There are two basic problems there: Too many people, and that it is hard for farmers to provide sufficient security to get loans to finance industrialisation because they don't own any land. With the latter, you could get collectives arranging to aggregate their land and e.g. share machinery.
Basically, they've socialised the land ownership, but not socialised the farming operation, and as a result they have a mismatch where they've made their farmers a high financing risk. Either socialising parts of the farming operation, or privatising the property would both likely be better than their current alternative for profitability of farms.
But the issue of too many people exacerbates the problem: More efficient farms have the potential to be more profitable because you can farm a larger area with fewer people. If the number of people remain constant, you don't have the same incentive, since you are paying for the labor anyway, and probably won't be able to afford it either. So ultimately whatever they do, they will want to encourage a reduction in the number of farmers.
The problem is that the government would not like to have to deal with a growing unemployment problem in the cities by driving people to leave their plots, and they also would not enjoy the social unrest it could potentially cause to force the issue. Hence their slow reforms.
(It's also very indicative about the ideology of the Chinese government that it has not made any moves towards socialising the farming; e.g. they could have increased the land rent but provided farmers access to collectively owned farm machinery as part of it, or even explicitly required farmers to arrange cooperatives and only rent out bigger parcels of land - instead they are opting for means of making farming rights a commodity subject to market forces)
To note, China did delve into farm operation collectivization under Mao, but this was almost completely undone by Deng.
Communism has nothing to do with the scale things are operated at.