The Great Recession reduced weekly hours by 1.3 hours in the hotel sector but not in the other sectors. Thus, for most employed workers in these three sectors, weekly hours remained constant during recessions. This result contrasts with that in the agricultural sector where weekly hours rose substantially during recessions.China’s economic liberalization and structural change have proceeded for several decades. Since the economic reforms were initiated in the late 1978, China’s economy has grown substantially. For example, the annual growth rate of GDP was 8.5% in 1979-84 and 9.7% in 1985-95 . Moreover, despite the Asian financial crisis, China’s economy continued to grow at 8.2% annually between 1996 and 2000. Foreign trade has been expanding even more rapidly. China’s trade to GDP ratio increased from 13% in 1980 to 44% in 2000 . Although reform has penetrated throughout the whole economy since the early 1980s, most of the successive transformations began and in some way depended on growth in agricultural sector . After 1978, decollectivization, price increases, and the relaxation of local trade restrictions on most agricultural products accompanied the take off of China’s agricultural economy in 1978-84. Grain production increased by 4.7% per year. Even higher growth was enjoyed in horticulture, livestock and aquatic products . Although agricultural growth decelerated after 1985 after the one-off efficiency gains from the decollectivization, the country still enjoyed agricultural growth rates that have outpaced the rise in population . Despite the healthy expansion of agriculture,vetical aquaponics system the even faster growth of the industrial and service sector during the reform era has begun to transform the rural economy, from agriculture to industry and from rural to urban.
During this process, the share of agriculture in national economy has declined significantly. Whereas agriculture contributed more than 30% of GDP before 1980, it fell to 16% in 2000 . During this same time, agriculture’s share of employment fell from 81% in 1970 to only 50% in 2000. The rapid economic growth, urbanization and food market development have boosted demand for meats, fruits and other non-staple foods, changes that have stimulated sharp shifts in the structure of agriculture . For example, the share of livestock output value more than doubled from 14% to 30% in 1970 to 2000 . Aquatic products rose at an even more rapid rate. One of the most significant signs of structural changes in the agricultural sector is that the share of cropping in total agricultural output fell from 82% to 56%. Moreover, the most significant declines in crop-specific growth rates have been experienced in the grain sector . Changes in the external economy for agricultural commodities have paralleled those in domestic markets. Whereas the share of primary products in total exports was over 50% in 1980, it fell to only 10% in 2000 . Over the same period, the share of food exports in total exports fell from 17% to 5%. The share of food imports fell from 15% to 2%. Disaggregated, crop-specific trade trends show equally sharp shifts and suggest that exports and imports increasingly are moving in a direction that trend toward products in which China has a comparative advantage . The net exports of land-intensive bulk commodities, such as grains, oil seeds and sugar crops, have fallen; exports of higher valued, more labor-intensive products, such as horticultural and animal products, have risen.
The proportion of grain exports, which was only around 20% of total agricultural exports in the 1990s, is less than half of what it was in the early 1980s. By the late 1990s horticultural products and animal and aquatic products accounted for about 80% of agricultural exports . These trends are even more evident when reorganizing the trade data grouping them on the basis of factor intensity.Taken as a whole, we believe the trends of China’s economic structure and agricultural trade over the past two decades reveals that the changes that are expected to be experienced as a result of WTO are not new. Changes in the structure of economy and agricultural production and trade suggest that China was already moving towards a point that was more consistent with its domestic resource endowments. To the extent that the new trade agreements reduce barriers to allow more land-intensive products into the domestic market and the fall in restrictions overseas stimulates the export of labor-intensive crops, WTO main impact will be to push forward trends that were already happening on their own. The commitments that China provided in its WTO Protocol of Accession are largely consistent with the nation’s long-term reform plan. Despite the continuity with the past, few can dispute that the terms of China’s WTO accession agreement pose new challenges to the agricultural sector. In some cases, there will likely be large impacts on rural households, and will undoubtedly elicit a sharp behavioral response . However, the nature and severity of the impacts will not only depend on how households respond. Perhaps of even greater importance will be how China’s agricultural policy makers will manage their sector as the new trade regime takes effect. To examine this set of issues more carefully, in this section we first review agricultural policy during the reform era. In the next section we will then see how WTO measures will change the environment in rural China.
