CONFIDENTIAL # 3
G.F. 326
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34.
To the general public, the major concern is the
increase in the retail prices of consumer goods. In 1985,
with a view to tackling the problem of the procurement prices of agricultural products being higher than their retail prices, the central authorities decided to liberalize the prices of secondary foodstuffs. In consequence, the prices of fruit, vegetables, eggs and poultry increased by more than 20% during the year. As a remedy, the state granted each person a food subsidy of
7.5 yuan, which was equivalent to about 8% of the average salary. Another aspect of the price reforms which has a
bearing on the living standard of the general population is the liberalization of retail prices of commodities and services outside mandatory plans. These include petty commodities, catering services and certain kinds of personal services.
35.
The Chinese authorities have, on many occasions,
reiterated that the rate of price increase would not
exceed that of wage increase. If statistics provided by China are accurate reflections of the real situation, one
does find that in past years, this principle has been
adhered to. In the last three years, the average wage
rose by 15% per annum while the average inflation rate was 6%. Of course, it is doubtful whether the official price
statistics reveal the true extent of inflation
ation (6)
(6)
According to China's official statistics, the general level of retail prices rose by 6% during 1986. But views gathered from an economist from Shanghai suggested that the prices of non-staple foodstuffs, which accounted for a significant share in total expenditure, increased by roughly 20% in the same year.
CONFIDENTIAL # *
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