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Small-scale household pond aquaculture development has significantly contributed to Chinese food security, poverty reduction, and improved livelihood of farmers. Before the onset of the economic reform in 1979, markets were non-existent. We address the question of the importance of the part played by decentralized government in coordinating the economic activities from a planned to a market-directed economy in the aquaculture sector. In this case study, we have interviewed farmers and officials and used secondary official data in Shandong province. We find that coordination by local government has been crucial in developing small-scale household agricultural and aquaculture production in transitional economy, and enabling the market to become the driving force in the development of household pond aquaculture in rural China. The Chinese experience may bring valuable lessons for other developing countries, where hunger are endemic, and the smallholder farmers are the key target in poverty reduction. [ABSTRACT FROM AUTHOR]