Move to Lift State Price Controls Stalls in China

BEIJING — China had planned to take new and important steps toward lifting state price controls at the beginning of this year but was forced to hold off because of political resistance, a leading Chinese government economist has disclosed.

Song Tingming, head of the research bureau for Premier Zhao Ziyang’s state commission on economic reform, said in an interview this week that the intention had been to let the prices of a few raw materials, including steel, be determined by market forces of supply and demand.

“Because there was such a big difference between the prices fixed by the state and market prices, some people felt it would not be safe,” Song said.

The Chinese government still plans to go forward with decontrolling prices, Song said, but he added that the regime has learned that it must move ahead “the way a lao taitai (old woman) walks.” In China, old women whose feet were bound during childhood walk in a distinctive manner, extremely slowly and carefully.

Prices ‘Most Sensitive’

During the interview, the Chinese economist provided an unusually candid description of the problems the regime is having in trying to move from a centrally planned system with state-controlled prices to a market economy. While insisting that China will continue its effort to change the price system, he admitted that this is “the most sensitive part” of the regime’s economic reform program.

Decontrolling prices in China, Song asserted, is “first of all a political problem.” He said official prices have been so low for so long that “it is like a ball under the surface of the water. . . . If you let your hand go, the ball springs up.”

The problem extends beyond China to all socialist countries, Song declared. “For a socialist country, if there’s a danger, it’s the problem of prices. Poland is a good example. Although a country like ours doesn’t have (Poland’s) level of chaos, we have to be cautious on this point.”

In Poland, attempts to lift prices touched off food riots in the 1970s and led to the formation of Solidarity, an independent trade union, in 1980.

Food Prices Rose in 1985

China’s first serious effort toward price reform came in 1985, when the regime allowed consumer prices of some food items, such as meat and vegetables, to float upward.

The inflation rate for that year was officially listed at 12% in Chinese cities, and some economic analysts believe that the real figure was considerably higher.

At the beginning of 1986, Premier Zhao announced that there would be no major price changes that year. Last summer, the regime did lift controls on some consumer items, such as bicycles. It appeared to be setting the stage for new price changes this year.

But in December, a series of student demonstrations for democracy spread through the country, and the regime became increasingly concerned that the unrest would spread to urban workers. In early January, the State Council, China’s Cabinet, published a circular announcing that there would be no increase this year in the number of goods whose prices are determined by market forces.

Emphasis Shifted

“Consideration has been given to the social impact and the psychological impact of the price increases,” Song said. “At the end of last year, we changed our position. We decided that this year, we will emphasize the job of invigorating enterprises.”

The economist said the decision was not directly related to the student demonstrations.

“The students did not raise the question of price increases,” he said. However, at the time of the demonstrations, some workers said they supported the students because of their anger over rising prices.

At the moment, Chinese industrial enterprises face a two-tier pricing system for the raw materials they use. Some goods are allocated to them under the state plan, and for these the enterprises pay a fixed, low price. Anything they wish to obtain beyond this allocation must be bought on the open market at higher prices.