little autonomy. Improving these weak points was the beginning of the Rural Reform. $ ^{31} $

Production in the old system was controlled by command from the higher units on the basis of a central plan. Market mechanisms and price signals $ ^{32} $ had not been used in controlling production. Everything was controlled by command, and the economy could not create its efficiency and incentives.

## 2 -1-2-1 First Stage : 1977-1983

At the Third Plenum of the 11th Party Congress, China decided to begin reforms. There, agriculture was considered as the main area. On the basis of self surveys, China enacted new policies to transfer decision-making power to lower levels. They sought to give more power to producing groups, authorize family plots, install the income distribution based on labor, allow the rural market trade, $ ^{33} $ and raise prices of agricultural products at which the government purchased from the peasants.

China decided to introduce the “Household Contract Responsibility System (HRS)” $ ^{34} $ into agriculture through many experiments on the product responsibility system. There were some opposite opinions about the system, but Deng Xiaoping gave strong support to the system in May 1980. The “Product Responsibility System” in agriculture was officially approved by a document $ ^{35} $ in September 1980. This decision characterized and made great advances in agricultural reform.

Official approval to HRS brought big changes to the rural economy. Not only did production greatly increase, but the system of China’s agriculture changed to one suitable for the commodity production system from self-supporting production. Labor productivity was also improved. $ ^{36} $ The decision completed the first stage of China’s rural reform. The result, which showed the importance of giving autonomy to peasants, influenced all the reform fields, including the urban reform. $ ^{37} $

## 2 -1-2-2 Second Stage : 1984-1991

After introducing the HRS, agricultural production grew steadily in the early 1980s. But by the mid-1980s, some problems, $ ^{38} $ which originated from defects in agricultural policies, appeared. $ ^{39} $ From 1984 to 1989, agricultural production, especially production of crops, remained stagnant. $ ^{40} $

In January 1985, the National Council announced “Ten Measures for activating the Rural Economy” with which the rural reform advanced to the second step. Fundamental policies had kept the same general direction as the first stage, even in the new period. China kept giving more decision-making power to different areas, strengthening the producing power of non-agricultural sectors, tried to install a commodity economy and tried to modernize the agricultural sector.

According to the reform policy, the state monopoly purchasing system in agriculture was gradually loosened and market mechanisms became more important in agricultural production control. $ ^{41} $ Industrial plants had more weight in sown areas. $ ^{42} $

Restructuring of social and industrial structures in rural areas promoted development of TVEs. The share of TVEs in the rural economy exceeded 50 percent $ ^{43} $ in 1987. Development of TVEs changed the economic structure in rural areas, absorbed excess labor from agricultural