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Agricultural Planning and Pricing in the Post-Mao Period*

Published online by Cambridge University Press:  17 February 2009

Terry Sicular
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Extract

During the past decade China's leaders have called repeatedly for reductions in administrative interventions in the economy, for greater reliance on economic “levers,” for decentralization of economic decision-making, and for an increased role of markets. Although the need for liberalization is fairly widely accepted, debate over how far and how fast to proceed has continued. One view initially proposed by Chen Yun sees China moving towards a system where a “planned economy is primary, and markets are supplementary” (jihua jingji wei zhu, shichang tiaojie wei bu). Others advocate moving beyond Chen Yun's vision to a system where, in fact if not in name, allocation takes place primarily through markets. Li Peng's government work report to the first session of the Seventh National People's Congress suggests that the current consensus leans towards the latter, more progressive view:

The focus of reform of the planning system is to transform the function of state planning organs, gradually reduce mandatory planning and expand guidance planning, … use economic instruments, and gradually establish a new economic mechanism where “the state regulates markets, and markets guide enterprises” (guojia tiaojie shichang, shichang yindao qiye).

Type
Research Article
Information
The China Quarterly , Volume 116 , December 1988 , pp. 671 - 705
Copyright
Copyright © The China Quarterly 1988

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References

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3. Wu Xiang, loc. cit., states that the number of production planning categories (xiangmu) had been 21 before 1978, and was reduced to 16 in 1981 and again to 13 in 1982. The number of planning targets (zhibiao) had been 31 before 1978, and was reduced to 20 in 1981. This source does not define the terms “categories” and “targets,” but I assume that categories refers to type of farm product (e.g., grain, cotton, tobacco), for each of which there can exist one or more plan targets (e.g., early rice sown area target, wheat yield target).

4. Ibid. pp. 97–98; “Ba nongminde zizhuquan yu guojia jihua xietiao chilai: nongye ye bixu shixing yi jihua wei zhu, shichang tiaojie wei bu” (“Co-ordinate farmers' self-determination with planning: agriculture carries out taking planning as primary and market regulation as supplementary”), Guangming ribao (Guangming Daily), 23 January 1982, p. 1; “Guowuyuan pizhuan guojia jiwei ‘Guanyu gaijin jihua tizhide ruogan zhanxing guiding’” (“The State Council approves the State Planning Commission's ‘Some provisional regulations on reforming the planning structure’”), Renmin ribao (People's Daily), 10 10 1984Google Scholar; and “Zhonggong zhongyang, guowuyuan guanyu jin yibu huoyue nongcun jingide shixian zhengce” (“The Central Committee and State Council implement policies to further enliven the rural economy”), (Document No. 1, 1985)Google Scholar, Renmin ribao, 25 03 1985, Sect. 1.Google Scholar

5. Xiang, Wu, “The contract responsibility system,” p. 97Google Scholar; “Taolun nongye ruhe guanqie yi jihua wei zhu, shichang tiaojie wei bu” (“A discussion of how to carry out planning as primary and market regulation as supplementary in agriculture”), People's University Reprints, No. 15 (1982), pp. 71–73, 76Google Scholar; Daohe, Xu and Qiao, Gong, “Yao qieshi gaohao nongye jihua”Google Scholar (“Conscientiously do well agricultural planning”), ibid. No. 1 (1983), pp. 105, 109. Plan implementation, not surprisingly, varied considerably from place to place. While in some localities production planning was disregarded by producers and local cadres, in others local cadres continued to use old planning methods. One county in Shandong, for example, set mandatory sown area targets for grains (by type of grain), oilseeds (also by type), and cotton through 1984, and only switched to guidance planning in 1985.

