Price Stability and Development in Mainland China (1951-63)

C ONTROLLING inflation in any underdeveloped economy where the emphasis is on rapid economic growth is never easy. Policies for controlling price increases almost invariably affect a country's rate of growth-a fact no less true for Mainland China than for any other developing country. The particular interest of the Chinese Communist experience arises from the high degree of direct control exercised over most aspects of the Chinese economy. This high degree of control has often forced the regime to face the relationship between inflation and growth in areas where the connection between the two is commonly ignored. Until 1958 or 1959 the Communists in China had managed not only to achieve a high rate of growth, but to keep price increases at a moderate level. They accomplished this in the face of a development strategy that gave overwhelming priority to the industrial producers' goods sector and a technique of planning that relied on overfull utilization of resources. In addition, during the first three years of the regime's existence, China was involved in a major war effort. Under similar, but probably less severe, handicaps the Soviet Union in