Price Reform in China, 1979-86.

• Author: Nazemzadeh, Asghar

The economic liberalization process and the movement towards a competitive market mechanism in China started in 1978. Guo focuses on the producer and procurement part of the reform, investigates the characteristics, the difficulties involved, and the achievements of this process.

In Chapter 1, a theoretical framework is developed to analyze the research objectives of the book. The socialist pricing system as well as price reform in the historical and international context are among other topics discussed in this chapter.

China's price reform began in 1979. Chapter 2 discusses the characteristics, goals, methods, stages, time frame and achievements of this reform. According to the author, the price reform policies were the compromised outcome of the conflicting views of the Centralists, Decentralists, and the Market Reformers in China.

Chapter 3 focuses on price formation, price determination, and price implementation in the administrative price reform. During this reform the administration placed more emphasis on supply and demand, quality, and cost structure. However, absence of proper price calculation, existence of conflicting views among administrators, and also lack of the needed skills to implement the related policies resulted in an irrational and inefficient pricing system.

During the post reform period, Guo claims that prices were adjusted continuously to reflect international prices, cost structure, desired price ratios, peasants' standard of living, government revenue, and quality. Chapters 4 examines the effect of administered prices on output in the cotton and coal industries. Guo concludes that, depending on the nature of the commodity and the government policies, the price reform affected different industries differently. While cotton output responded to price changes significantly, steel output remained insensitive to price fluctuations.

In Chapter 5, Guo investigates the effect of producer price adjustments on the composition of output within the steel and bicycle industries. He concludes that the coexistence of shortages and surpluses in these two industries are fundamentally due to direct administrative controls, as well as irrational price ratios.

In 1985...