CHINA HAS THE WORLD'S LARGEST agricultural economy and one of the most varied. The nation stands first among all others in the production of rice, cotton, tobacco, and hogs and is a major producer of wheat, corn, millet, tea, jute, and hemp. This wide range of crops is possible because of the country's varied climate and agricultural zones. China participates on a large scale in international agricultural markets, both as an exporter and as an importer.

For over 4,000 years, China has been a nation of farmers. By the time the People's Republic of China was established in 1949, virtually all arable land was under cultivation irrigation and drainage systems constructed centuries earlier and intensive farming practices already produced relatively high yields. But little prime virgin land was available to support population growth and economic development. However, after a decline in production as a result of the Great Leap Forward (1958-60), agricultural reforms implemented in the 1980s increased yields and promised even greater future production from existing cultivated land.

A successful agricultural sector is critical to China's development. First, it must feed more than 1 billion people, about 21 percent of the world's population, using only 7 percent of the world's arable land. Second, it must provide raw materials for the industrial sector. Third, agricultural exports must earn the foreign exchange needed to purchase key industrial items from other countries.

Since 1949 China's political leaders have tried a variety of large-scale social experiments to boost agricultural production. First, a massive land reform program eliminated landlords and gave land to those who farmed it. Next, farm families were progressively organized into cooperatives, collectives, and finally people's communes. After more than twenty-five years of experience with communes, officials abolished these institutions, which had become too bureaucratic and rigid to respond to the flexible requirements of agricultural production. Also, farm production incentives languished in the commune system. In 1978 China's leaders began a program of far-reaching agricultural reforms. Townships and villages were organized, and new incentives were incorporated into contractual relationships tying farmers to economic cooperatives and businesses.

Since the revolution in 1949, China has devoted most of its investments and administrative energy to the industrial sector. Generally, the agricultural sector received special attention only when the leaders perceived that the sector was beginning to restrain China's overall economic development. Agricultural output basically kept pace with the growth of population but did not expand fast enough to raise living standards. Per capita consumption of grains, fibers, edible oil, sugar, fruits, vegetables, fish, meat, eggs, and dairy products remained low. The value of goods generated by the agricultural sector has grown, but not as fast as output generated by other sectors in the economy. In 1949 about half of the country's output came from the agricultural sector. Thi3cf his ratio dropped to 41 percent by 1955, declined to 31 percent by 1965, and fell another few percentage points in 1975 to 25 percent. But agricultural reforms initiated in the early 1980s brought a rise in agriculture to 33 percent of GNP in 1985. At the same time, more than 60 percent of the national labor force was employed in agriculture.

China in the late 1980s was thus poised to confront growing demands for agricultural production with a combination of timetested farming methods and modern agro-technology. The size and diversity of the country--in geography and in population--however, presented a unique challenge to China's policy makers and implementors.

Data as of July 1987