The financing repression of the private sector took two forms. One was a change in the lending priorities of Chinese banks. Banks were now instructed to support agriculture rather than to support rural entrepreneurs transitioning out of agriculture. This is an industrial policy mentality par excellence. Because of the view that agriculture is strategic – ensuring cheap agricultural supplies to industry and to cities – and because of distrust of the price mechanism, the idea is that the state had to use policy levers to affect the relative returns between farm and non-farm activities.
