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excess of their supply(5).
This gap may have widened
further in 1986 and the first half of 1987 when better-quality goods were diverted to overseas markets to
earn foreign exchange.
29.
On the demand side, there has been an unleashing
of purchasing power because of the rather substantial
increases in incomes. In the rural sector, especially in
the more developed regions, the considerable increases in the prices of agricultural produce and in the earnings from sideline production have raised the incomes of the
rural population. In the urban sector, there has been increases of 15% and 19% per annum respectively in both wages and the total wage bill paid to staff and workers in the past three years, as shown in Tables 4 and 5. These increases were attributable to bonus payments, above quota
payments and the adoption of piece rate wages by some enterprises (table 6). The rate of increase in wages has
certainly exceeded that of productivity increases. In
1984 for instance, the rate of increase in wages for state-owned enterprises, at 16% in real terms was double
that of the increase in productivity, at 8%. In brief,
the substantial increases in incomes, coupled with a
diminution of social pressures against high consumption
contributed to the consumption boom and inflation in China
in 1984 and 1985.
(5)
As an illustration, when the prices of seven consumer items were liberalized in August 1986 (paragraph 19), the price of top grade bicycles jumped from Rmb 180 to Rmb 250.
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