With the introduction of rural reforms in the early 1980s, China broke with its collectivist past and began the arduous transition from a centrally planned to a free market economy. The People's Communes - the institutional basis of agriculture under Mao - were disbanded, and communal land was redistributed to users through a family-based "Household Contract Responsibility System"; (HCRS), which offered farmers more managerial freedom by linking rewards directly to production and efficiency.

The first period of agricultural reform was largely successful, with grain production increasing enormously and a bumper harvest of over 400 million tons being achieved in 1984. This success legitimised a move towards the further fragmentation and individualisation of agriculture - including the forestry and livestock sectors. The HCRS model was subsequently extended to grazing areas and in 1985 a new Rangeland Law was promulgated, under which rangeland could be contracted to collectives or individuals.

The success of previous agricultural reforms was not, however, mirrored in the livestock sector. Today, the Rangeland Law is unenforceable in many parts of China, while the contract system for grasslands has failed miserably. Far from promoting the sustainable use of the rangelands, the new system has tended to enhance pasture degradation, with economic freedom acting as a stimulus for individuals to increase production, whatever the long term implications for the range. The situation as it stands raises a number of questions about the implementation and consequences of the HCRS and Rangeland Law in the livestock sector. In particular it raises doubts about the wisdom of extending policy measures designed for crop agriculture to the livestock sector, without taking into account the inherent differences between production systems.

This analysis suggests that the principal underlying cause of the current alleged "Tragedy of the Commons" situation in Ningxia is the establishment of collectivist institutions which undermined the legitimacy of customary rights structures over the regulation of grasslands. Communes failed to create the necessary socio-economic and regulatory conditions that allowed individuals to pursue their own well-being without harming the prospects of future generations. Instead, the pattern of resource use that developed bore all the characteristics of an open-access system, under which resources were squandered. The present government’s attempt to privatise and individualise rangeland areas also lacks these essential regulatory conditions, and many features of rangeland use have changed little since the collectivist era. Most significantly the problem of free-riding remains unresolved.