6. “The Central Committee and State Council implement policies to further enliven the rural economy” (Document, No. 1, 1985), Sect. 1.Google Scholar

7. Author interviews, Zouping county, Shandong province.

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12. Starting in 1980 with tea, and in 1982 for second category products more generally, the central government permitted provinces to set quota targets and allowed prices for deliveries beyond these quotas to float within a certain range in accordance with market conditions. According to 1982 statistics, after 1980, 15 provinces/autonomous regions began to use such methods for over 80 second category products, usually in major producing areas. Specific methods for handling above-quota deliveries varied regionally and included continued use of the old procurement price, above-quota price bonuses, encouragement sales awards, and negotiated price procurement. This policy was instituted in response to diversion of second category products away from the state in the early 1980s, when these products were increasingly sold on the market or to rapidly growing team and commune industries for higher prices. Consequently, state factories suffered shortages of raw materials. See Ministry of Commerce Institute of Commercial Economic Research, A Sketch Commercial History, pp. 391–93.Google Scholar

13. Sicular, Terry, “China: food pricing under socialism,” in Sicular, Terry (ed.), Food Price Policy in Asia: A Comparative Study (Ithaca: Cornell University Press, forthcoming)Google Scholar, discusses the history of encouragement sales programmes. Some such incentive programmes were implemented by the central government, others by provinces.

14. Encouragement sales awards for these farm products are given in Zuoyan, Li, “Lectures,” pp. 52–54Google Scholar; Agricultural Technical Economic Handbook Editorial Committee, Ruofeng, Niu et al. (eds.), Nongye jishu jingji shouce (Agriculture Technical Economic Handbook) (Beijing: Nongye chubanshe, 1984), pp. 759–64Google Scholar; and Ministry of Commerce Institute of Commercial Economic Research, A Sketch Commercial History, pp. 390–91.Google Scholar

15. Ministry of Commerce Institute of Commercial Economic Research, A Sketch Commercial History, p. 394.Google Scholar

16. Ibid.

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18. Table 4 and State Statistical Bureau Department of Commercial Price Statistics, Zhongguo maoyi tongji ziliao, 1952–83 (Statistical Materials on China's Trade, 1952–83) (Beijing: Zhongguo tongji chubanshe, 1984), p. 156.Google Scholar Producers also faced obligatory above-quota deliveries, but no information is available on the level of or changes in these obligations.

19. Discrepancies probably reflect different degrees of disaggregation in what is counted as a “product,” for example, hen and duck eggs could be counted as one product, i.e. eggs, or as two.

20. Price Theory and Practice Editorial Department, A Chronology, pp. 59, 137, 213.Google Scholar The count given in this source for the 1984 reductions is identical to that in Jingji ribao (Economic Daily), 25 07 1984, p. 1.Google Scholar

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22. Xiji, An, “A discussion of our country's structural reforms,” p. 24.Google Scholar Sub-standard cotton was permitted on the market in the early 1980s, but prohibitions on graded cotton remained until 1985.

23. Price Theory and Practice Editorial Department, A Chronology, pp. 137–38Google Scholar; “Questions of the current policies of rural economy: Document No. 1 issued by the Central Committee of the Communist Party of China,” 1 January 1983, English pamphlet issued by International Liaison Department of the Research Centre for Rural Development of the State Council.

24. Dahuai, Wang, “Nongchanpin jiage zhishi jiangzuo: liangshi he youliao jiage (shang)” (“Lectures on knowledge of agricultural prices: grain and oil-bearing crop prices (first half)”), JGLLYSJ, No. 2 (1985), pp. 50–53.Google Scholar

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26. Ministry of Commerce Institute for Commercial Economic Research, A Sketch Commercial History, p. 558Google Scholar; ZGTJNJ 1986, p. 552.Google Scholar

27. Xiji, An, “A discussion of our country's structural reforms,” p. 24.Google Scholar

28. Zhiqiang, Guo and Jianshi, Gu, “Mianhua chaogou jiajia cujinle shengchan, dan yeyou bibing” (“The above-quota price bonus for cotton promotes production, but has disadvantages”), JGLLYSJ, No. 5 (1983), p. 34.Google Scholar

29. Ibid.; Muqiao, Xue, “1979 nian yilai wending he tiaozheng wujia wenti” (“Questions in stabilizing and adjusting prices since 1979”), Jingji yanjiu, No. 6 (1985), p. 42Google Scholar; Yi, Xu, Baosen, Chen and Wuxia, Liang, Shehui zhuyi jiage wenti (Socialist Pricing Questions) (Beijing: Zhongguo caizheng jingji chubanshe, 1982), pp. 121–24, 216–17.Google Scholar

30. Price Theory and Practice Editorial Department, A Chronology, pp. 126, 141.Google Scholar

31. ZGTJNJ 1986, p. 595.Google Scholar

32. Increased sales of grain at low retail prices under rapidly expanding encouragement grain sales programmes also exacerbated the budgetary problem.

