impetus for the restructuring and development of Chinas national economy, laying the foundation for steady democratic political progress.

IV. Carrying out scientific outlook on development for further progress in the countryside
The agricultural household contract system was the prelude to Chinas reform. Relying on the people, the Party has been vigorously advancing reform in both cities and the countryside, fostering economic and social development. Since the 16th Party Congress, Comrades Hu Jintao and Wen Jiabao have defined the issue of agriculture, farmers and the countryside as the top priority of the work of the Party and the government, putting forward the principle of gives more, take less and relax control. At the Fourth Plenum of the 16th CPC Central Committee, General Secretary Hu presented his comments on the two tendencies: throughout the development of all industrialized nations, at the beginning of industrialization, there is a tendency of agriculture supporting industries. But when industrialization reaches a certain level, industry supporting and repaying agriculture and cities repaying the countryside for balanced development are also a universal tendency. In general, we have entered the stage where industry promotes agricultural development and cities support the countryside. This shift marks a milestone and a breakthrough in Chinas rural reform and progress. We should carry out the scientific outlook on development in the spirit of the 17th Party Congress and intensify the rural reform and make new breakthroughs. We should continue to emancipate the mind, identify new areas for breakthroughs, set up incentive mechanisms to further unleash the enthusiasm of farmers. The initiatives of farmers are a great engine powering rural development. With further reform, the CPC Central Committee issued five No.1 Documents in five years in a row on balancing urban and rural development and took a series of policies to raise farmers income. The framework for the long-term mechanism of give more, take less and relax control is taking shape and being improved in practice. These efforts will continue to foster prosperity in agriculture and the countryside and push forward the building-up of a new countryside

and all-round well-off society. We can learn from history that in future rural reform and development, as long as we care for and improve peoples welfare, rely on and respect farmers, we will be able to bring their enthusiasm and their initiative into full play.