imported products, particularly technology (Manatoo, 1990, pp. 63-79).
When Chairman Mao died, and the last of the "Red Guard" influence was purged from the Chinese political environment, a government with more pragmatic economic views gained power. In 1978, this new government initiated a series of economic changes in the PRC, which were referred to as readjustments. These economic readjustments, which were continually expanded through early-1988, brought about both immediate and continuing significant changes in the structure and the management of the Chinese domestic economy (Anderson, 1990, p. 17).
Throughout the history of the Peoples Republic, stable and affordable prices for essential consumer products have been a part of state policy (Brown, 1994, pp. 10-19). In the state-run stores, where quota-produced agricultural products are sold, stable and affordable prices still prevail. The problem with the state-run stores is two-fold. First, the supply is often not sufficient to meet the demand. Second, the choice of available products is usually narrow. By contrast, the open market provides over-quota and non-quota agricultural products (1) in sufficient quantity to meet demand, (2) in a greater variety than that found in the state-run stores, and (3) at prices that are unaffordable to an increasing proportion of the population (Brown, 1994, pp. 10-19).
Food price increases have been accompanied by price increases for non agricultural products (Blejer & Gregory, 1990, pp. 32-35). The price increases are a major source of concern for the Chinese economic planners. That element of the Chinese leadership that is more comfortable with strict central planning views the prices problem as evidence that the liberalization of the economy was a mistake. As a result, those favoring the decentralization policy have introduced reforms into the system, as a means of insuring its continuation. In the context of prices, refo...