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Redefining State, Plan and Market: China's Reforms in Agricultural Commerce*

  • Terry Sicular
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Since the late 1970s the Chinese government has taken major steps to open up domestic markets and promote the development of commerce. Policies during the reform period have included reducing the scope of commercial planning, eliminating state commercial monopolies, and permitting individuals, collectives and enterprises to buy and sell at mutually acceptable, market-based prices. The effects of such measures are evident in the busy retail districts of China's cities and in the lively market fairs in the countryside.

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1 Here and below state commerce includes trade by the National Federation of Supply and Marketing Co-ops, which, despite being nominally collective, has effectively been a branch of the state commercial system.

2 For discussion of commercial reforms in these spheres, see Byrd, William A., “The impact of the two-tier plan/market system in Chinese industry,” Journal of Comparative Economics, Vol. 11, No. 3 (1987), pp. 295308, Hussain, Athar, “The Chinese enterprise reforms,” London School of Economics China Programme Working Paper No. 5 (June 1990), Holton, Richard H. and Sicular, Terry, “Economic reform of the distribution sector in China,” American Economic Review, Vol. 81, No. 2 (1991), pp. 212–17, and the World Bank, China: Internal Market Development and Regulation (Washington, D.C.: The World Bank, 1994).

3 This section summarizes the 1980s reforms and gives more detail on the 1990s. For in-depth discussion of the 1980s, see Oi, Jean, State and Peasant in Contemporary China: The Political Economy of Village Government (Berkeley: University of California Press, 1989), Watson, Andrew, “The reform of agricultural marketing in China since 1978,The China Quarterly, No. 113 (1988), pp. 128, and Sicular, Terry, “China's agricultural policy during the reform period,” in Joint Economic Committee of the U.S. Congress, China's Economic Dilemma in the 1990s: The Problems of Reforms, Modernization, and Interdependence (Washington, D.C.: U.S. Government Printing Office, 1991), pp. 340364.

4 Since the 1950s China's commercial administration has undergone several reorganizations. See Ministry of Commerce Institute of Economic Research, Xin Thongguo shangye shigao (A Commercial History of New China) (Beijing: Zhongguo caizheng jingji chubanshe, 1984) and Contemporary China's Commerce Editorial Committee, Dangdai Zhongguo shangye (Contemporary China's Commerce) (Beijing: Zhongguo shehui kexue chubanshe, 1988), Vol. 1.

5 To cover the losses of money-losing commercial enterprises, the government made additional outlays totalling 9 billion yuan in 1984. Zhongguo tongji nianjian, 1993 (Statistical Yearbook of China, 1993) (Beijing: Zhongguo tongji chubanshe, 1993), pp. 215, 231, 626.

6 Zhongguo shangye nianjian, 1990 (Almanac of China's Commerce, 1990) (Beijing: Zhongguo shangye nianjianshe, 1990), p. 16.

7 This announcement suggests that negotiated grain procurement had not been entirely voluntary. See Zhongguo shangye nianjian, 1990, pp. 15–16, 47, and Sicular, Terry, “Establishing markets: The process of commercialization in agriculture,” unpublished manuscript, 1994.

8 Some 70% of these price subsidies was for grain, oilcrops and cotton. Zhongguo tongji nianjian, 1993, pp. 215, 231.

9 Watson, Andrew, “Market reform and agricultural development in China,” University of Adelaide Chinese Economy Research Unit Working Paper No. 94/3 (January 1994), pp. 1214, Crook, Frederick W., “Reform of China's grain and oilseed markets,” in U.S. Department of Agriculture, China: Situation and Outlook Series, RS–93–4, July 1993, pp. 1215, and Zhongguo shangye nianjian, 1992, p. 1–3.

10 Zhongguo shangye nianjian, 1992, p. 1–3, and Zhongguo shangye nianjian, 1993, pp. 1–3, IV-1 to IV-3. The expansion of the grain market reforms to other provinces in 1993 is reported by Xirong, Ji, Yiman, Dong and Meijun, Sun, “Survey of grain circulatory restructuring in Hunan and Hubei,” Zhongguo nongcun jingji (China's Rural Economy), No. 2 (1993), pp. 4548, translated in JPRS-CAR 93–036, 3 June 1993, pp. 24–27, and Jiyun, Cheng, “Anhui province implements new policy on grain production and sales,” Nongmin ribao (Farmer's Daily) (23 April 1993), p. 1, translated in JPRS-CAR 93–054, 30 July 1993, p. 35. Shandong adopted grain market reforms in 1993 (author interviews, Zouping county, Shandong, 1993–94).

