ABSTRACT
This and the following chapter examine the impact of market-oriented reform on the state agencies that administered commerce under the planning system, and show how in the early 1990s those agencies were adapting to market reform by becoming entrepreneurial. The state commerce system in the reform era has been relatively under-researched, with much more attention being focused on the reform of industry and productive enterprises. Yet the commerce system was an important part of the command economy, and its reform lies at the heart of the market reform project. Under the central planning system, state administrative agencies in China distributed almost all agricultural and industrial goods in accordance with national and local economic plans. A comprehensive system of commerce departments, state and collective enterprises purchased goods from producers and distributed them nation-wide at prices fixed by the state. This state commerce system was the bridge between producers and consumers and the keystone of the command economy. When it was established in the 1950s, it accorded with both the ideological commitment of the CCP leadership to state ownership and the eradication of capitalism, and the practical need to gain control of a war-ravaged economy. However, from the late 1970s, it was criticised by economic reformers for contributing to sluggish economic growth, and its reform became an integral part of the post-Mao economic development project. Reform documents have argued that production can be increased and made more efficient if producers are brought closer to their consumers and have to respond to the market demand. To do this, state administrative allocation of goods should end, and market mechanisms should be introduced. Commerce system reform is thus inextricably linked with the introduction of commodity markets and central to the market reforms.
