Justin Yifu Lin’s “Interpretation of China’s Economy” Note 4

Original link: https://ljf.com/2022/09/03/1129/

Lecture 6: Rural Reform and Related Issues

1. The process of reform

(1) The need for reform

Under the leadership of a new generation of leaders with Deng Xiaoping as the core, China’s reforms since the end of 1978 have been carried out in a two-track and gradual manner. The results of practice are better than shock therapy in the Soviet Union and Eastern European countries based on existing economic theories. Much more effective.

(2) Agricultural systems, policies and performance before the reform

From 1952 to 1978, the average growth rate of crops was 2.5%, and the average growth rate of cereals (that is, grain) was 2.4%, while the average growth rate of China’s population during the same period was about 2%. The growth rate was 0.4% faster than that of 1952, which was an increase of only 10% in 1978 compared with 1952 (see Table 6.2). In terms of the image of this growth concept, that is, the boys who went to college at that time ate a few more bites per meal, and it can be said that the improvement of living standards was extremely limited.

(3) Measures and results of the reform

The promotion of the household contract responsibility system has achieved unexpected results. From 1978 to 1984, when the household contract responsibility system was fully promoted, the growth rate of agriculture increased from 2.9% to 7.7%. more than doubled, and the growth rate of food production is also twice as fast as before. At the same time, due to the implementation of the family planning policy since the 1970s, the population growth has dropped from the original 2% to 1.3%, which means that the growth rate of per capita grain is even faster, laying the foundation for China’s grain production in the later years. “The basics.

(4) Debates on the household contract responsibility system

The household contract responsibility system is not only right, but also the biggest achievement of China’s rural reform, but there are still some problems in rural areas after the household contract responsibility system, mainly in the two aspects of food security and “three rural issues”.

2. Issues related to post-reform

(1) Food security issues and policy choices

(2) “Three Rural Issues” and Solutions

The general expression for the “three rural issues” is “the countryside is really poor, the farmers are really suffering, and agriculture is really dangerous.” However, after careful analysis, these three problems can actually be summed up into one, that is, the relatively slow growth of farmers’ income.

Under the catch-up strategy, in order to avoid a large number of unemployed people in the cities, it is not only necessary to strictly restrict the transfer of rural population to the cities, but also to transfer the new labor force from the cities to the countryside. There are no job opportunities in the city. Therefore, if we want to successfully transfer rural labor to cities and prevent the transferred rural labor from becoming a burden and a problem in cities, we must adjust the national development strategy and develop labor-intensive industries in accordance with comparative advantages.

In order to narrow the gap between urban and rural areas and between regions, it is necessary to establish a unified national market, to eliminate the distortion of the prices of various factors, so that the comparative advantages of each region can be brought into play. , in order to reduce transaction costs and improve transaction efficiency, so that factor prices can gradually tend to equilibrium.

Lecture 7 Urban Reform and Legacy Issues

1. Reform of the urban industrial sector

(1) The main problems existing in the urban industrial sector

The problems existing in my country’s urban industrial sector can basically be summarized into the following three aspects:

· Structural imbalances The industrial sector exhibits structural imbalances, mainly manifested in the existence of many shortages in the economy. On the one hand, things that are already in short supply are more likely to be in short supply;

·Coordination issues In the past, all resources were allocated by the state through the planning department.

·In the original state-owned enterprises with low incentives, “big pot of rice, iron rice bowl, good work and bad work”, the incentive mechanism is very unclear, and the enthusiasm of workers to work is generally low, which leads to very low efficiency of the enterprise.

(2) The solution before the reform

First, structural problems generally rely on central adjustment.

Second, changing compartmentalization to alleviate coordination problems through decentralization.

Third, increase incentives through political mobilization.

(3) Solutions after the reform

Recognize the role of material interests in the reform of incentive mechanisms. The reform of the incentive mechanism is the biggest difference from past reforms. Comrade Xiaoping acknowledged the importance of material interests, and emphasized that a well-done enterprise should be different from a poorly-done enterprise, and that the material interests, living standards, and wages of well-done workers should also be different from those of poorly-done workers.

(4) The process of reform

The reform is a process that starts from the micro-governance of enterprises, and then advances to the resource allocation and price formation mechanism, from a single-track price and allocation mechanism to a dual-track, and finally to a single-track market.

2. Reform of micro-operating mechanism

(1) Profit retention system

(2) Contracting system

(3) Clarity of property rights

(4) Overall assessment

In the absence of effective supervision, the risks that the operators acting as agents take more, eat more, and occupy more national interests are greatly increased, and the problem that national interests cannot be guaranteed is unavoidable.

3. Resource Allocation Mechanism and Price System Reform

(1) The emergence of the market track and the coexistence of dual tracks

(2) Merging from the plan to the market

4. The process of reform

(1) Materials

(2) Foreign exchange management

(3) Financial aspects

So far, my country’s financial system is basically a dual-track system, and the integration from the dual-track to the market has not yet been completed. The government still strictly controls the price and allocation of funds, and the role of the market track has been greatly restricted.

(4) The rise of non-state-owned enterprises such as township and village enterprises

The emergence of the market track has unexpectedly brought about the development of non-state-owned enterprises such as township and village enterprises, which has greatly promoted the improvement of resource allocation.

V. Achievements and Problems of the Reform

If the reform of SOEs cannot find a final way out, then these distortions of the system must exist, because for those SOEs that are not viable, unless they go bankrupt, they must be given some form of protection, and these Protection is the remnant of a planning system that is not compatible with the market system. references

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