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Consumption and Living Standards in China, 1978–83

Published online by Cambridge University Press:  17 February 2009

Nicholas R. Lardy
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Extract

Marxist economists and socialist planners share the view that the major objective of socialist economic development is to meet the needs of mass consumption. During the debates that followed the death of Mao Zedong in 1976 there was a searching examination of the extent to which development policy in the previous two or more decades had succeeded in raising living standards. A central premise of the policies of reform and Readjustment that emerged by the late 1970s from this debate was that consumption growth since the 1950s had been too slow. What was the evidence to support this contention? In what ways has policy since 1978 sought to redirect economic growth towards increased levels of consumption? Have these policies been successful and to what extent are they likely to continue to raise living standards?

Type
The Readjustment in the Chinese Economy
Information
The China Quarterly , Volume 100 , December 1984 , pp. 849 - 865
Copyright
Copyright © The China Quarterly 1984

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References

1. Eckstein, Alexander (ed.), Quantitative Measures of China's Economic Output (Ann Arbor, Michigan: University of Michigan Press, 1980)CrossRefGoogle Scholar .

2. International Bank for Reconstruction and Development, China: Socialist Economic Development, Vol. I: The Economy, Statistical System, and Basic Data (Washington, D.C.: International Bank for Reconstruction and Development, 1983), p. 82Google Scholar .

3. TJNJ 1983, p. 25.

4. International Bank for Reconstruction and Development, China: Socialist Economic Development, Vol. 1: The Economy, Statistical System, and Basic Data, p. 78Google Scholar .

5. Lardy, , Agriculture in China's Modern Economic Development, p. 158Google Scholar .

6. NYNJ 1980, p. 380.

7. The main uncertainty is how completely the methodology takes into account the costs of inputs that peasants purchase, mostly on private markets.

8. See for example a page 1 news article in Guangming ribao (Guangming Daily) on 7 February 1981 citing State Statistical Bureau (SSB) data giving total peasant income as 73 yuan in 1956 and 113 yuan in 1976 (years not shown in column (5) of Table 2 but part of the same series) or an increase of 2 yuan per year. Similarly misleading statements have been made by China's highest leaders. For example Ziyang, Zhao, the premier of the State Council, in his ”Report on the Sixth Five-Year Plan” delivered at the Fifth Session of the Fifth National People's Congress on 30 11 1982 (Beijing Review, No. 51 (1982), p. 18)Google Scholar claimed that peasant income had increased by an average annual rate of 4·3 per cent between 1955 and 1980 without any mention that this was measured in current prices and vastly overstated the real increase in the peasant standard of living.

9. Travers, Lee, ”Bias in Chinese economic statistics: the case of the typical example investigation,” The China Quarterly, No. 91 (09 1982), pp. 478–85CrossRefGoogle Scholar.

10. This can be inferred from the notes to the tables that present the results of the farm household surveys. See TJNJ 1981, p. 431 and TJZY 1983, p. 84.

11. SSB, ”Selected economic statistics materials,” in 1981 JJNJ, VI, p. 25Google Scholar and TJZY 1983, p. 81 .

12. The following paragraphs are based on more detailed analysis presented in Lardy, , Agriculture in China's Modern Economic Development, pp. 163–65, 192–200Google Scholar and Agricultural Prices in China, World Bank Staff Working Paper, No. 606 (Washington, D.C.: International Bank for Reconstruction and Development, 1983), pp. 31–50Google Scholar .

13. Siheng, Li, “Points on China's grain situation,” Nongye jingji congkan (Agricultural Economics Digest), No. 4 (1981), p. 56Google Scholar .

14. The data in the next few paragraphs are in terms of per worker in the state sector. This may result in a slight overstatement of the average price subsidies and benefits enjoyed by members of the non-agricultural population. While all state workers are members of the non-agricultural population, not necessarily all members of the non-agricultural population are in households in which one member is a state employee. Of the 95 million workers and staff members in 1978, 75 million were employed in state-owned units and 20 million were employed in collective units. Although workers in urban collectives are all members of the non-agricultural population and thus eligible for subsidized food and health benefits, they do not receive the benefits administered through the trade union system, which operates only within state-owned enterprises. Moreover, enterprise funded welfare programmes are probably less generous in collectives. But many urban collective workers are members of households in which there is a member employed by the state, and thus would benefit directly from the subsidized housing and indirectly from other benefit programmes provided to state workers. What is unknown is the share of the non-agricultural population residing in households in which no member is employed (or retired from employment) by the state and what subsidies and benefits (in addition to those provided through the trade union system which constitute about 20 per cent of the subsidies and benefits of state employees) these individuals would not receive.

15. Losses in 1981 were 0·2 yuan per kilogram of rationed cereals, and 1·6 yuan per kilogram of rationed vegetable oils. Shengming, Yang, “Income, commodity prices, and living standards,” Renmin ribao (People's Daily), 16 04 1982, p. 5Google Scholar . I estimate losses as 0·15 yuan per kilogram in 1978 on the basis of changes in the average procurement price for cereals and the assumption that processing and distribution costs were unchanged. The average ration price of rice and wheat flour is 0·337 yuan per kilogram. Wang Zhenzhi and Wei Yunlang, “The changing situation concerning the scissors price differential in the exchange of industrial and agricultural products,” Jingji yanjiu ziliao (Economic Research Materials), No. 15 (1980), p. 47Google Scholar . This has a table with retail prices of selected consumer goods, including several rationed commodities, for selected years 1952–77.

