The formal proposal of the "feedback" theory for agriculture at the two-day central working conference on agriculture which ended on Wednesday shows the central authorities' intention to step up efforts to support rural development.

The conference is set to orientate our agricultural policies in the new year on the basis of a careful summary of last year's work.

The meeting rightly points out there are "two trends": Agriculture supports the take-off of industrialization in the initial stage of development; industry feeds back to promote agriculture as industrialization matures. The two can ultimately develop in a co-ordinated way.

Domestic economists have put forward the "feedback" theory in recent years to save the rural economy. But they are divided on whether the time is ripe to practise the theory.

The formal suggestion to apply the theory to China's economy at the conference indicates the policy-makers have reached a consensus and marks the central government's updated efforts to accelerate rural development.

The new policy orientation is hammered out against a backdrop of mixed scenarios in the agricultural sector this year.

An encouraging sign this year is the rebound in both output and farmers' incomes.

Authorities predict this year's grain production will exceed the target of 455 million tons.

The per capita income of farmers was 2,110 yuan (US$254) during the first three quarters, up 11.4 per cent year on year after deducting inflation. The growth rate is 7.6 percentage points higher than last year's figure.

In terms of per capita income from sales of farm produce, farmers earned 24.9 per cent more during the first three quarters over the same period of last year.

The big difference between farmers' overall per capita income growth and their per capita income growth from sales indicates farmers benefit more from farming.

The news that for the first time since 1997, cash incomes grew faster than the disposable income of urban residents deserves applause.

It means that the situation is improving significantly, although statistics for their income for the whole year are not yet available.

The heartening situation is due to factors such as favourable weather, rising grain prices and supportive policies of the central government, such as tax reduction.

But we have to remain sober-minded because the growth of incomes is in part a rebound from years of slow growth. Any change in weather or market conditions next year may cost farmers dear.

Mobility to urban areas to work, which increases incomes, needs to be made smoother.

Next year is the first year of the end of the grace period for China's agriculture in line with its World Trade Organization commitments. The real challenge from foreign competitors will intensify.

The new year will also be crucial for testing the country's tax reforms in rural areas. Pilot reforms in Northeast China's Heilongjiang Province, which centre on scrapping the agricultural tax, have seen local revenues slump. Whether the central government's transferred payments will fill the fiscal gap and whether corresponding government streamlining will proceed smoothly to cut administrative expenditure will determine the track of large-scale reforms across the country.

A central conference on agriculture may not provide an instant cure to these issues, but the "feedback" policy line the conference has set brings hope for ultimate solutions.

(China Daily December 31, 2004)