Incomes overall have risen across the board, including in rural areas, but income disparity between urban and rural citizens has been growing under the economic boom of the past quarter of a century. Now, having fallen behind other areas of economic development over the past two decades, agriculture is once again a top priority.
Following the Communist takeover in 1949, land was seized from landowners and given to the peasants, sealing Mao's position as the undisputed leader of 'New China'. But during the Great Leap Forward of 1958, the land was taken from the peasants again and put in the control of communes. To the farmers facing production quotas and fixed pricing on yields sold directly to the state, government regulation of their livelihood seemed an all-too-familiar return of feudalism. The communes, of course, were a failure.
In late 1978, Deng Xiaoping set a freer agricultural market in motion. The communes were dissolved and replaced by the 'household responsibility system', whereby land allotments were contracted to farmer families, shifting management responsibility back to households. Now, in the midst of the transition from a planned economy to a free market, prices of agricultural products are still subject to a measure of regulation, grain in particular. But reduced regulation has exposed China's countryside to economic survival-of-the-fittest, where lucky and diligent farmers are seen rising to affluence while others sink further into poverty.
Recent demographic shifts have had a significant effect on China's agriculture industry. With wages and living standards in urban areas vastly superior to those of the countryside, millions of Chinese are abandoning agriculture to look for work in cities. Meanwhile, the amount of arable land in China continues to decrease.
Irrigation and water pollution are also major issues. Generally speaking, northern China tends to be plagued by droughts while many southern regions are susceptible to floods. Channeling of water and flood management through construction of dams and canals has already been successful and there are plans for it to be further implemented on a larger scale.
In 2005, in order to deal with the problems facing the agriculture industry and peasant farmers, the Chinese government issued its 'Number One Document' on agriculture reforms. Major themes outlined in the document include modernization of standards and techniques as well as adoption of eco-friendly practices in order to conserve resources and limit devastation caused by natural disasters. It also declared the abolition of most agriculture taxes and increases in farm subsidies. Due to these new regulations, agriculture tax revenue fell 93% in 2005, and all taxes should be abolished by 2006.
Generally, peasant farmers are not as thrilled with the changes as would be expected. Although the central government seems to be taking steps to increase their standard of living, peasants in some parts of the country consider themselves victimized by local government officials.
Meanwhile, the Chinese diet is changing. Recent years have seen an increase in variety and greater consumption of higher-priced products. Chinese now eat more meat, more imports, more Western fast foods, and more high-value foods than ever before. Allowed greater leeway, farms are shifting from producing grains to more profitable commodities like cotton, fruits, vegetables, and dairy and meat products.
All these changes have contributed to China's increasing dependence on food imports. To promote self-sufficiency, the central government continues to purchase 75% of domestic grain production, and keep massive grain reserves. Following the massive famines of the Great Leap Forward period of the late 1950s, stable grain production has always been a top priority for the Chinese government.
Additional pressure comes from stipulations relating to China's entry into the WTO, which expose the agricultural industry to greater foreign competition. Utilization of the land area is not nearly as efficient in China as in developed countries, which rely much more heavily on employment of mechanization, chemicals and genetic engineering.
The Chinese authorities have required a system of certification for all genetically modified products introduced into the market, but their use is increasing.
There is a need for change in many other areas of the industry. Mechanized tools such as tractors, combines and processing equipment are still lacking, although Heilongjiang in China's far northeast reports agricultural mechanization already on par with developed nations. With the exception of the northeast, vast expanses of flat farmland are rarely found in China; planters are often forced to raise crops in small plots on whatever nooks and crannies are available, demanding a higher amount of manpower and limiting the use of efficient mechanized methods. Still, under these conditions, greater possibilities exist for mixed cropping, which can reduce the need for pesticides and fertilizers.
Overall, foreign investment in the agriculture sector has been minimal compared to other areas of China's economy. This is largely due to the lack of ability to own or gain usage of land. The main growth of foreign investment into the agriculture industry is from supermarket chains. Carrefour, for instance, has begun investing in agriculture to assure it has a steady supply of produce with high standards.