Deng's task: keeping farmers farming. Peking is struggling to stem the tide of Chinese farmers switching to rural industry. Small industry has been promoted, but there is concern about falling food production.

Unlike millions of other farmers in China, Zhang Fuquan has decided not to abandon agriculture to earn more money in rural industry. Instead, he has a foot planted in both farming and business, keeping the state happy and his income high. Thanks to his daughter, who tills the land allotted to the family for farming, he is free to manage a small lumber mill and furniture factory on behalf of his village.

The Zhangs' lucrative arrangement is their solution to a new problem China faces under Deng Xiaoping's economic reforms: how to maintain food production when large numbers of peasants are leaving farms and arable land is being used for housing and industrial expansion.

The Zhangs' arrangement keeps them in the good graces of local officials like Jia Hekun, vice-director of the town of Xin Ming. Jia is determined that farmers in his district stick to their contracts, since food production is the top priority even in this rich and rapidly industrializing county in Sichuan Province.

Under the contract system -- first instituted in parts of China in 1979 -- peasants negotiate with the state an annual contract that determines what and how much they'll produce and what price they'll get for it.

``If you're an ambitious peasant, you are free to do what you want,'' insists Jia. ``But the land you have must be used for grain production. It can't be abandoned.''

Sipping tea in the living room of Zhang's 10-room house, Jia affirmed that Zhang -- or at least his daughter -- understood the state's policy. Others, however, needed more convincing.

What does he tell a peasant who is tired of the hard work and low pay in the fields and wants to earn more money by going into industry?

``If a peasant objects to keeping up his land contract, I tell him to love the motherland, to be loyal to the [Communist] Party, to support socialism -- and to stay in agriculture!'' Jia said. He explained that farmers may turn over their land to others, although this is discouraged, since the town is committed to paying a subsidy to peasants who take over others' contracts.

Ultimately, government officials like Jia have the final say in whether peasants who have committed themselves to food production can change their work. Some 8 million peasants switched last year, and, since 1978, 60 million peasants -- 17 percent of China's rural work force -- have turned from tilling to other trades.

For a while, this mass exodus from farming looked like a promising development with few major liabilities. It marked new opportunities for a surplus labor force in the countryside, estimated between 15 and 20 percent of a rural population of 800 million people. And it offered high profits and better pay.

For Xindu County, the value of industrial output more than doubled last year, while agricultural output increased by less than 10 percent. That made it possible for ordinary workers, such as those in Zhang's factory, to earn more than 900 yuan ($293) a year -- 50 percent higher than the average farmer's wage in the area.

For China as a whole, rural per capita income increased to 400 yuan ($125) in 1985. That is 2.4 times that of 1978, and more than half of this increase is from the labor of a small number of ex-farmers in rural trades.

But these heartening economic trends have raised fundamental questions about the future of Chinese agriculture. The problem became a major political issue last year, when China's grain production for 1985 fell sharply. The first hints of a setback came last July, when floods devastated large portions of the rich grain-producing provinces of northeast China.

By the end of 1985, it was apparent that the downturn was the sharpest since the ``Great Leap Forward'' of 1959-61, when hundreds of thousands of people died of starvation. (Besides severe weather conditions, the Great Leap's failure has been pinned to Mao Tse-tung's push to establish the commune system throughout China, abolishing private plots and causing a drastic drop in productivity.) The 1985 harvest fell to roughly 375 million tons, a drop of some 6 percent from the 1984 high of 407 million tons.

The situation is very different from 25 years ago, since granaries are full from bumper crops of the past three years, and the 1985 harvest was still the third-largest in China's history. But the traditional fear of food shortages runs deep, especially since grain production per capita also dropped last year (see chart, Page 9), and China's production level is still slightly below the world average of 400 kilograms a person. Grain, which includes potatoes and soybeans in Chinese calculations, accounts for more than 80 percent of food consumption.

Chinese historical annals contain numerous warnings from imperial advisers about falling grain production. Thus, the rebuke last fall from veteran party leader and respected economist Chen Yun echoed an old theme.

``Township enterprises should be developed,'' Chen told the party's national conference in September. ``But the thing is that the call of `no prosperity without engaging in industry' [issued by the reformists] is heard much louder than that of `no economic stability without agricultural development. . . .' Grain shortages will lead to social disorder.''

Chen's blunt remarks came as a political thunderbolt at the end of a meeting meant to focus attention on Deng's plans to bring younger people into the party leadership. Even before other leaders took up Chen's concerns, his speech was publicized in the party newspapers and had the effect of a policy statement.

In Xin Ming, town official Jia said that only a week after Chen's address, he was referring to it in his regular meetings with peasants. He used it as one more persuasive tool in trying to keep the state production targets on track for the next planting season.

``It was high time for Chen Yun to point out this phenomenon,'' said Jia. ``If it becomes a general trend, it would be very serious.''

The government has offered several reasons for the fall-off in the 1985 grain harvest. Half of the decrease has been attributed to natural disasters -- devastating floods in northeast China, the worst since the turn of the century, and a drought in several southern provinces.

Another factor is the increase, according to the state plan, in land planted in cash crops and the decrease in grain planting. Some 60 million mou (about 10 million acres) were shifted out of grain last year -- three times the average amount in the previous four years. Government officials now admit this was excessive.

A third reason was peasant responses to changing market conditions.

``The bumper harvest in 1984 meant that farmers had difficulty selling their surplus grain. So they planted other crops in 1985,'' say Li Jinghua, spokesman for the Ministry of Agriculture.

The central government's response to the grain problem has been to fine-tune its pricing policies and reduce the farmer's risk. This includes raising the minimum price the state will pay for surplus grain production. This year, the state's minimum price will be 35 percent higher than in 1985. Next: China's younger leaders and how they got to party's top rungs.