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Twenty-eight years ago, Guan Youjiang signed a secret agreement under which Xiaogang villagers of east China's Anhui Province decided to divide the then People's Commune-owned farmland into pieces for individual households to cultivate.

On Thursday, Guan, now 60, signed a very different agreement: to lease his 0.13 hectares of farmland to the Xiaogang Village Development Cooperative for an annual rent of 1,000 yuan (US$125).

"Division of farmland helped my fellow countrymen become well-fed but did not bring as much wealth as we had expected," said Guan, "Today, we are leasing our farmland to the cooperative to explore a way that can lead us to prosperity."

Guan is one of the 23 Xiaogang villagers who signed the agreement on Thursday. A total of 13.3 hectares of farmland will be leased to the village development cooperative, funded by a Shanghai-based animal and poultry breeding company.

According to the agreement, the company will use the 13.3 hectares of farmland to build a pig-breeding base and grow grass.

Villagers who have leased their farmland to the company will be paid 500 yuan (US$62.5) per 0.06 hectares of farmland and they can choose to find a job elsewhere in China or in the company for a monthly salary of 600 yuan (about US$75).

The agreement is effective for 20 years and the content of the agreement and standard of land rents will be adjusted every five years. Local villagers can decide either to obtain dividends from the business by investing their farmland or continue leasing their farmland to the company.

The practice will be a development of a contract system initiated 28 years ago rather than being a throwback to a planned economy, said Lu Zixiu, an expert of rural affairs in Anhui Province.

On one night in Nov. 1978, 18 villagers at Xiaogang risked their lives to sign a secret agreement which divided the then People's Commune-owned farmland into pieces for each family to cultivate.

The practice was supported by Deng Xiaoping, chief architect of China's reform and opening to the outside world, and recognized by the Chinese government. Xiaogang has since been seen as the pace-setter for the nation's rural reform.

Allocating farmland to each household fired the locals' enthusiasm for agriculture production, which had been contained in the outmoded planned economy. The ensuing 1980s became a primary period for development in China's rural areas, which once outperformed their urban peers.

However, since the beginning of the 1990s, rural areas have gradually lost their lustre, along with flows of large amounts of resources, including labor force, land and funds, to cities.

Located on the bank of the Huaihe River, the country's third largest river haunted by frequent floods, Xiaogang village lacks resources for development. The village did not become the "national model" in leading locals to wealth through land division as people had expected. On the contrary, some Xiaogang villagers still live a poor life today.

"Land division and the contract system did help release production forces, yet farming individually will not grant the farmers a prosperous life," said Lu, the expert of rural affairs.

Some experts suggested that farmers should combine forces to achieve the goal of raising their income and improving their living standards.

Shen Hao, secretary of the Xiaogang village committee of the Communist Party of China, expected more villagers would lease their farmland to the cooperative if the first group of 23 farmers could obtain more profits from land leasing.

"We expect the Xiaogang village to witness another period of fast development," said Shen.

Yan Jinchang, 56, a villager who leased his 1.5 hectares of farmland to the company, said he was confident in operation with the cooperative.

He plans to find a job in the company, which means an annual income of 7,200 yuan (US$900) in addition to his income of 11,500 yuan (about US$1,400) from leasing his farmland.

"More importantly, leasing my farmland to the cooperative helps reduce risks," Yan said.

According to the head of Xiaogang village, lease of the second batch of 13.3 hectares of farmland is now under discussion.

(Xinhua News Agency April 23, 2006)