ABSTRACT
In 1978 the economy was stagnant, production and distribution were inefficient and corrupt; there was little or no new commercial enterprise; China had fallen behind the rest of the world and would be hard put to it to feed its population. At that date most prices were set by the central government, virtually all production was managed by government ministries and innovation in response to the market was rare. Visitors to China were amused by the quaint retail shops with their domestic goods based on designs of the 1940s and characterized by shortages such that vast crowds might collect in a particular state shop if the rumour got round that some sewing machines were available. Yet by 1995 few prices were controlled and two-thirds of the economy had been subjected to market influences.
