ture, and accelerated the installation of a commodity economy to rural areas.

In line with the development of the rural economy, problems became clear. Though agricultural production recorded a historical high in 1984, it stopped growing or even decreased its production after 1985. This result alone clearly indicates that there are some failures in agricultural policies. Other than weather conditions and transition to economic plants, the stagnant growth of peasants' income compared to urban residents shattered the incentives of peasants. To earn more money, a large labor force began to move from rural areas to urban areas. $ ^{44} $ Furthermore, introducing HRS broke up collective organization in rural areas. State investment to the rural infrastructures also stayed at stagnant levels because the government paid much attention to industries. The most important point: nothing new had been introduced to rural reform after the development of HRS. One Chinese document pointed out that the main reason for the stagnation of agricultural production was inadequate policies. $ ^{45} $

## 2 -1-2-3 Third Stage : 1991-Present

The third stage is from the Eighth Plenum in November 1991. In the former rural reform since 1979, the focus had been mainly on the application of HRS and improving the quantities of production through individual household encouragement. The reforms paid little attention to rural collective activities, which suffered the many ill-effects of the rural economy like maintaining agricultural infrastructures. As time went by, problems like weakened administrative organizations and stagnant agricultural infrastructure became clear. At that point, China again had to try to fix those problems by re-introducing collective organization in the rural economy. $ ^{46} $

As the reforms deepened, the income gap between coastal developing urban areas and inland rural areas, especially those which could not develop TVEs, became significantly wider and more visible. The higher income standard of the coastal area has been broadcast to the inland areas through television and other communication media. This caused a labor flow from the inland rural areas to the coastal urban areas. Labor power from inland areas, which cause many additional problems, is now one of the most important sources of labor in the rapidly growing coastal areas. Though TVEs aimed to keep labor power in the rural area by hiring them in the villages even if peasants stopped working as farmers, the characteristics of TVEs are now changing. Some reports claim that the labor force from the inland areas is becoming the main labor source in some coastal TVEs. $ ^{47} $ This labor flow phenomenon cannot be solved, it might even get bigger because of the recent overheated development.

Even now, though it has many limitations, the HRS is the central element in the agricultural production system.

## 2 -1-3 Development of TVEs

In most cases, TVEs originated from factories which belonged to the People's Commune. These days, most domestic-invested enterprises in rural areas are normally called “Township and Village Enterprises (TVEs).” Recently, about 2/3 of rural social income $ ^{48} $ is earned from non-agricultural sectors like TVEs.

At the beginning of the rural reforms, rural factories $ ^{49} $ were positioned as a measure to