China’s economy has experienced remarkable growth since reforms were initiated in 1978
and pushed forward by a number of subsequent policy initiatives. The household
responsibility reform that distributed lands to individual households increased farmers’
incentives and agricultural productivity by about 50 percent in early 1980s (Lin 1989; Huang
and Rozelle 1996; Jin et al. 2002). Other reforms that boosted China’s economic growth
since the mid-1980s include the development of rural township and village-owned
enterprises, measures to provide a better market environment through domestic market
reform, fiscal and financial initiatives, the devaluation of the exchange rate, trade
liberalization, the expansion of special economic zones to attract foreign direct investment
(FDI), reform in state-owned enterprises (SOE), agricultural trade liberalization, and many
other policy efforts . As a result, the average annual growth rate of gross domestic product
(GDP) between 1979 and 2009 was about 10 percent (NSBC 2010). Real GDP in 2010 wasnearly 20 times that in 1978 (figure 1). Per capita GDP in nominal US dollars increased from
US$224 in 1978 to US$4,230 in 2010.