Agriculture

Agricultural products were distributed in three major ways in China during the 1980s. They were either retained by the household (now the primary production unit) for distribution among its members, procured by the state, or sold in free rural or urban markets.

Approximately 63 percent of the population was located in rural areas, where the majority of the people worked in agriculture and rural industries. Under the responsibility system (see Glossary) for agriculture instituted in 1981, the household replaced the production team (see Glossary) as the basic production unit. Families contracted with the economic collective to farm a plot of land, delivered a set amount of grain or other produce and the agricultural tax to the state, and paid a fee to the collective. After meeting these obligations, the household was free to retain its surplus produce or sell it in free markets. Restrictions on private plots and household sideline production were lifted, and much of the production from these was also sold on free markets (see Post-Mao Policies Planning and Organization , ch. 6).

Distribution of food and other agricultural goods to urban consumers, industry, and rural areas deficient in food was carried out primarily by the state and secondarily by producers or cooperatives. The state procured agricultural goods by means of taxes in kind and by purchases by state commercial departments (state trading companies) under the Ministry of Commerce. The agricultural tax was not large, falling from 12 percent of the total value of agricultural output in 1952 to 5 percent in 1979. In 1984 the number of agricultural and sideline products subject to state planning and purchasing quotas was reduced from twenty-nine to ten and included grains, edible oil, cured tobacco, jute, hemp, and pigs. In 1985 the system of state purchasing quotas for agricultural products was abolished. Instead, the state purchased grain and cotton under contract at a set price. Once contracted quotas were met, the grain and cotton were sold on the market at floating prices. If market prices fell below the listed state price, the state purchased all available market grain at the state price to protect the interests of producers. Vegetables, pigs, and aquatic products sold to urban, mining, and industrial areas were traded in local markets according to demand. Local commercial departments set the prices of these goods according to quality to protect the interests of urban consumers. All other agricultural goods were sold on the market to the state, to cooperatives, or to other producers. Restrictions on private business activities were greatly reduced, permitting peasants as well as cooperatives to transport agricultural goods to rural and urban markets and allowing a rapid expansion of free markets in the countryside and in cities. The number of wholesaa7f sale produce markets increased by 450 percent between 1983 and 1986, reaching a total of 1,100 and easing pressure on the state produce distribution network, which had been strained by the burgeoning agricultural production engendered by rural reforms. In 1986 free markets, called "commodity fairs," numbered 61,000 nationwide.

Once food was procured and transported to urban areas, it was sold to consumers by state-owned stores and restaurants. In the mid-1980s food items were also available in free markets, where peasants sold their produce, and in privately owned restaurants. As noted previously, the prices of pigs, aquatic products, and vegetables were determined by local authorities according to quality and demand prices of other products floated freely on the market. Except for grain, edible oil, and a few other rationed items, food items were in good supply.

Industrial goods used in agricultural production were sold to agricultural units in the 1980s. Local cooperatives or state supply and marketing bureaus sold most agricultural producer goods, including chemical fertilizers and insecticides, to households at set prices. The state also offered preferential prices for agricultural inputs to grain farmers to encourage grain production. Households were permitted to purchase agricultural machinery and vehicles to transport goods to market. In order to ensure that rural units could cover the costs of the increasing quantities of industrial inputs required for higher yields, the government periodically reduced the prices of the industrial goods sold to farmers, while raising the procurement prices for agricultural products. In the mid-1980s, however, the price gap between agricultural and industrial products was widening to the disadvantage of farmers.

Data as of July 1987