11 “Moving ahead while tackling difficulties – correspondent summarizes new situation of all-out pursuit of economic system reform,” Zhongguo jingji tizhigaige (China's Economic Structure Reform), No. 10 (1993), pp. 16–18, translated in JPRS-CAR 94–010, pp. 14–16.

12 Colby, Hunter W., “Discouraged by IOUs and pests, cotton farmers cut 1993 area,” in U.S. Department of Agriculture Economic Research Service, China: Situation and Outlook Series, RS-93–4, July 1993, pp. 2426, Ying, Dong and Jianhua, Cheng, “Historical retrospective on China's cotton system,” Zhongguo nongcun jingji, No. 6 (1994), pp. 2835, translated in JPRS-CAR 94–046, 15 September 1994, pp. 67–75, and Fang, Ren, “China's cotton industry moves toward market system,” Jingji ribao (Economic Daily) (22 December 1992), p. 2, translated in JPRS-CAR 93–009, 9 February 1993, p. 44.

13 Interviews in Zouping county, Shandong, 1992–94.

14 Ying, Dong and Jianhua, Cheng, “Historical retrospective,” Li Wenru, “Taking price reform as the breach and enlivening grain enterprises as the focus – reform of grain circulation will take a big step,” Jingji cankaobao (Economic Reference News), 10 December 1992, p. 1, translated in JPRS-CAR 93–008,5 February 1993, pp. 38–39, Zhongguo shangye nianjian, 1992, p. 1–5, and Zhongguo shangye nianjian, 1993, pp. 1–4,1–5.

15 Dong Ying and Cheng Jianhua, “Historical retrospective,” Li Wenru, “Taking price reform as the breach,” Scott Rozelle and Albert Park, “Gradual reform and institutional development: the keys to success of China's agricultural reforms,” unpublished manuscript, Stanford University, January 1995, pp. 78, and author interviews in Zouping county, Shandong, 1991–94.

16 Tyler, Patrick, “Chinese leader says ‘mistakes’ by government fueled inflation,” New York Times, 6 March 1995, pp. A1, A9.

17 Reports of renewed rationing can be found in various news sources, for example, in China News Digest, 1 May 1995, 9 January 1995, 12 December 1994, and 17–18 October 1994.

18 Xirong, Ji, Yiman, Dong and Meijun, Sun, “Survey of grain circulatory restructuring,” Zhongliang, Zhan and Chongzong, Leng, “The pros and cons of the reform of the grain and oil purchasing and marketing system,” Jiage yuekan (Pricing Monthly), No. 3 (1993), pp. 3334, translated in JPRS-CAR-93–039, pp. 30–33, and Jiyun, Zhou, “Problems and suggestions stemming from changes in the wake of deregulation of grain prices and dealings,” Jiage yuekan, No. 9 (1993), pp. 4243, translated in JPRS-CAR 94–002, pp. 25–28.

19 Ying, Dong and Jianhua, Cheng, “Historical retrospective,” and author interviews in Zouping county, Shandong, 1993 and 1994.

20 Retail sales are deflated using the national retail price index. These numbers are calculated using data from Zhongguo tongji nianjian, 1993, pp. 31, 238, 611.

21 Rural free market transactions are deflated using the free market price index. These numbers are calculated using data from Zhongguo shichang tongji nianjian, 1993 (Yearbook of China's Market Statistics, 1993) (Beijing: Zhongguo tongji chubanshe, 1993), pp. 415,459, and Zhongguo shangye waijing tongji ziliao, 1952–88 (Statistical Materials on China's Commerce and Trade, 1952–88) (Beijing: Zhongguo tongji chubanshe, 1990), p. 399.

22 Zhongguo tongji nianjian, 1994, pp. 59,499, and Zhongguo shichang tongji nianjian, 1993, pp. 47, 415.

23 Zhongguo tongji nianjian, 1994, pp. 276, 280; Zhongguo tongji nianjian, 1993, pp. 311, 315;Zhongguo tongji nianjian, 1990, pp. 312, 316; Zhongguo tongji nianjian, 1986, p. 675.

24 Because self-supplied items have been valued at below-market accounting prices, these numbers overstate the shares of cash income and cash expenditures. In recent years the State Statistical Bureau has increased the prices at which it values retained output, so that the degree of this bias has been reduced. The change in accounting practices, however, creates a problem of comparability over time. If valuation of retained output had remained constant, then growth in commercialization would be larger than that shown by the official statistics.

