Countries of the World/COUNTRYS.BIN/dp/0083/00838.txt

Text File | 1991-06-24 | 40KB | 616 lines

$Unique_ID{COW00838}
$Pretitle{260}
$Title{China
Chapter 8A.   Trade and Transportation}
$Subtitle{}
$Author{Roxane D. V. Sismanidis and Ernestine H. Wang}
$Affiliation{HQ, Department of the Army}
$Subject{foreign
trade
percent
china
economic
goods
state
imports
industrial
agricultural}
$Date{1989}
$Log{}
Country:     China
Book:        China, A Country Study
Author:      Roxane D. V. Sismanidis and Ernestine H. Wang
Affiliation: HQ, Department of the Army
Date:        1989

Chapter 8A.   Trade and Transportation

     Trade and Transportation are the lifeblood of an economy. In the
twenty-five years that followed the founding of the People's Republic of China
in 1949, China's trade institutions and transportation and communications
networks were built into a partially modern but somewhat inefficient system. The
drive to modernize the economy that began in 1978 required a sharp acceleration
in commodity flows and greatly improved efficiency in economic transactions. In
the ensuing years economic reforms were adopted by the government to develop a
"socialist planned commodity economy" that combined central planning with market
mechanisms. These changes resulted in the decentralization and expansion of
domestic and foreign trade institutions, a greatly enlarged role for free
markets in the distribution of goods, and a prominent role for foreign trade and
investment in economic development. Despite increased investment and development
in the 1980s, the transportation and communications sectors were strained by the
rapid expansion of production and the exchange of goods.

     Transportation, postal services, communications, and trade, including
services, employed about 6.3 percent of the national labor force in the
mid-1980s-about 22 percent of the nonagricultural labor force. Chinese
statistics estimate that these sectors produced about 7.4 percent of the gross
national product in 1983.

Internal Trade and Distribution

Agriculture

     Agricultural products were distributed in three major ways in China during
the 1980s. They were either retained by the household (now the primary
production unit) for distribution among its members, procured by the state, or
sold in free rural or urban markets.

     Approximately 63 percent of the population was located in rural areas,
where the majority of the people worked in agriculture and rural industries.
Under the responsibility system (see Glossary) for agriculture instituted in
1981, the household replaced the production team (see Glossary) as the basic
production unit. Families contracted with the economic collective to farm a plot
of land, delivered a set amount of grain or other produce and the agricultural
tax to the state, and paid a fee to the collective. After meeting these
obligations, the household was free to retain its surplus produce or sell it in
free markets. Restrictions on private plots and household sideline production
were lifted, and much of the production from these was also sold on free markets
(see Post-Mao Policies; Planning and Organization, ch. 6).

     Distribution of food and other agricultural goods to urban consumers,
industry, and rural areas deficient in food was carried out primarily by the
state and secondarily by producers or cooperatives. The state procured
agricultural goods by means of taxes in kind and by purchases by state
commercial departments (state trading companies) under the Ministry of Commerce.
The agricultural tax was not large, falling from 12 percent of the total value
of agricultural output in 1952 to 5 percent in 1979. In 1984 the number of
agricultural and sideline products subject to state planning and purchasing
quotas was reduced from twenty-nine to ten and included grains, edible oil,
cured tobacco, jute, hemp, and pigs. In 1985 the system of state purchasing
quotas for agricultural products was abolished. Instead, the state purchased
grain and cotton under contract at a set price. Once contracted quotas were met,
the grain and cotton were sold on the market at floating prices. If market
prices fell below the listed state price, the state purchased all available
market grain at the state price to protect the interests of producers.
Vegetables, pigs, and aquatic products sold to urban, mining, and industrial
areas were traded in local markets according to demand. Local commercial
departments set the prices of these goods according to quality to protect the
interests of urban consumers. All other agricultural goods were sold on the
market to the state, to cooperatives, or to other producers. Restrictions on
private business activities were greatly reduced, permitting peasants as well as
cooperatives to transport agricultural goods to rural and urban markets and
allowing a rapid expansion of free markets in the countryside and in cities. The
number of wholesale produce markets increased by 450 percent between 1983 and
1986, reaching a total of 1,100 and easing pressure on the state produce
distribution network, which had been strained by the burgeoning agricultural
production engendered by rural reforms. In 1986 free markets, called "commodity
fairs," numbered 61,000 nationwide.

     Once food was procured and transported to urban areas, it was sold to
consumers by state-owned stores and restaurants. In the mid-1980s food items
were also available in free markets, where peasants sold their produce, and in
privately owned restaurants. As noted previously, the prices of pigs, aquatic
products, and vegetables were determined by local authorities according to
quality and demand; prices of other products floated freely on the market.
Except for grain, edible oil, and a few other rationed items, food items were in
good supply. Industrial goods used in agricultural production were sold to
agricultural units in the 1980s. Local cooperatives or state supply and
marketing bureaus sold most agricultural producer goods, including chemical
fertilizers and insecticides, to households at set prices. The state also
offered preferential prices for agricultural inputs to grain farmers to
encourage grain production. Households were permitted to purchase agricultural
machinery and vehicles to transport goods to market. In order to ensure that
rural units could cover the costs of the increasing quantities of industrial
inputs required for higher yields, the government periodically reduced the
prices of the industrial goods sold to farmers, while raising the procurement
prices for agricultural products. In the mid-1980s, however, the price gap
between agricultural and industrial products was widening to the disadvantage of
farmers.

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. P