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1. Rural conditions before 1978 -- 2. reform measures after 1978 -- 3. Nonfarm development models -- 4. Issues and future directions -- 5. Annexes.

This paper discusses the impact of rural reforms and industrialization strategies on the modernization process in, and the economic structure of, rural areas during two historical periods: 1949 to 1978 and 1979 onward. Because of a series of structural reforms, the rural economy has undergone profound changes since 1979; the rapid growth of the nonfarm sector is one of the changes. In promoting the nonfarm sector, two development models have been followed: the development of publicly owned nonfarm industries and the development of privately owned nonfarm industries in rural areas. The paper reaches the following conclusions. System reform plays an important role in developing the rural economy. However, such reforms must be welcomed by the rural people, must support their initiatives, and must promote the growth of the rural economy. Industrialization strategy should be conducive to increased rural income and to the coordinated development of both agriculture and industry. In promoting the growth of the rural nonfarm sector, no uniformity of development should be demanded and no restrictions or bans applied. Lastly the development of the nonfarm sector will create a host of problems which will need serious attention, but which can be solved gradually.