Agricultural product price reform has been crucial within rural economic reform, and represents a fundamental test of whether a socialist market economy can be established successfully in China's rural areas. Changes to the system of pricing agricultural output have also played an important role in economic reform and development throughout the Chinese economy. Successful price reform is necessary to motivate wider systemic reform during the process of establishing a market economy in rural areas.

Three stages in the reform of agricultural product prices

China's agricultural product price reform has been proceeding gradually since rural reform was initiated at the end of 1978. The scope of reform widened over time, and its objectives became more explicit. Reform of agricultural product prices has now reached a critical stage.

The evolution of China's system of pricing agricultural output can be divided into three distinct but closely related stages. The first was dominated by adjustment of state prices. The second included both adjustments to government-set prices, and partial price liberalisation. The third has involved deliberate transformation of the price setting mechanism towards reliance on markets.

The first stage occurred between 1979 and 1984. The main thrust of reform was to raise the prices of agricultural products against those of industrial output, and to adjust relative prices within the farm sector, with the aim of stimulating agricultural development.