This book explains how policy changes affect farmers' production incentives and efficiency of resource allocation within and outside agriculture in modern China. It analyses two different development periods: Mao's period and the reforming post-Mao period. Simple econometric models are employed to examine the impact of modern inputs on land productivity of grain over time and across regions. A spatial equilibrium model is also used to test the effects of different policy alternatives on allocative efficiency and to identify the optimal spatial patterns of crop production. The book concludes that the pursuit of local self-sufficiency, lack of farmers' incentives, national resource allocation and underinvestment were the main factors restricting grain production and agricultural growth during Mao's period. Institution and price reforms aimed to increase farmers' production incentives, and market reforms aimed to improve allocative and marketing efficiency, were two important factors boosting production in the earlier stage of agricultural reforms in the 1979-84 period. Long-term tendency to undermine the role of agriculture, lack of state investment and inconsistency in market reforms explained the stagnation of grain production in the late 1980s, and still remain the major threats to sustained grain production and agricultural growth in China.