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CHINESE EXPERIENCE IN THE INTRODUCTION OF A MARKET MECHANISM INTO A PLANNED ECONOMY: THE ROLE OF PRICING
Author(s) -
Mao Yushi,
Hare Paul
Publication year - 1989
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/j.1467-6419.1989.tb00062.x
Subject(s) - economics , price mechanism , planned economy , china , planner , point (geometry) , market mechanism , mechanism (biology) , market price , microeconomics , macroeconomics , market economy , philosophy , geometry , programming language , mathematics , epistemology , political science , computer science , law
. A brief review is first presented of the changes in pricing institutions in China since 1949, with particular emphasis on the shift from an equilibrium price system to a distorted price system. The authors argue that distorted prices are harmful to economic growth even in a planned economy, since even an experienced economic planner can never escape from the full implications of a distorted price system. Examples are given showing the detrimental results of such a system. The central point of China's economic reform is the extension of decision‐making power to enterprises and the introduction of a market mechanism so as to improve microeconomic efficiency. But such a goal cannot easily be achieved due to the false information provided by the distorted price system. So price adjustment becomes an issue of primary importance, and the authors discuss the difficulties for price adjustment posed by various interest groups.