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Ningbo, China — The leadership of the Chinese Communist Party concluded a crucial meeting on Sunday, at which it discussed the global financial crisis and a key problem related to the growing economic imbalance in the country – how to develop the rural areas. The party put forth a roadmap for rural reform which, like the reform policy of 1978, is likely to shape rural development for years to come.

China could not have built up the world’s third largest economy – after those of the United States and Japan – without the reform process introduced in 1978, which began with major changes in agricultural policies.

History witnessed the alarming poverty and hunger that resulted from former Chairman Mao Zedong’s policy of collective production, whereby land was owned and controlled by a commune or village. The peasants worked together to plant and harvest the crops as dictated by the commune leadership. They were not even allowed to own chickens or pigs – all farm animals belonged to the collective.

Given the ideology of the time, any attempt to change the system would have been met with demands to “cut off the tail of capitalism.” A well-known slogan of the day proclaimed that “socialist weeds are better than capitalist crops.”

Under this mode of production China’s agriculture wilted. Starvation threatened the whole country. Many peasants died for lack of food, or lack of money to pay for medical treatment when it was needed. All this was the result of Mao’s insistence on carrying out class struggle and persisting in revolution.

Unfortunately, China’s light industry went down the drain as well. Due to perceived threats from the two superpowers, China devoted its energy to building up heavy industry for military purposes. Until the early 1980s light industry remained backward and there were great shortages of basic materials such as clothing, bicycles and even paper for printing books.

When Deng Xiaoping came to power in 1978, he prudently decided to begin his reforms from the countryside. The first reason was the need to solve the pressing food problem, but the second reason was that tackling collective ownership in the cities was a much harder task.

Deng’s insight was shared by his comrades, Wan Li, who later became National People’s Congress chairman, and Zhao Ziyang, who became Party General Secretary. Wan and Zhao were responsible for the post-Mao agrarian reform in Anhui and Sichuan provinces. They introduced a contract responsibility system whereby communal lands were divided up and contracted to individual farmers.

Under the new policy farmers could sell their surplus produce, after selling a basic quota to the state. Peasants were also allowed to grow vegetables and other crops beside rice and grains. The Anhui and Sichuan agricultural reforms were heralded as brilliant innovations by the central government.

Rural reforms paved the way for urban reforms, as success in the countryside made the peasants better off while people in the cities were still constrained by the collective system. As late as 1985 most urban workers remained poor. Many did not have refrigerators, color TVs, telephones or washing machines.

In 1980 Deng selected four coastal Chinese cities to become special economic zones – Shenzhen, Zhuhai, Shantou and Xiamen. In 1984 another 14 coastal cities were opened up, offering favorable policies to attract foreign investors. This marked the return of capitalism – or the market system – to China. The open cities quickly grew into modern metropolises, setting an example for inland cities.

Such a radical change brought criticism. Conservatives put forward the concept of the "birdcage economy," arguing that the market system in China should be controlled like a bird in a cage. The cage should be large enough for the bird to survive, but the cage was necessary to prevent the bird from flying away.

In the spring of 1992 – in the aftermath of the 1989 Tiananmen incident that cast a chill over foreign investment in China – Deng made his famous “southern tour,” a visit to the special economic zones during which he suggested that capitalist countries did not have a patent on the market economy. He said that both central planning and market forces were viable methods of controlling economic activity, thus setting the direction for China’s vibrant economic development to take off.

The special economic zones may be credited for boosting China’s economic growth, but it was the earlier agricultural reforms that created the significant shift in ideology and practice that allowed this to happen. Likewise, the current policy shift with regard to rural reforms may have long-lasting implications for the whole of China.

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(Dr. Zhang Quanyi is associate professor at Zhejiang Wanli University in Ningbo, China, and a guest researcher at the Center for the Study of Non-traditional Security and Peaceful Development at Zhejiang University in Hangzhou. His research interest revolves around the creation of a world state. He can be contacted at qyzhangupi@gmail.com. ©Copyright Zhang Quanyi)