China to Let Prices Rise Toward True Values--but Cautiously, Aides Say

China’s leaders are determined to carry out fundamental price reforms but will do so cautiously, two key Chinese policy-makers indicated Monday.

To boost agricultural production and increase economic efficiency, China must allow the prices of many items to rise toward their true value, the two officials said at a press conference in connection with the 13th National Congress of the Communist Party of China. This means that many government subsidies and artificial controls will have to be eliminated, they said.

But they added that this must be accomplished while maintaining or increasing the real incomes of urban workers to avoid public dissatisfaction.

“The question of price reform cannot be avoided,” Gao Shangquan, vice minister of the State Commission for Restructuring the Economy, told reporters. “ . . . In carrying out the price reform we have to give consideration to the ability of the country, the society and the people to sustain such price reform. So our policy is to persist in price reform, but proceed in a steady manner to maintain basic stability of prices.

“Price reform is a very complicated question,” Gao added. “At present, the increase in the prices is an issue that the people have many complaints about.”

China’s retail price inflation rate was 6% last year, down from 9% in 1985, according to official statistics. The rate rose at an annual rate of 6.3% in the first six months of this year. Prices for non-staple foods were up 14%; vegetables, 18%, and meat, poultry and eggs, 11%.

Wages were up slightly more, making for a 2% increase in the average worker’s base income after allowing for the price increases, according to the government.

Du Runsheng, director of the party’s Rural Policy Research Office, said that in order to assure a growing food supply for China’s population of slightly more than 1 billion, the government will allow food prices to continue to rise. That would “improve the relations of exchange between cities and the countryside, and thus improve the initiative and enthusiasm of the farmers,” he said.

Zhao Ziyang, the party’s acting general secretary, said Sunday in his keynote speech to the congress: “We should gradually establish a system under which the state sets the prices of a few vital commodities and labor services while leaving the rest to be regulated by the market. The reform of the pricing system should correspond to the policy of readjusting incomes, so as to ensure that the people’s actual living standards will not go down in the course of reform, but will rise gradually with increased production.”

Gao said Monday that this means wages will go up “commensurate with the increase in labor productivity.”

Du said that major investments are needed to increase productivity but that China must not try to do too much too fast.

“If investments are made with too great rapidity and the scale of investment is overextended, if the total demand grows rapidly and consumption balloons, this will inevitably lead to (an overly rapid) increase in prices, which will in turn lead to dissatisfaction,” Du said.

He implied that the largest increases in food prices are likely to be in the area of subsidized, high-demand non-essentials. He cited beer as an example.

Du also said that with the growth of rural industries, growing numbers of farmers are taking up non-agricultural jobs and that this has created the conditions for China to consider a policy that would allow farmers to transfer their land rights to other farmers.

“We will persist in the public ownership of the land,” Du said. “But we have also introduced the principle of the separation of ownership of the land from management power of the land. . . . We are now considering the transfer of the utilization right of the piece of land.”

If such a policy is adopted, Du said, farmers who have contracted with village authorities to farm particular pieces of land will be able to transfer use of the land to others by mutual agreement, either with or without compensation.

The government also intends to set up a system of land leasing by which publicly owned land could be used for non-agricultural purposes upon payment of fees, Du said.

Delegates to the congress separated into 33 groups Monday and conducted panel discussions on Zhao’s opening report. The meetings were closed to the foreign press, but on Monday evening the state-run television news program showed delegates praising the ideas set out in the speech.