To the extent that free markets show little concern for the existence of externalities, they are unlikely to produce optimum outcomes with regard to the protection and enhancement of the natural environment. Accordingly, the increasing emphasis on markets to deliver development in China under Deng Xiaoping and his successors has the capacity to threaten the long-term environmental sustainability of that development. While there are good reasons to remain sceptical about the ability of market mechanisms to promote sustainable rural development in many respects, market reforms in China and the opening of the country to the outside world have nevertheless provided opportunities for farmers to engage in ecologically sensitive agriculture in the form of `green' food and organic farming. Given that these forms of agriculture reduce farmers' use of chemicals compared to conventional farming — chemicals which are costly to produce and environmentally degrading to use — they contribute to ensuring a more environmentally sustainable future for Chinese farming, post-WTO entry, whilst providing opportunities for farmers to enrich themselves at the same time: a `win–win' state of affairs. This will remain the case, however, only so long as the state is prepared to create and reinforce appropriate institutional arrangements
RAE2008 UoA49. Originally assigned to The China and Transitional Economics Research Centre.