In the 1980s economic diversification in the Chinese countryside was so rapid
that by 1990 the contribution of non-farming activities to rural value-output had
already overtaken that of agriculture. This is a process that has since intensified,
both in the agricultural economy “proper”, where animal husbandry and aquatic
production have expanded disproportionately compared with crop cultivation
growth, and in the non-farming rural economy.
Remarkably, over 80 percent of gross rural income in China now derives from
non-agricultural activities, and almost 60 percent comes from rural industry alone.
A further significant share derives from other non-agricultural activities, such as
construction and services. In 2004 the value-added of industrial activities in
rural Township and Village Enterprises (TVEs) was higher than that of all agricul-
tural activities, and more than two times that of value-added from crop cultiva-
tion. Gross income from all rural non-agricultural activities is now well over four
times that of gross farm income. Indeed, rural economic diver-
sification has assumed an importance that transcends China’s domestic econ-
omy: in 2004 the value of TVE export deliveries was about US$205 billion.
These developments are mirrored in employment trends. Official statistics sug-
gest that between 1978 and 2005 TVEs on their own generated more than 114
million new jobs in the rural sector.
The decline in the share of farm workers in total employment – from 90 percent
to less than one-third – is testimony to the remarkable degree of rural employ-
ment diversification that has taken place in China since 1978. But it is a salu-
tary reminder of the continuing employment challenge posed by agriculture that
although it has been in decline since 1991, the number of workers still tied to
farming in 2004 was still 31 million (11 percent) more than in 1978.
Perhaps the most dramatic manifestation of employment change in the Chinese
countryside since the early 1980s is reflected in the mushrooming of the TVEs.
The impact of the expansion of this sector on rural employment is captured in
, which also shows the functional distribution of the TVE labor force.
Over 70 percent of those working in rural TVEs are now engaged in industrial
and commercial activities, and a further 10 percent in construction. The success
of TVEs is without doubt one of the most remarkable features of China’s social
and economic development under reform. As will be shown in the following sec-
tion, their geographical distribution is highly concentrated in a very small num-
ber of provinces, although (as is also argued below) it is too simple to suggest that
the further geographical extension of TVEs offers a realistic basis for the formula-
tion of future rural employment expansion policies.
The ownership pattern of TVEs has also undergone rapid change, although dis-
entangling the reality of such changes is extremely difficult. According to official
sources, in 1980 all TVEs were collectively owned. By 1985, however, one-third
of their workforce were categorised as “individual self-employed”. Subsequently,
there was also a rapid expansion of privately owned enterprises. By 2002 over a
quarter of all rural TVE employees were working in private enterprises, and with a
further 45 percent working on an individual self-employed basis, only 37 percent
of TVE employees were in collectively owned units.
Concealed in these figures are interesting findings relating to changes in the
average size of TVE, measured by number of employees. It would appear that
the average enterprise size in all ownership categories has increased over time,
although private and self-employed units have remained smaller than Collectively
Owned Enterprises (COEs).
Data also suggest that average labor productivity in collectively owned TVEs
has outstripped that of both other ownership categories. To what extent this
reflects a trade-off between the fulfilment of efficiency and employment goals
is an interesting question that deserves further investigation. The answer may
partly lie in the adoption of more modern, capital-intensive technology by larger
collective TVEs – a process perhaps also matched in recent years by the private
TVE sector.
Overall, China’s success in rural job creation since 1979 has been remarkable.
Yet so strong remains the legacy of the rural bias in so many aspects of develop-
ment during the Mao Era that even allowing for the serious labor consequences of
urban state-owned enterprise restructuring in recent years, it is in the countryside
that China faces the greatest employment challenge. The origins of this challenge
lie in two structural features. First, the existence before 1978 of large-scale con-
cealed unemployment has, under the impact of later reforms, been transformed
into a more visible and therefore more challenging problem. It would be wholly
wrong to suggest that under-employment is a purely post-1949 phenomenon in
China. On the contrary, there is plentiful evidence to indicate that throughout
the first half of the twentieth century – no doubt, much earlier too – the sea-
sonal nature of farm work dictated that periods of intense activity alternated
with those, often much longer, of inactivity. Data collected by Buck in his fam-
ous survey of farm conditions in China during the pre-war period12 highlight
the complexity of agricultural employment conditions in the countryside. On
the one hand, only 35 percent of able-bodied men between the ages of 16 and 60
were engaged full-time in farm work – a figure which, however, rose to 93 percent
if those engaged on a part-time basis were included. On the other hand, Buck’s
study also reveals that only 19 percent of farms recorded no agricultural labor
shortage throughout the year. Such findings are not mutually contradictory.
