Liberalization and Rural Market Integration in China

In the early 1990s, leaders allowed market liberalization to proceed in food markets. During this time, markets burgeoned with grain. Faced with tight budgets, leaders saw an opportunity to make the economy more efficient and at the same time reduce government fiscal obligations. Urban grain reforms phased out rationing and provided incentives for city grain retailers, who had been ration shop bureaucrats, to engage actively in market trade (Watson). These policy shifts were closely followed by a series of rural marketing reforms, and, for the first time in many decades, transactions among private and commercialized traders accounted for most of the movement of China's food. While the initial implementation of liberalization policies was considered by most to be successful (Chen 1994b), during the rapid food price inflation in 1994 officials attempted to reverse some of the reforms. A perception of loss of control over agricultural commodity circulation has led to a reassessment of the progress of China's market reform program (Duan). Policy makers and academics have vigorously debated the reasons for successes and failures of the liberalization of food markets and the implications for future policy reform. Some argue that the recent breakdown in agricultural pricing policy calls into question the commitment the government should make to re-