TNAG-1623-FCO40-2237-Relations-between-Hong-Kong-and-China-1987 — Page 137

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substantially.

These adjustments were later extended to the non-agricultural sector. According to one estimate, during the period 1979 to 1984, the state-determined price of coal was adjusted upwards by about 30%; and that of metals and building materials by approximately 50%. The adjustments were made with reference to the prices in the market, in many cases this was a black or grey market.

13.

of greater interest is China's policy towards price deregulation, which paves the way for the emergence of different forms of price determination within the

Chinese economy.

As mentioned before, the basis for enforcing a set of administrative prices was a centralized system of controls over the production and distribution of goods. This basis was, however, partially eroded in the early 1970s with the expansion of a local collective sector of industrial production (mainly industrial production by communes and production brigades) which was only marginally incorporated into the national planning system. These small-scale local enterprises produced a considerable amount of industrial goods not governed by the production targets of the national planning system, and therefore not included in state distribution

plans (1). The central authorities were thus under

pressure to give local authorities certain flexibility in determining prices. This flexibility took the form of ad hoc prices that were allowed to deviate from the centrally determined prices within a certain range.

(1)

Part of the production and exchange was incorporated into local plans but these plans were only

marginally integrated into the centralized system of production and distribution.

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