ABSTRACT
This chapter sketches out an analysis of how the transition from plan to market is occurring, with primary focus on the two-tier plan/market system for industrial producer goods. The evolution from a plan-dominated to a market-dominated goods allocation system in Chinese industry has been inextricably linked with the phenomenon of multiple allocation channels and multiple pricing, including markets with flexible prices at one extreme, which will henceforth be termed the two-tier plan/market system. The reduction of truck allocations through the central plan in the strong sellers’ market of 1984 is an example. However, the existence of functioning markets at which industrial goods are traded on a voluntary basis with a considerable degree of price flexibility strongly suggests that in China the demise of the command system has indeed been accompanied by the emergence of goods markets. A number of pricing reforms encouraged the emergence and development of the two-tier system.