While government expenditures in most areas of agriculture have increased gradually during the reform period, the ratio of agricultural investment to agricultural gross domestic product has monotonically declined since the late 1970s. In 1978, officials invested 7.6 percent of AGDP . By 1995, the proportion of AGDP committed to investment fell to 3.6 percent. Exceptions were only recent years in the late 1990s when this ratio rose. Moreover, a significant capital outflow from agriculture to industry and rural to urban has occurred during the last two decades through the financial system and government agricultural procurement . China’s policies governing the external economy have played a highly influential role in shaping the growth and structure of agriculture for many decades. During the entire Socialist Period , the overvaluation of China’s domestic currency destroyed incentives to export effectively isolating China from international exporting opportunities.After the reforms were initiated, however, officials allowed the real exchange rate to depreciate by 400% between 1978 and 1994. Except for during the past few years when the exchange rate has experienced a slightly re-appreciation, adjustments in the exchange rates throughout most of the reform period have increased export competitiveness and contributed to China’s export growth record. These, in turn, have helped the overall expansion of the national economy. Perhaps more than anything, China’s open door policy, including its exchange rate policy, has contributed to the rapid growth in the importance of the external economy.The shift of labor from the rural sector to the urban sector lies at the heart of a country’s modernization effort and China has been experiencing this primarily two ways: by the absorption of labor into rural firms and by movement of massive amounts of labor into the off farm sector in cities. Rural industrialization has played a vital role in generating employment for rural labor, raising agricultural labor productivity, and farmer’s income. The share of rural enterprises in GDP rose significantly from less than 4% in the 1970s to more than 30% by 1999.
REs have dominated the export sector throughout the 1990s . And, perhaps most importantly, REs employ 35% of the rural labor that works off the farm. In addition to formal wage earning jobs in rural areas, a large and rising part of the rural labor force also works in the self-employed sector. At the same time, although China’s factor markets still contain a number of structural imperfections, such as employment priority for local workers, housing shortages,farming vertical and the urban household registration system, labor has poured into the cities during the last 20 years and labor markets emergence are transforming the economy.According to a nearly national representative survey of 1200 households across China, it is found that more than 100 million rural workers found employment in the urban sector in the late 1990s . In fact, to an extent never found before, China’s labor markets have allowed migration to become the dominant form of off-farm activity; been increasingly dominated by young and better educated workers; expanded fastest in economies or areas that are relatively well-off; and recently begun to draw workers from portions of the population, such as women, that earlier had been excluded from participation. According to the work on some researchers, if China continues to change at the pace it has in the past 20 years, and other provinces experience the same changes that have already occurred in the richest provinces, China’s economy will continue to follow a healthy development path and be on the road to modernization.China has a strong agriculture research system that has generated technologies adopted by millions of farmers to meet the increasing demand of food and agricultural products in the most populous country in the world . All previous studies consistently show that research-led technological change is the main engine of agricultural growth.Technology produced by China’s agricultural research system accounts for most of the rise in the cropping sector’s total factor productivity between 1980 and the late-1990s . Despite this past record, China faces considerable challenges. Although as a publicly funded agricultural research system, it functioned well and addressed many important problems, its expenditures have been tied to public budgets. Falling fiscal support has taken its toll. Currently, there is much concern that agriculture research investment intensity has declined since the early 1980s and reached a dangerously low level, only 0.44 in 1999 . At the same time, the increasing evidence of overlapping, inefficiency, over-staffing, and inappropriate technology make fundamental reform of the current research system an essential task.Price and market reforms were key components of China’s policy shifts from a socialist to a market-oriented economy. The reforms associated with China’s policy reforms, however, began slowly and have proceeded gradually. Market liberalization began with non-strategic commodities such as vegetables, fruit, fish, livestock, and oil and sugar crops. Little effort was made on the major crops. And, although the aims of the early reforms were to raise farm level prices and gradually deregulate the market, most of the significant early reforms were done by administrative measures .
However, as the rights to private trading were expanded in the early 1980s, and official allowed traders the to buy and sell the surplus output of almost all categories of agricultural products, the foundations of the state marketing system began to be undermined. Since the mid-1980s, market reforms have continued though only in a stop and start way. For example, after record growth in agricultural production in 1984 and 1985, a second stage of price and market reforms was announced in 1985 aimed at radically limiting the scope of government price and market interventions and further enlarging the role of market allocation. Because of the sharp drop in the growth of agricultural production and food price inflation in the late 1980s, however, implementation of the new policy stalled. Mandatory procurement of grains, oil crops, and cotton continued. After agricultural production and prices stabilized in 1990-92, another attempt was made in early 1993 to abolish the grain compulsory quota system and the sale at low prices to consumers. The state distribution and procurement systems were substantially liberalized, but the policy was reversed when food price inflation reappeared in 1994: government grain procurement once again became compulsory. As well, a provincial governors’ grain responsibility system was introduced in 1994-95, aimed at encouraging greater grain self-sufficiency at the provincial level. Further retrenchments followed; in 1998 the central government initiated a controversial policy change prohibiting individuals and private companies from procuring grain from farmers . Grain quota procurement prices were set more than 20% higher than market prices, which meant a transfer in favor of those farmers able to sell at that price . Not surprisingly, stocks started to accumulate and procurement and market prices had to come down relative to international prices in 2000. Despite these periodic cycles in the reform process, markets have gradually emerged in rural China.According to Lardy , the share for agriculture was just 6% in 1978 but had risen to 40% by 1985, 79% by 1995 and 83% by 1999. Moreover, the state’s intervention was unable to halt the flow of grain across provincial boundaries. Huang and Rozelle find that agricultural prices for all major commodities, including rice, wheat, and especially for maize and soybeans have moved together across far reaching localities within China.