TNAG-1623-FCO40-2237-Relations-between-Hong-Kong-and-China-1987 — Page 150

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under mandatory planning because these enterprises will

try all means to circumvent their quota obligations.

This, in turn, results in a further shrinkage in the

share of output under central distribution.

41.

The growth in the relative importance of the

non-planned sector in the Chinese economy should have、

prepared the way for further price reforms after the

effects of the reforms so far enacted have been fully

digested and filtered through. Given that China has

probably reached the point at which a return to the old

system of complete control over production and distribution of goods would be almost impossible, price control has become increasingly difficult and

ineffective. Huge costs are involved in monitoring transactions in the market and it is highly likely that black market activities will emerge once excess demand

builds up. It follows therefore that China's recent

policy to stabilize prices may not be effective, in so far as it has not been accompanied by stringent

measures to re-centralize production and distribution

activities.

42.

Notwithstanding the challenge posed by the

"non-planned" sector, a further rapid transformation in

China's price system involving the scrapping of all

state-fixed prices is highly unlikely. Any such change

would draw strong opposition from those protected

sectors which are used to obtaining supplies of low-priced inputs. It appears that the "double-track

price system" for industrial raw materials and

machinery will continue to exist in near future.

likely development pattern of price reforms in the

years to come is a continuation of the alternate

"stop-go" measures experienced in the past eight

A

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