The economic reform program implemented in the early 1980’s was built, by and
large, on the promotion of industry at the expense of agriculture. Over the past two decades,
the rapid industrialization of China was mainly marked by the surge of small-scale enterprises
in rural areas which absorbed huge amounts of surplus labour in agriculture. As a
consequence, during the reform era, substantial efficiency gains have been reaped from the
reallocation of resources to higher productivity sectors (Maddison, 1998; Wu, 2004; World
Bank, 19971).