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THE SOCIALIST MARKET ECONOMY
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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