CONFIDENTIAL **
G.F. 326
7
14.
A major development on the price front in the early phase of China's economic reform took place in the electronics sector in 1979, when a national experimental programme was initiated to introduce range prices (also known as floating prices) for four major types of industrial electronics products. In 1981, the coverage of range prices was extended to all heavy industrial products and by 1982 all industrial products were allowed to adopt range (or floating) prices. The range within which prices were allowed to float was generally set within +20% of the centrally determined prices. The introduction of range prices marked a significant change in China's price system in that price could now move, albeit within certain limits, away from the State fixed prices to reflect the underlying supply and demand conditions.
15.
Parallel to this development was the emergence
of an officially sanctioned market for intermediate industrial products, which was intended to be a secondary market for the trading of surplus intermediate industrial products held by industrial enterprises. This surplus mainly came from the enterprises' production above quota and the self-retained portion of an enterprise's output.
These market transactions basically followed range
(floating) prices rather than state-fixed prices.
16.
Concern over stability has, however, prevented
big strides in price reforms. In respect of complete price de-regulation, the Chinese government has only liberalized prices of petty commodities. By 1983, the prices of 510 such items were decontrolled. Although the number is impressive, it should be noted that even when all petty commodities were taken together, they only accounted for 5% to 6% of the gross value of retail sales
at that time.
CONFIDENTIAL #