ABSTRACT
This chapter focuses on several major aspects of prices and wages in China. It reviews various functions performed by prices in the Chinese planning system and examines the structure of prices and the process of their formulation. The chapter discusses Chinese price policies of differentiation and stability, analyzing in particular the role of profit in price formation and wage structure and policies. It explores the economic consequences of the existing price system and outlines reforms as well as problems arising from those reforms. As in the Soviet Union, prices in China are mainly used by the central planners to secure the compliance of enterprise managers with the plan and to evaluate the performance of the managers. The allocative function of prices is mainly subsidiary and subordinate to allocation by administrative order. The entire price structure in China comprises the following five categories: factory Prices, exfactory Prices, agricultural procurement prices, wholesale prices, retail prices.
