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deliberately purchased cheaper raw materials of lower quality so as to make more profit.
Background leading to the price reforms
10.
By
Notwithstanding its problems, China's price system stood unchallenged for nearly three decades. the late 1950s, the state had largely acquired control over the production and distribution of materials and commodities, and had established a monopoly over commodity trade. The price system was backed up and enforced by strong central authorities. The limited market activities which then existed, such as rural trade fairs and trading among individuals, posed no threat to the main centrally controlled system.
11.
The background leading to the price reforms was related to two inter-related developments in the Chinese economy. First, starting in the early 1970s, there gradually emerged an economic sector outside the state planning system. The growth of this sector accelerated in the late 1970s and the early 1980s, as a result of reforms in the economic management and production system. Second,
even within the state planning sector, some attempts have been made to rely more on market forces in order to improve efficiency in resource allocation.
Price reforms up to 1984
12.
Price reforms in China generally take two forms price adjustment and price deregulation (of varying degrees). The adjustment of state-fixed prices began in 1979 when the purchase prices of farm and side-line products and the retail prices of eight non-staple foodstuffs were adjusted upwards
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