Under the collectivized system, grain production kept up with population growth (China's population nearly doubled from 1950 to 1980), and the rural population was guaranteed a secure but low level of subsistence. But the collectivized system seemed to offer few possibilities for rapid economic growth. There was some discontent with a system that relied so heavily on orders from above and made so little allowance for local conditions or local initiative. In the late 1970s, administrators in provincial-level units with extensive regions of low yields and consequent low standards of living began experimenting with new forms of tenure and production. In most cases, these took the form of breaking up the collective production team, contracting with individual households to work assigned portions of collective land, and expanding the variety of crops or livestock that could be produced. The experiments were deemed successful and popular, and they soon spread to all districts. By the winter of 1982-83, the people's communes were abolished; they were replaced by administrative townships and a number of specialized teams or businesses that often leased such collective assets as tractors and provided services for money.
The agricultural reforms of the early 1980s led to a confusingly large number of new production arrangements and contracts. Underlying the variability of administrative and contractual forms were several basic principles and trends. In the first place, land, the fundamental means of production, remained collective property. It was leased, allocated, or contracted to individual households, but the households did not own the land and could not transfer it to other households. The household became, in most cases, the basic economic unit and was responsible for its own production and losses. Most economic activity was arranged through contracts, which typically secured promises to provide a certain amount of a commodity or sum of money to the township government in return for the use of land, or workshops, or tractors.
The goal of the contracting system was to increase efficiency in the use of resources and to tap peasant initiative. The rigid requirement that all villages produce grain was replaced by recognition of the advantages of specialization and exchange, as well as a much greater role for markets. Some "specialized households" devoted themselves entirely to production of cash crops or provision of services and reaped large rewards. The overall picture was one of increasing specialization, differentiation, and exchange in the rural economy and in society in general. Rural incomes increased rapidly, in part because the state substantially increased the prices it paid for staple crops and in part because of economic growth stimulated by the expansion of markets and the rediscovery of comparative advantage.
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