33. Sicular, Terry, “China: food pricing”Google Scholar; Price Theory and Practice Editorial Department, A Chronology, pp. 30–31, 34–35.Google Scholar

34. Dahuai, Wang, “Lectures,” p. 52.Google Scholar

35. 1984 ZGJJNJ, pp. IV–50, IX–132Google Scholar; Price Theory and Practice Editorial Department, A Chronology, pp. 176–77.Google Scholar Concurrently, the 5% price subsidy for northern cotton that had been instituted in 1979 was eliminated. Adjustments in the northern cotton price weights have occurred every year since 1984, and in the southern price weights in 1987. The northern cotton price was reduced in 1985 and again in 1986 by lowering the proportionate weight placed on the above-quota price to 70% and then to 60%, but in 1987 it was raised back to the 1985 level of 70%. In 1987 the southern price was raised by changing the proportions to 50:50. See Tables 2, 3.

36. JGLLYSJ, No. 4 (1985), p. 51.Google Scholar

37. The state had called for elimination of all provincial price bonuses and subsidies for tobacco in 1981/82 (Price Theory and Practice Editorial Department, A Chronology, pp. 83, 115, 134Google Scholar). In 1985 grain awards were eliminated for cotton, and chemical fertilizer was only to be awarded to cotton purchased under contract (see Appendix). Furthermore, in 1985 when the price of grain sold under incentive programmes was raised to equal the proportionate procurement price, the value of remaining grain awards was reduced.

38. JGLLYSJ, No. 4 (1985), p. 51.Google Scholar

39. “Guojia wujiaju deng ba danwei xiada ‘Guanyu gaijin nongchanpin jiage guanli de ruogan guiding’” (“The State Price Bureau and eight units send down ‘Some decisions on reforming management of agricultural prices’”), JGLLYSJ, No. 5 (1986), pp. 55–56.Google Scholar The 17 goods for which the Centre continues to fix procurement prices include paddy, wheat, corn, soyabeans, peanuts, rapeseed, cottonseed, sesame seed, cotton, tobacco, sugarbeet and cane, and silk cocoons. The 11 goods subject to guidance pricing include live hogs, wood, wool, hemp and tea. This decision also decentralized management of state sales prices for agricultural products and ex-factory prices for lumber products.

40. Some of these savings were, as when subsidiary food prices were raised in 1979, redirected in the form of wage increases towards protecting urban living standards. With the release of hog and pork prices in 1985, the state announced that it would give urban residents a subsidy or income supplement (Price Theory and Practice Editorial Department, A Chronology, p. 252).Google Scholar

41. Ibid. pp. 252–53.

42. “A discussion of how to carry out planning as primary,” p. 75.Google Scholar Some portion of these sales were probably at negotiated prices.

43. Table 5, Yuehua, Li and Liqun, Zhao, “Some views,” p. 43Google Scholar; and Min, Zhu, “A summary,” p. 6.Google Scholar

44. Institute of Development General Topics Group, “Nongmin, shichang, he zhidu chuangxin: baochan daohu banian hou nongcun” (“Farmers, markets, and creating a new system: the countryside eight years after contracting to households”), Jingji yanjiu, No. 1 (1987), pp. 8–9Google Scholar; Wenbao, Liu and Xinwu, Zheng, “Wanshan liangshi hetong dinggou zhidude tujing” (“Avenues for perfecting the grain contract procurement system”), Nongye jingji wenti, No. 11 (1986), p. 60.Google Scholar

45. “Official 1987 statistics on economic and social development,” China Daily, 6 03 1988, p. 4.Google Scholar

46. Price Theory and Practice Editorial Department, A Chronology, pp. 156, 160.Google Scholar

47. Ibid. pp. 170, 173.

48. Ibid. pp. 205–207, 213–14; “Jin yibu gaige nongcun shangpin liutong tizhi: guowuyuan pizhuan guojia tigaiwei, shangyebu, nongmuyuyebu de baogao, yaoqiu renzhen tansuo gaohao liutong de xin tujing, xin xingshi” (“Further reform the system of rural commodity circulation: State Council approves State Commission on Structural Reform, Ministry of Commerce, Ministry of Agriculture, Animal Husbandry I and Fishery's report, asks for conscientious exploration of new avenues, new forms for I improving circulation”), Jingji ribao, 25 07 1984, p. 1.Google Scholar