16. The usual translation of full as “welfare” is misleading since in Chinese practice welfare expenditures are invariably exclusive of the need-based programmes that the word welfare commonly connotes in the west, at least in the United States. Need-based welfare programmes in China, most of which are of a short-term nature, are financed with “relief funds”(jiuji fei).

17. TJNJ 1981, p. 439.

18. NYNJ 1980, pp. 382–83.

19. TJNJ 1983, pp. 147, 453.

20. TJNJ 1983, p. 357. These figures exclude the cost of land.

21. Long, Ji, Zhenzhi, Wang, and Yangzhi, Wang, Shehuizhuyi jiage wenti yanjiu (Research on Socialist Price Problems) (Beijing, 1982), p. 121Google Scholar .

22. International Bank for Reconstruction and Development, China: Country Economic Memorandum (Washington, D.C.: International Bank for Reconstruction and Development, 1983), p. 95Google Scholar.

23. The highest level references to illicit price mark-ups are found in State Council, “Notice on strengthening market and price management,” Zhonghua jenmin gongheguo guowuyuan gongbao (Bulletin of the State Council of the People's Republic of China), No. 12 (1983), pp. 523–25Google Scholar and SSB, “Communiqué on fulfilment of China's 1983 national economic plan,” Beijing Review, No. 20 (1984), p. IXGoogle Scholar.

24. TJZY 1983, p. 79.

25. TJZY 1983, p. 20 and “Communiqué on fulfilment of China's 1983 national economic plan,” p. XI.

26. TJZY 1983, p. 81; TJZY 1984, p. 94.

27. TJZY 1984, p. 88.

28. Xingyi, You, “Opinions on the compilation of the retail price index,” Jiangxi caijing xueyuan xuebao (Bulletin of the Jiangxi Finance and Economics College), No. 3 (1981), pp. 33–37Google Scholar, reprinted in Caimao jingji (Finance and Trade Economics) Chinese People's University Nationals Reprints, F.5, No. 3 (1982), p. 56. By contrast, the United States consumer price index employs base year weights (a Laspeyres index).

29. Zhuofu, Liu “Issues in stabilizing market prices,” Gongye jingji guanli congkan (Industrial Economic Management Abstract), No. 4 (1981), pp. 10–14Google Scholar , reprinted in Caimao jingji, F.5, No. 9 (1981). This cites 1980 price reductions approved by the State Council for the following commodities at the retail level: nylon socks, plastic products, western medicines, refrigerators, televisions, tape recorders and digital watches.

30. Xingyi, You, “Opinions on the compilation of the retail price index,” p. 60Google Scholar .

31. You Xingyi, ibid. for example, lists only the state list price index, the negotiated price index, and market price index. In half a dozen other articles dealing with price indices, there is no mention of a rural cost of living index or even an index of retail prices in rural markets. The published index of prices of manufactured goods sold in rural areas is not an acceptable substitute both because it excludes food products and services and because the number of manufactured commodities included in the index is too small. See the discussion in Lardy, , Agriculture in China's Modern Economic Development, pp. 108–112Google Scholar .

32. International Bank for Reconstruction and Development, China: Country Economic Memorandum, p. 96.

33. Peasant cereal consumption in 1978 was 192·5 kilograms (measured in terms of trade grain) and the weighted average procurement price for six kinds of grain was 0·2128 yuan per kilogram, unhusked weight. Lardy, , Agriculture in China's Modern Economic Development, pp. 158, 249Google Scholar . The product of the price (adjusted to a trade grain basis) and the quantity consumed is 49·3 yuan.

34. TJZY 1983, p. 84.

35. The total value of subsidies on domestically produced cereals was 12·9 billion yuan and I have estimated the subsidy on imported cereals at from 0·6 to 2·4 billion yuan, the lower figure applying when the official exchange rate is used in the estimate, the higher when the domestic resource cost of earning a unit of foreign exchange is used as the implicit exchange rate. Lardy, , Agriculture in China's Modern Economic Development, p. 195Google Scholar . Of this amount 3·7 billion yuan was for rural consumption, the residual, 9·8 to 11·6 billion yuan went for subsidies of urban consumption. Indirect evidence suggests that almost none of the four billion yuan in annual subsidies in 1975—78 accrued to rural consumers.

36. Lardy, Agriculture Prices in China.

37. The cost of residential construction in urban areas rose 50 per cent, from 89 yuan to 135 yuan per square metre, between 1978 and 1982. TJNJ 1983, p. 357.

38. TJZY 1984, p. 93.

39. “The Sixth Five-Year Plan of the People's Republic of China for national economic and social development,” Beijing Review, No. 21 (1983), p. IVGoogle Scholar .

40. TJZY 1983, p. 79.

41. TJZY 1983, p. 76 and “Communiqué on fulfilment of China's 1983 national economic plan,” Beijing Review, p. VIII.

42. Nicholas R. Lardy, Agriculture in China's Modern Economic Development.

43. Bunce, Valerie, Do New Leaders Make a Difference? Executive Succession and Public Policy under Capitalism and Socialism (Princeton, New Jersey: Princeton University Press, 1981), pp. 158–67Google Scholar .