Market Reforms and Changes in Crop Productivity: Insights from China

A complex combination of factors, leading to stagnation and declining productivity in crop production for five years, has created a quiet crisis in China's agriculture. It is closely related to China's political crises of the late 1980s that led to the demonstrations and repression at Tiananmen in 1989. A key factor that led to the discontent was increases in food prices in the previous year. The government had to raise food prices to compensate for declining agricultural productivity and to enable farmers to purchase more inputs on which high levels of production depend. When market reforms were intoduced in China during the 1980-84 period, agricultural productivity went up about 15 percent. (This combines improvements stemming from technical and structural change, and does not include increases inproduction dur to increased inputs.) During the 1985-89 period, however, productivity declined for many reasons, and most of the gains of the early 1980s were lost. Additional policies were required to stabilize and consolidate the emerging market system.