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The core of this article comprises three sections. The two outer sections are the more substantial and seek to describe and analyse the evolution of agricultural policy in what has come to be regarded as the first and second stages of China's rural reform. In between, briefer consideration is given to the transitional year of 1984, when a major change in agricultural policy began to be apparent.
The essential ingredients of land-augmenting technical change, required by most developing countries in Asia, have been delineated by Professor Ishikawa and traced during earlier periods for India, Japan, Taiwan and Mainland China. Among all the indicators associated with progress in agricultural development, only three are indispensable to rapid and prolonged growth in yields at the initial stage: improved water control; abundant supplies of fertilizers; and high-yielding seed varieties responsive to these inputs. While the introduction of one or more of these three normally provides some growth in average yields, there are much greater returns when all three are applied appropriately. These are the fundamental ingredients of the “green revolution,” which has provided rapid growth in cereal yields throughout most of Asia and elsewhere in the developing world.
During the past decade China's leaders have called repeatedly for reductions in administrative interventions in the economy, for greater reliance on economic “levers,” for decentralization of economic decision-making, and for an increased role of markets. Although the need for liberalization is fairly widely accepted, debate over how far and how fast to proceed has continued. One view initially proposed by Chen Yun sees China moving towards a system where a “planned economy is primary, and markets are supplementary” (jihua jingji wei zhu, shichang tiaojie wei bu). Others advocate moving beyond Chen Yun's vision to a system where, in fact if not in name, allocation takes place primarily through markets. Li Peng's government work report to the first session of the Seventh National People's Congress suggests that the current consensus leans towards the latter, more progressive view:
The focus of reform of the planning system is to transform the function of state planning organs, gradually reduce mandatory planning and expand guidance planning, … use economic instruments, and gradually establish a new economic mechanism where “the state regulates markets, and markets guide enterprises” (guojia tiaojie shichang, shichang yindao qiye).