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This paper presents a macro-micro analysis of the impact of policy reforms in China on agricultural production, input use and soil quality change for a major rice-producing area, namely Jiangxi province. This is done in three steps. First, a quantitative assessment is made of the impact of market liberalization policies on the economic environment of farm households in Jiangxi province. Econometric analyses based on provincial, national and world market data are used to explain changes in rice and fertilizer prices in Jiangxi province over time. Next, the impact of China's recent income support policy and latest price trends on farm household choices with respect to activity choice (particularly rice and livestock) and input use (fertilizers, pesticides, manure) is assessed for two villages with different degrees of market access in north-east Jiangxi province. Two village-level general equilibrium models are used to analyse household decision-making and interactions between households within these villages. The parameters are estimated and calibrated from an extensive survey held in these villages in the year 2000. Finally, the impact of land tenure policy on farm management decisions (labour, manure and chemical input use), soil quality (available P and K and total N and C) and rice yields is analysed through an econometric analysis of plot-level data for three villages. Two-stage least squares (2SLS) is used to control for interactions with yields and for feedbacks towards input use. The paper ends with a number of suggestions for policy adjustments that would reduce the problem of natural soil compaction in the research area.
