Agricultural Reform in China: Getting Institutions Right (review)

Assessing the current state of agricultural policy in China is much like painting a large house. Once you have finally finished, you must quickly start again because the boards first addressed have long since faded. It is clear, even during these mercurial times, however, that after three bumper harvests the focus of further reform has shifted from gross production issues to financial reforms such as those related to pricing, marketing, and distribution. Indeed, Premier Zhu Rongji speaking in July 1998 called the reforms of China's domestic grain marketing and distribution systems the most important reforms for the central government in 1998.

Yiping Huang, drawing on his experience as a researcher in China as well as a consultant for international agencies such as the World Bank and the OECD, has anticipated these trends, arguing that every effort must be made to reduce government involvement and open up China's agricultural sector to international trade if growth in that sector is to continue. In a short but quite satisfying new volume, he combines well-written qualitative essays with economic models to provide a reasoned assessment of the path China's agricultural planners and policies have taken, where they now stand, and in what direction he believes they should be going. This is well-trod ground, but the pace of change in China's agricultural sector and the myriad new conditions that have emerged in the post-Uruguay Round global agricultural economy are more than enough justification for this volume. The final conclusion, that protectionism will grow increasingly expensive to maintain, and that opening markets to international competition will ultimately benefit all—including China's farmers and the rural economy as a whole—also does not come as a surprise. Given the swings from shortage to surplus that have characterized China's domestic grain markets in the past five years, not to mention the growing subsidies for urban food supplies and near-stagnant agricultural incomes, particularly for grain farmers for the same period, it is clear that further market reform and trade liberalization must occur. It is, then, neither the topic nor the conclusion that is novel or most important to the success of this interesting book. Rather, it is Huang's informative and creative synthesis of analytical methods and the issues that are central to successful reform, as well as the placement of the case of China into larger theoretical discussions regarding institutional reform, that are his genuine contributions to the literature.

Presenting a most successful merger of concise, well-written essays that incorporate statistical models that seldom inhibit the flow of the text, Huang courses the history of agricultural reform from an economic perspective while challenging readers to place China's experience in the larger context of how institutions adjust to new conditions. Adopting a historical perspective in chapters 2 through 6, he assesses the problems associated with the agricultural sector during the commune era, moves on to those problems that were resolved during the reform era, and then turns to unresolved constraints on further growth. In this process, of course, he compares each period with the previous one, often using traditional economic models to clarify his points—the essence of an economic-historical approach. In a forthright manner he identifies the particular events and economic signals that spurred China's agricultural planners to take action at pivotal moments throughout the reform era. All through these chapters, he identifies these "turning points" that resulted in either progressive reforms, retrenchments, or reversals of previous policies. These chapters are marked by a rich detail that results in a very readable text. Going beyond this foundation, he also looks at China's experience as a case study of comparative institutional reform, synthesizing the experiences mostly of other East Asian nations, but also regularly comparing China's experience with the theoretically ideal institutions of a "pure" market economy. This latter comparative approach—juxtaposing what theory says will [End...