ABSTRACT
This chapter examines the initial success of the rural economy and analyses the sluggish growth of the countryside since the mid-1990s by looking into the problems of tapering off of rural industry, local government fiscal constraints, rural land requisition and underdevelopment of rural finance. It describes the policy initiatives made by the central government to remedy the rural problems. China's rural areas had gone through a series of far-reaching reforms, which accomplished remarkable and uncontroversial results. Rural reforms were also praised for their spectacular achievement in poverty reduction. The number of rural residents living under the official poverty line shrank from 250 million in 1978 to 29 million in 2003, representing a decline of poverty incidence from 30.7 percent to 3.1 percent. Apart from loose land security jeopardising rural households' income growth, underdeveloped rural finance creates another bottleneck in rural development. Apart from land reform, expansion of rural finance is vital to sustain an increase in rural income.
