document, constitute a thorough revision of economic theory and practices which have prevailed since the 1950s. Rigid bureaucratic control over economic units which left them with little incentive for improving performance, was diagnosed as the major cause of poor economic performance, low levels of efficiency and a low rate of technological innovation. The reform strategy is to relax controls over economic units and give them more freedom and material incentive to improve economic performance and respond to market forces. Attempts have been made to effect a reform of the price system so that prices, which have been set administratively, can better reflect and respond to market conditions. China is to become a "planned commodity economy" with central guidance of the economy being achieved through more varied and indirect planning methods which work through or take note of market forces.
Agriculture
"Recently the Yellow River overflowed its banks and for several years the harvests were
poor. Therefore, I journeyed about the empire and performed sacrifices to the Earth Lord praying for the sake of the common people that the grain might grow well." (Emperor Wu of Han)
Agricultural production accounts for about a third of total output value. Although great efforts have been made to improve drainage, irrigation and water conservation, the harvest is still vulnerable to floods and drought. There has been a steady expansion in the volume and range of agricultural machinery produced, but the level of mechanisation is still far behind that of major western countries or Japan. The supply of chemical fertilisers has increased markedly and the practice of multiple cropping and the use of improved strains of seeds have also contributed to increases in output. The major food crops are rice and wheat, the former being produced for the most part in the southern half of the country. Other important food crops include soya beans, barley, maize, sorghum, oats and potatoes; oil seeds such as rape and peanuts; sugar cane and sugar beet; tea and a wide variety of fruit and vegetables. Cotton is grown widely, especially in the Changjiang (Yangtze) and Huanghe (Yellow River) basins. Important industrial crops are tobacco, fibres, rubber and silk. Increases in the production of grain, the staple food, have until recently barely kept pace with population growth.
Since 1978 collective economic activities have been increasingly reduced. These were previously organised through the People's Communes. Smaller units, in most cases peasant households, now have more say in organising and carrying out agricultural work. This new, more flexible method of management is known as the “responsibility system". Households or other small units are contracted to supply to the commune or government purchasing agency a quantity of crops from an allotted area of commune land. The household has a wide area of choice as to how it fulfills this contract and any surplus produced is at its disposal. Households have a right to work the land allotted to them for a period of at least fifteen years. This land may be transferred from one household to another, provided this is approved by the commune. An area of commune land of up to 15% of the total can also be divided between peasants for use without contractual obligations. Greater freedom has also been given to peasants to undertake "sideline operations" and to market what they produce. This policy, together with an increase in prices paid by the State for agricultural products and favourable weather conditions, has resulted in a marked improvement in agricultural performance.
Industry
"For the manufacture of useful things which constitute the necessaries of life, the Chinese
excel. They make them durable and suit them to the demand. ” (Anon, 1838)
Manufacturing industries are still mainly located in the coastal cities such as Shanghai and Tianjin and in the northeast region, although several new industrial areas have been
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