Introduction
Since 1978, along with the dismantling of the planned
economy system and the deepening of the reform of the
economic system, commodity, capital, labor service and
technology markets have appeared one after the other
in China. Now China has transformed its planned economy
system into an initial socialist market economy system.
As a result the regulatory function of the market has
been strengthened tremendously.
Commodity Market
In order to extend the regulatory function of the market,
the state has gradually reduced the categories of products
for planned production, eliminated the restriction that
enterprises were only allowed to engage in production
but not in business operation, and abolished the practice
of the state fixing commodity prices. As a result, the
rights of enterprises to purchase, produce and sell
have been extended. Enterprises may organize and establish
wholesale markets and trading centers; the wholesale
and retail commercial systems are being restructured;
and the non-public economy is allowed to take part in
commercial activities.
Capital Market
Since the reform and opening began, China has continuously
expanded the capital market by improving the credit
and loan mechanism, and developing stock and state debt
markets. At the beginning of the 1980s, the reform of
the credit and loan mechanism, beginning with unified
plan, multi-level control, connection of deposits with
loans, and being responsible for making up differences
developed in accordance with the ratio between assets
and debts, and eliminating the limits for the sizes
of loans. In order to match this important change, new
measures have been adopted, such as re-granting loans,
re-discounting, reserve fund rates and making market
business public, thus standardizing and strengthening
the control and adjustment of the credit and loan market.
At the same time, the stock market grew from nothing
to become a large-scale stock market, symbolized by
the Shanghai and Shenzhen stock exchanges.
Price Reform
Before the reform and opening was introduced, most commodities
on the Chinese market were priced by the state. But
since the start of the reform and opening, along with
the expansion of the commodity market scale and the
change of the relations between commodity supply and
demand, the state has carried out price reform step
by step and according to plan. The fixing of prices
by the state follows three forms: the fixing of price
by the state, state guiding prices and market regulatory
prices. The market regulatory price has been gradually
relaxed -- By 1999 the pricing of 95 percent of consumer
goods and 80 percent of investment goods had been relaxed.
These prices were regulated mainly through the relations
between market supply and demand. A socialist market
pricing mechanism is gradually taking shape.
In the pricing system, the irrational state of basic
product prices being too low has been improved, and
the pricing structure is becoming more rational step
by step. Comparing 1998 with 1978, the index of the
retail sales prices of rural industrial products increased
by 3.88 times; and the index of the synthetic relative
prices between industrial and agricultural commodities
was 59.7 percent. Besides, the price scissors in the
exchange of industrial products for agricultural products
were alleviated. In 1998, the prices of agricultural
products increased by 5.83 times, compared with those
of 1978, and the prices of industrial products by 2.95
times, and their price ratio was 0.6∶ 1. In accordance
with the requirements of the socialist market economy,
China has been establishing a pricing mechanism macro-regulated
and controlled by the government, and fixing prices
through the market.
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