Markets in Chinese Industry

Prereform markets and market-like resource allocation mechanisms in Chinese industry were quite limited, particularly in their impact at the enterprise level. Some of the extra-plan methods for allocating or reallocating industrial goods in prereform China were similar to those in other centrally planned economies. Development of markets for industrial goods in the early years of reform, though explicitly considered one of the main components of the reform package, was uneven and largely dependent on changing demand-supply conditions. Available firm-level data provide evidence on the quantitative significance of industrial product markets at the micro level. Interregional exchange in the prereform period was limited in terms of both the products and the provinces involved. Provinces, and perhaps to a lesser extent local governments, appear to have begun to exchange important goods and materials with each other in the early 1970s. This chapter attempts to grapple, in a preliminary and tentative fashion, with the question of market functioning in Chinese industry.