PRICE REFORM IN CHINA, 1979-1991

Abstract

The dissertation addresses one of the significant issues in the Chinese economy today; namely, the problem of how to make the transition of the Chinese traditional price system from central planning to a market-oriented one. The attempt to make this transition has met with obvious achievements as well as failures. It is useful to take a closer look at these successes and failures for further improving the price system in China. The paper comprises four chapters. The Introduction chapter provides a succinct evaluation of the centrally planned economic system of China, a brief review of the Chinese traditional price system in 1949-78, and an account of the inefficiency generated from the price control. Chapter II provides a framework of the price reform in 1979- 91. The principles, policy options, and general premises of the price reform are discussed in the first section. The second section provides a detailed examination of the measures implemented for the price reform. These measures include realignment of prices, deregulated prices for industrial and agricultural products, market prices for farm and other products, the dual price system of capital goods, and the effects of price increase on real wage rate. Chapter III illustrates the problems associated with the price reform. These problems can be classified into the following sections: persistent supply bottleneck, financial burden due to price subsidies, problems in relative price structure, distortions in the industrial structure, problems of the dual price system, price instability, and inefficiency in resource allocation. Chapter IV concludes the dissertation. It is noted that the key to a further price reform rests on allowing market mechanism to work successfully.