Faced with economic collapse in the early 1960s, the government sharply revised the immediate goals of the economy and devised a new set of economic policies to replace those of the Great Leap Forward. Top priority was given to restoring agricultural output and expandÍÍÍÍing it at a rate that would meet the needs of the growing population. Planning and economic coordination were to be revived- -although in a less centralized form than before the Great Leap Forward--so as to restore order and efficient allocation of resources to the economy. The rate of investment was to be reduced and investment priorities reversed, with agriculture receiving first consideration, light industry second, and heavy industry third.

In a further departure from the emphasis on heavy industrial development that persisted during the Great Leap Forward, the government undertook to mobilize the nation's resources to bring about technological advancement in agriculture. Organizational changes in agriculture mainly involved decentralization of production decision making and income distribution within the commune structure. The role of the central commune administration was greatly reduced, although it remained the link between local government and agricultural producers and was important in carrying out activities that were too large in scale for the production brigades. Production teams were designated the basic accounting units and were responsible for making nearly all decisions concerning production and the distribution of income to their members. Private plots, which had disappeared on some communes during the Great Leap Forward, were officially restored to farm families (see Importance of Agriculture Recognized Planning and Organization , ch. 6).

Economic support for agriculture took several forms. Agricultural taxes were reduced, and the prices paid for agricultural products were raised relative to the prices of industrial supplies for agriculture. There were substantial increases in supplies of chemical fertilizer and various kinds of agricultural machinery, notably small electric pumps for irrigation. Most of the modern supplies were concentrated in areas that were known to produce "high and stable yields" in order to ensure the best possible results.

In industry, a few key enterprises were returned to central state control, but control over most enterprises remained in the hands of provincial-level and local governments. This decentralization had taken place in 1957 and 1958 and was reaffirmed and strengthened in the 1961-65 period. Planning rather than politics once again guided production decisions, and material rewards rather than revolutionary enthusiasm became the leading incentive for production. Major imports of advanced foreign machinery, which had come to an abrupt halt with the withdrawal of Soviet assistance starting in 1960, were initiated with Japan and West European countries.

During the 1961-65 readjustment and r 88aecovery y period, economic stability was restored, and by 1966 production in both agriculture and industry surpassed the peak levels of the Great Leap Forward period. Between 1961 and 1966, agricultural output grew at an average rate of 9.6 percent a year. Industrial output was increased in the same years at an average annual rate of 10.6 percent, largely by reviving plants that had operated below capacity after the economic collapse in 1961. Another important source of growth in this period was the spread of rural, small-scale industries, particularly coal mines, hydroelectric plants, chemical fertilizer plants, and agricultural machinery plants. The economic model that emerged in this period combined elements of the highly centralized, industrially oriented, Soviet-style system of the First Five-Year Plan with aspects of the decentralization of ownership and decision making that characterized the Great Leap Forward and with the strong emphasis on agricultural development and balanced growth of the "agriculture first" policy. Important changes in economic policy occurred in later years, but the basic system of ownership, decision-making structure, and development strategy that was forged in the early 1960s was not significantly altered until the reform period of the 1980s.

Data as of July 1987