Accelerating China's Rural Transformation

"...two issues remain central to the [Chinese] government's rural development objectives: food security and poverty alleviation. China has made remarkable progress in meeting these goals: the economy, including the rural sector, has grown at phenomenal rates during the reform period."

While China's rural products, input, labor, and land markets are improving, they remain nascent. China still needs to foster several critical institutions, such as an effective fiscal system, a more efficient rural financial system, a workable land tenure arrangement, and a revamped trade and investment environment for agriculture. The primary purpose of this report is to identify and consolidate information on these crucial issues that impact on rural development in China. This report assesses strategic options from the perspective of efficiency, equitable development, and growth. It is intended to assist government officials and World Bank staff to prioritize policy and institutional reforms and public investment decisions in the rural sector.

This report aims to identify and consolidate information on crucial issues that impact on rural development in China. China ' s rural economic achievements of the past two decades - rapid growth and declining poverty - have been remarkable. However, replicating these achievements and improving sustainability during the next two decades will be difficult as many underlying conditions have changed. Economic reforms were initiated when supply shortages constrained growth, but currently, weak demand is more constraining. Furthermore, the productivity gains are largely exhausted from transition policies and institutions; future productivity gains will come from efficiencies, stimulated by market forces, and improved productivity of scarce water and land resources, through resource conservation and new technologies. The rural-agricultural sector will remain dependent on a robust urban-industrial sector to create jobs and absorb surplus rural and agricultural labor - thereby permitting the remaining farmers access to additional land resources. An effective fiscal system, a more efficient financial system, a workable land tenure arrangement with marketable land-use rights, and improved agricultural investment incentives need to be fostered. Continued reform will entail further liberalization of production, pricing, and marketing policies. It will also entail strong government promotion of a market environment and investments in public services and infrastructure.