ABSTRACT
Grain production per capita is quite low and variable in China. Government agencies were able to buy grain in the free market at prices lower than those offered by private merchants. A grain procurement quota was assigned to each individual producer, telling him how much grain must be sold to the state and at whatprice. The state reasoned that it was meaningless to raise retail grain prices, as it would have to pay back what it received in the form of increased grain prices to its employees in the form of increased wages. The complaints from peasants and grain or commerce departments and the decline of the free market prices convinced many people, including policy makers, that there was an over supply of grain in the mid 1980s. The state planned grain supply for industrial and other uses started at the same time as rationing, and is known as "unified grain marketing" when combined with rationing.
