1.1.2 Poverty reduction driven by the reform of rural economic system （1978-1985）

This period marked the completion of the reform of rural economic system revolving around the Household Contract Responsibility System，which enabled rural residents to contract land on a household basis and utilize labor force and spend their income on their own.People were incentivized to invest capital and labor in their contracted land and manage it in a more scientific way.From 1978 to 1985，consumption of agricultural fertilizers doubled；total power of agricultural machinery increased by 78 percent；grain yield per unit area was up by 40 percent；and agricultural productivity increased by 40.3 percent[10].Increased productivity，supplemented by the free utilization of labor force，loosened market control，and diverse planting/breeding varieties，shifted surplus labor to set up township enterprises.Statistics show that another around 41.45 million rural workers，11 percent of rural labor force at that time[11]，began to take up non-agricultural work during this period，which became a new growth point for peasant household income.

In this period，the Chinese government also improved conditions of exchange for agricultural products by increasing price and deregulating circulation of products outside unified state purchase.From 1978 to 1985，the composite procurement price index of Chinese agricultural products increased by 66.8 percent；additional personal income brought by increasing price contributed to 15.5 percent of the total income rise.Under the combined effect of the factors above，the net income of rural residents per capita increased by 132 percent.Caloric intake was up from 2300 kcal per person per day in 1978 to 2454 in 1985.According to the standard then[12]，50 percent of the rural poor in this period did not worry about food or clothing anymore.If gauged by the current poverty line，over 100 million people were lifted out of poverty.Poverty headcount ratio was reduced to 78.3 percent[13].

Poverty reduction and alleviation in this period were mainly achieved by increasing productivity and boosting non-agricultural employment through institutional reform and price adjustment of agricultural products.Different households in different regions enjoyed benefits to various degrees.However，the income gap between families began to widen due to disparate locations，resources and family conditions.Gini coefficient based on rural residents’ income increased from 0.21 in 1978 to 0.28 in 1985.In some areas，a household could earn an annual income of over 10000 yuan，while there were still a fair number of peasants without sufficient food，clothing and shelter.

As the distribution of areas hit by severe poverty changed in the course of rural structural reform，since 1982，the Chinese government has carried out agricultural construction projects in Dingxi city and the Hexi district of Gansu province，and the Xihaigu district of Ningxia Hui Autonomous Region，hoping to eliminate extreme poverty in a development-oriented way.This marks the beginning of China’s effort to alleviate poverty in particular areas through developing local resources，and provides valuable experience for the plans later on to carry out development-oriented poverty relief work on a larger scale[14].In 1984，the central committee of the CPC issued the Notice on Assisting the Transformation of Poverty-Stricken Areas，which explicitly stated that the key to shaking off poverty was to depend on the local people to carry out commodity production locally based on local peculiarities，hoping to spur the internal dynamism of the corresponding area.It was also proposed to focus on eliminating poverty in large swathes，and county governments were responsible for the overall arrangements of development funds allotted by different departments.This Notice，as the first policy issued，marked the start of nationwide development-oriented poverty alleviation since 1986.