ABSTRACT
The decline in relative incomes in China’s rural sector presents a major challenge for China’s reformers at the beginning of the twenty-first century. Rural incomes managed to keep pace with growth in the rest of the economy until 1997, when real incomes in the western and central provinces started to decline. In addition the gap between rich and poor households has been widening (Zhang, J.G. 2000). Rural incomes have fallen for a number of reasons. Supply has outstripped demand for a number of agricultural products, particularly grain, pushing prices down. Incomes received from the township and village enterprises (TVEs) have fallen, as have the incomes of migrant labourers working in urban areas (Lu 2000). A decline in demand after monetary policy was tightened in 1993 could be behind these factors. Of more fundamental concern, the potential for the further expansion of agriculture seems to be exhausted. Institutional reforms are nearly complete1 and China does not have a comparative advantage in crop and grain production, as the area of cultivated land is limited.