Rather, the unambiguous message conveyed in Buck’s investigation is that under-
employment, not open unemployment, was the major problem facing labor
management in rural China. One of the strengths of farm organization during
the Mao years was that collectives maximized employment through effective, if
not efficient mobilization of available labor supplies for purposes of rural cap-
ital formation, such as irrigation and other kinds of infrastructural construction.
However, the dismantling of the collective framework in the early 1980s left a
vacuum in this regard that has not been filled. In addition, efficiency-enhancing
rural reforms exacerbated under-employment by raising farm workers’ productiv-
ity. The outcome was a massive overhang of surplus farm labor, manifested most
obviously among crop cultivators. Despite the creation of tens of millions of new
non-agricultural jobs in the countryside, the problem has persisted. Even today,
there probably still exist 130–150 million surplus rural laborers – some sources
suggest even more – most of whom are farmers. This would suggest that up to 45
percent of the agricultural labor force, or 30 percent of the entire rural labor force,
are in surplus. Survey findings revealed that in 2002 a member of the rural labor
force worked, on average, for 9.83 months per annum (6.7 in agriculture and 3.13
in rural non-farm activities). Regional differences apart, such average estimates
conceal wide variations in work attendance rates and anecdotal evidence suggests
that the marginal productivity of many under-employed farmers who work for no
more than a few weeks in the year is close to zero.
The second structural feature to which reference should be made is the occu-
pational profile of farming itself. Chinese agriculture has traditionally been
dominated by crop, and especially grain, farming. Alongside rural economic
diversification, the rapid expansion of livestock farming and fishing since the
1980s has also generated a much more diversified agricultural economy. During
the same period, the share of crop farming in the Gross Value-Output (GVO) of
agriculture declined from 80 percent to marginally less than 50 percent, while
the combined contribution of husbandry and fishing has risen to 44 percent.
The changes in profile of farm production have, however, not been matched by
changes in the structure of agricultural employment, which is still dominated by
crop farming. Comprehensive time-series data showing the changing employ-
ment composition of farming appear not to be available, but there is little doubt
that the proportion of workers tied to crop cultivation remains extraordinarily
high. One authoritative source shows that out of a total farm labor force of 365.71
million in 2000, some 349.4 million workers – almost 96 percent – were engaged
in growing crops of one kind or another. A figure in excess of 90 percent no
doubt exaggerates reality. That is, it includes both those whose involvement in
crop farming is part-time – even marginal, as measured by the value of Labor’s
Marginal Productivity (MPL). But the inference that farm under-employment
is heavily concentrated in the cropping sector is confirmed by the findings of
China’s first “National Agricultural Census”.
It is noteworthy too that between the early 1980s and the early 1990s, the
expansion of the farm workforce, in absolute terms, and its maintenance at a high
level could not be explained by changes in sown area or in its composition. Such
findings appear to underline the severity – probably increasingly so – of the prob-
lem of farm under-employment that China has faced under the impact of post-
1978 reforms.
An important observation relating to farmers’ welfare also deserves to be made.
It is that since the sown area under grain still accounts for two-thirds of the total
sown area, most crop farmers – almost certainly, a disproportionately high pro-
portion of them – are to a greater or lesser extent dependent for a living on the
least remunerative of farming activities (namely, grain cultivation). The govern-
ment’s imperative of grain self-sufficiency has imposed a high cost in terms of
efficiency, as measured inter alia by the distribution of labor in agriculture. In
2004, for example, the GVO of cereal farming accounted for only 35 percent of
agricultural GVO, although (as indicated above) it absorbed a far larger share of
the work time of the farm labor force.