25 Zhongguo tongji nianjian, 1994, pp. 459, 472–73, 484–85.

26 Zhongguo shichang tongji nianjian, 1993, p. 415, and Zhongguo tongji nianjian, 1994, p. 499.

27 Zhongguo tongji nianjian, 1993, pp. 611, 625, and Zhongguo tongji nianjian, 1994, p. 499.

28 Interviews, Zouping county, Shandong, 1992–94, Watson, Andrew, “The reform of agricultural marketing,” and Guorong, Guo and Ji, Li, “Regional grain circulation becoming more market oriented,” Zhongguo nongcun jingji, No. 9 (1994), pp. 3641, translated in JPRS-CAR-94–055, 30 November 1994, pp. 57–62.

29 See Oi, Jean, “Economic growth and local governments in Zouping county,” unpublished manuscript, Harvard University, 1993, for an interesting discussion of this issue.

30 This distinction is also problematic because of the complexity of ownership forms in China. For example, township enterprises are officially classified as “collective,” but they are often set up and run by local governments and thus are effectively local state enterprises. See Walder, Andrew, “The varieties of public enterprise in China: an institutional analysis,” unpublished manuscript, Harvard University, January 1994.

31 Note that the term “market” as used here is not limited to trade at periodic or free markets. “Market” trade also includes voluntary exchange that takes place in other venues.

32 Aggregate numbers on the share of state trade are problematic because such statistics value state and non-state trade at different prices. State trade includes planned commerce at below-market prices, and so its relative size is understated. Non-state trade is also undercounted, but for a different reason: the official Chinese statistics exclude intra-rural trade, which is entirely non-state. Unfortunately, the net bias of these two counterbalancing effects is unclear, and it may have changed over rime.

33 Central Policy Research Office and the Office of Rural Fixed Observation Sites of the Ministry of Agriculture, “Excerpts from a special survey report: ‘Rural households and the market',” Jingji ribao, 4 January 1994, p. 1, translated in JPRS-CAR 94–014,2 March 1995, pp. 23–25.

34 The figures in Tables 2 and 3 are in quantity terms, and so they do not suffer from the bias caused by the fact that state purchases and sales are valued at below-market planned prices.

35 The household survey gives lower shares for state commerce than the aggregate data because the survey probably counts intra-rural trade. Central Policy Research Office and the Office of Rural Fixed Observation Sites of the Ministry of Agriculture, “Excerpts from a special survey report.”

36 See, for example, Zhongguo shangye nianjian, 1990, p. 76, and Zhongguo shangye nianjian, 1991, p. IV–39.

37 Zhongguo shangye nianjian, 1993, p. IV–26.

38 Sicular, Terry, “Why quibble about quotas? The effects of planning in rural China,” Harvard Institute of Economic Research Discussion Paper No. 1714, February 1995, p. 20, and Zhiqiang, Li, “An analysis of China's cotton output in 1994,” Zhongguo nongcunjingji, No. 6 (1994), pp. 2527, translated in JPRS-CAR 94–045, 19 August 1994, pp. 83–86.

39 Zhongguo shichang tongji nianjian, 1993, p. 207, and Table 3.

40 These numbers include products traded at both state fixed and state guidance prices (guojia dingjia, guojia zhidaojia). Zhongguo gaige yufazhan baogao (1992–1993): Xinde tupo yu xinde tiaozhan (China Reform and Development Report (1992–1993): New Breakthroughs and Challenges) (Beijing: Zhongguo caizheng jingji chubanshe, 1994), p. 54.

41 Calculated using data in Tables 3 and 5.

42 I use a rate of 0.70 to convert husked rice into paddy equivalents (procurement is measured in husked rice, output in paddy). The output data are from Zhongguo tongji nianjian, 1993, p. 364; the procurement data are from Zhongguo shangye nianjian, 1993, p. XII–114 Dilemmas in reforming state-market relations in rural China,” unpublished manuscript, Stanford University, February 1995.

45 Sicular, “Establishing markets.”

46 Zhongguo tongji nianjian, 1993, p. 354.

47 Enjiang, Cheng, “Financial issues and the forces for grain marketing reforms in China,” The University of Adelaide Chinese Economy Research Unit Working Paper No. 94/13, November 1994.

* I thank Richard Garbaccio and Scott Rozelle for their generous help with data and sources, and Peter Nolan, Andrew Walder and other participants at the China Quarterly workshop for their comments. This research received financial support from the National Science Foundation under grant number SES-8908438, the Committee on Scholarly Communications with China with funds from the U.S. Information Agency, and the University of Western Ontario.

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