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China's Main Page

THE SOCIALIST MARKET ECONOMY

 

 

 

 

 

 

 


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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 considerably.

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 tn engage in production but not in business operation, and abolished the practice of the state fixing the commodity prices.  As a result, the rights of the 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.  Through the reform, the unitary pattern in which the public economy monopolized commercial activities has been broken up step by step, and the commodity market pattern of diversified economic elements and operation forms with the public ownership of commerce as the main body has been established.

Before 1978, there were 791 products belonging to means of production allocated according to state plans, but now only five of them remain, and the rest have entered the market.  Now, thousands of department stores, supermarkets and chain stores are scattered everywhere in both rural and urban areas.

  A great variety of food, clothing and other commodities satisfies the needs of consumers.  The total market sales grow with each passing year.  in 1998, the rural market achieved 1,132.7 billion yuan-worth of sales of consumer goods, 12.9 times the figure in 1978; the urban market achieved 1,782.5 billion yuan-worth of sales of consumer goods, 23.8 times the figure in 1978.  At the same time a buyer's market has appeared in the commodities sector in which the supply and demand of most commodities are kept in balance, the supply of some gods exceeds the demand, price trends are steady and the guiding function of the market for producers has been strengthened.

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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 1998 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 1997 with 1978, the prices of minerals, raw materials and manufactured products increased 8.2, 5.2 and 3.3 times respectively, and their price ratio was 1.7:1:0.6.  Besides, the price scissors in the exchange of industrial products for agricultural products were alleviated.

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  In 1997, the prices of agricultural products increased by 5.25 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.

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, re-discounting, reserve fund rates and making market business public, thus standardizing and strengthening the control and adjustment of the credit and loan market.

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Current account balance:
$297.1 billion (2009 est.)
country comparison to the world: 1
$426.1 billion (2008 est.)
Exports:
$1.204 trillion (2009 est.)
country comparison to the world: 2
$1.435 trillion (2008 est.)
Exports - commodities:
electrical and other machinery, including data processing equipment, apparel, textiles, iron and steel, optical and medical equipment
Exports - partners:
US 17.7%, Hong Kong 13.3%, Japan 8.1%, South Korea 5.2%, Germany 4.1% (2008)
Imports:
$954.3 billion (2009 est.)
country comparison to the world: 4
$1.074 trillion (2008 est.)
Imports - commodities:
electrical and other machinery, oil and mineral fuels, optical and medical equipment, metal ores, plastics, organic chemicals
Imports - partners:
Japan 13.3%, South Korea 9.9%, Taiwan 9.2%, US 7.2%, Germany 4.9% (2008)
Reserves of foreign exchange and gold:
$2.422 trillion (31 December 2009 est.)
country comparison to the world: 1
$1.953 trillion (31 December 2008 est.)
Debt - external:
$347.1 billion (31 December 2009 est.)
country comparison to the world: 22
$400.6 billion (31 December 2008 est.)
Stock of direct foreign investment - at home:
$456.3 billion (31 December 2009 est.)
country comparison to the world: 10
$378.1 billion (2007 est.)
Stock of direct foreign investment - abroad:
$191.8 billion (31 December 2009 est.)
country comparison to the world: 18
$147.9 billion (31 December 2008 est.)
Exchange rates:
Renminbi yuan (RMB) per US dollar - 6.8249 (2009), 6.9385 (2008), 7.61 (2007), 7.97 (2006), 8.1943 (2005)

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