49. Price Theory and Practice Editorial Department, A Chronology, p. 281Google Scholar; JGLLYSJ, No. 2 (1987), p. 47.Google Scholar

50. Yingbi, Duan, “Liangshi liutong tizhi bixu da gaige” (“The grain circulation system needs a major reform”), Nongye jingji wenti, No. 11 (1986), p. 37Google Scholar, gives these statistics, which are based on State Statistical Bureau materials. He does not specify if the prices to which he refers are market prices or average prices paid by farmers for all inputs purchased (including those purchased at lower state list prices). I suspect they are probably average prices, in which case these percentages understate increases in market prices.

51. Shiqiang, Wang, “Jiangshou huafei weihe duixian buliao” (“Why are they not making good on encouragement sales of fertilizer”), Renmin ribao, 11 07 1987, p. 5Google Scholar; “Jianjue luoshi liangshi hetong dinggou ‘san guagou’ zhengce-guojia jingwei fuzhuren Ye Qing jiu guowuyuan jingji tongzhi da benbao jizhe wen” (“Resolutely carry out the ‘three links’ policy for grain contract procurement – Vice-chairman of the State Economic Council Ye Qing answers our reporters questions on the State Council economic communique”), Renmin ribao, 2 07 1987, p. 2.Google Scholar

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54. Wen, Lu, “Dangqian nongcun gaige zhong de sange zhongyao maodun” (“Three important contradictions in the present rural reform”), People's University Reprints, No. 23 (1985), pp. 33–35Google Scholar; Oi, Jean C., “Peasant grain marketing and state procurement: China's grain contracting system,” The China Quarterly, No. 106 (1986), pp. 272–90CrossRefGoogle Scholar; Wenbao, Liu and Xinwu, Zheng, “Avenues for perfecting”Google Scholar; Institute of Development General Topics Group, “Farmers, markets, and creating a new system”; author interviews in Shandong, Hubei, Guangdong.

55. Institute of Development General Topics Group, “Farmers, markets, and creating a new system,” p. 9.Google Scholar

56. Ibid. pp. 1–16; Wenbao, Liu and Xinwu, Zheng, “Avenues for perfecting.”Google Scholar

57. Table 4; Min, Zhu, “A summary of pricing,” p. 3Google Scholar; Jiyun, Tian, “Persevere in reform”Google Scholar; “Shenru gaige, zengjia touru, cujin nongcun jingji chixu xietiao fazhan – 1986 nian ‘Quanguo nongye gongzuo huiyi’ shuping” (“Deepen reform, increase investment, promote continued rural economic adjustment and development – a review of the 1986 ‘National Rural Work Conference’”), Zhongguo nongcun jingji, No. 2 (1987), p. 8.Google Scholar

58. In Shandong the “link up” programmes applied to grain, cotton and peanuts (author interviews).

59. See discussion of “using industry to subsidize agriculture” in section on production planning.

60. Xinghan, Zhao, “Shangpin jingji, dengjia jiaohuan he ‘yigong bunong’” (“Commodity economy, equal value exchange, and ‘using industry to subsidize agriculture’”), JGLLYSJ, No. 6 (1986), pp. 18–19.Google Scholar

61. “Resolutely carry out the” three links “policy” and Shiqiang, Wang, “Why are they not making good.” Document No. 1, 1986Google Scholar, also refers to this problem.

62. Table 5, Yuehua, Li and Liqun, Zhao, “Some views on the extraordinary growth,” p. 43Google Scholar, and China Daily, 1 04 1988, p. 3.Google Scholar

63. A simple cobweb model with a perfectly or nearly perfectly inelastic demand curve illustrates how instability arises. If an external shock increases the market price above its equilibrium value, suppliers respond by increasing output, which results in a dramatic fall in market prices because as prices fall purchases do not increase to absorb the extra output. Similarly, if an external shock reduces the market price below its equilibrium value and so induces a decline in production, the shortage will cause the market price to increase without limit because purchasers will not reduce their demand in response to higher prices.