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China Industry
After 1982, reforms moved China's economy to a mixed system
based on mandatory planning, guidance planning (use of economic
levers such as taxes, prices, and credit instead of administrative
fiat), and the free market. In late 1984 further reforms of the
urban industrial economy and commerce reduced the scope of
mandatory planning, increased enterprise autonomy and the authority
of professional managers, loosened price controls to rationalize
prices, and cut subsidies to enterprises. These changes created a
"socialist planned commodity economy," essentially a dual economy
in which planned allocation and distribution are supplemented by
market exchanges based on floating or free prices
(see Prices
, ch.
5).
As a result of these reforms, the distribution of goods used in
industrial production was based on mandatory planning with fixed
prices, guidance planning with floating prices, and the free
market. Mandatory planning covered sixty industrial products,
including coal, crude oil, rolled steel, nonferrous metals, timber,
cement, electricity, basic industrial chemicals, chemical
fertilizers, major machines and electrical equipment, chemical
fibers, newsprint, cigarettes, and defense industry products. Once
enterprises under mandatory planning had met the state's mandatory
plans and supply contracts, they could sell surplus production to
commercial departments or other enterprises. Prices of surplus
industrial producer goods floated within limits set by the state.
The state also had a planned distribution system for important
materials such as coal, iron and steel, timber, and cement.
Enterprise managers who chose to exceed planned production goals
purchased additional materials on the market. Major cities
established wholesale markets for industrial producer goods to
supplement the state's allocation system.
Under guidance planning, enterprises try to meet the state's
planned goals but make their own arrangements for production and
sales based on the orientation of the state's plans, the
availability of raw and unfinished materials and energy supplies,
and the demands on the market. Prices of products under guidance
planning either are unified prices or floating prices set by the
state or prices negotiated between buyers and suppliers. Production
and distribution of products not included in the state's plans are
regulated by market conditions.
Data as of July 1987
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