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The Progress of the Marketization of Domestic Trade

After 1978, along with tile progress of economic reforms and maketization, China' s domestic trade put an end to the traditional highly-centralized planned economic system and realized the transformation of economic system: domestic trading entities, traditionally monopolized by the government, have developed into a multiple competitive pattern, under which standardized companies coexist with individual businesses ; commodity prices have been market-oriented rather than valorized by the government ; the administrative system for domestic trade has gone through a fundamental change ; market size ranging from commodity, service, housing to education, medical care and insurance etc has been constantly growing; market transaction rules have been gradually improved and perfected, and the domestic trade has been conducted under a more standard and adequate legal system. Above all, China boasts a market economy system for domestic trade, which has been basically put in place and improved increasingly.

(Ⅰ) Changes in Trading Entities

At the beginning of the reform and opening-up, China' s domestic trading entities were mainly composed of two parts: state-owned enterprise and cooperative enterprise, and trading activities conducted by state-owned enterprise constituted the main part of domestic trade. With the progress of economic restructuring, the government began to lift its restrictions on village fair trade since 1979; in 1985, the system of unified and fixed-state purchase of agricultural and sideline products was abolished; in 1991, the government carried out a policy of "four decontrols" over management, price, distribution and employment, and introduced a system of agency in the field of goods and materials circulation after 1995. On the one hand, besides the traditional public-owned enterprises, the reform brought about a great number of individual businesses, some of which have developed into enterprises that were duly established according to the Corporation Law and have played a significant rule in the domestic trade; on the other hand, the traditional state-owned enterprises have undergone a transformation in light of the requirements of modem enterprise system. In the wake of the development of China's opening-up, the overseas trading enterprises have also joined the domestic trade. Currently, a pattern, under which various domestic trading entities can equally compete within the scope of laws, has taken shape.

(Ⅱ) Changes in Pricing Mechanism

Before the reform and opening-up, commodities' prices were mostly valorized by the Chinese government. In 1978, the government-priced commodities accounted for 97 percent, 100 percent and 92.6 percent of the total social retail sales, the total sales volume of industrial production goods and the total purchase volume of farm and sideline products respectively. After over 20 years of the market-oriented reform, such percentage have been changed greatly and a market-oriented pricing mechanism has fundamentally come into being. According to the Pricing Catalogue of the State Development Planning Commission and Relevant Departments under the State Council (2001), the number of the commodity and service items priced by the government was reduced to 13 in 2001 from 141 listed in the 1992 Pricing Catalogue. The 13 items included important reserved materials designated by the central government, products monopolized by the government, certain fertilizers, certain key drugs, textbooks, natural gas, water supply of irrigation works directly under control of the central government or crossing more than one province, power, military supplies, key transportation service, basic postal service, basic telecom service, special service etc. In addition, fees collected by the governmental agencies, prices of finished oil products and reference prices and public prices of urban land have started a further reform, and the price formation mechanism has been improved by degrees.

(Ⅲ) Changes in Government Administrative System

In the domestic trade, changes in the government administrative system are mainly revealed in two aspects:

First of all, in order to adapt to the development of domestic market economy, the government organs removed or merged their original administrative departments, undergoing a gradual transition from an administration pattern characterized by issuing orders to a management pattern with an adequate legal system.

Second, the domestic trade experienced a transition from an administration pattern characterized by issuing orders to a control pattern with an adequate legal system, and in particular in the price administration, more stress was laid on the legal system. Table 6-2 indicates the important documents regarding price administration enacted and put into force by the Chinese government since the reform mid opening-up.

The changes of the trade administrative organs and the formulation of the relevant price laws and regulations imply that, in the domestic trade, the scope of administration has been shrinking and gradually disappearing, and that the governmental administration has been brought into line with an adequate legal system.

(Ⅳ) Expansion of Market Size for Domestic Trade

In the traditional centrally planned economic system, there were only partial articles and services allowed to enter market for deal; while production goods were not regarded as commodities, and articles and services in many fields were distributed as welfare in kind or under the supply system. With the advancing and deepening of the reform, such a traditional distribution system was broken, and many articles that used to be allocated with a welfare nature have been allowed to enter market, having become trading objects, of which the most important are housing, health care and education etc.

1. Marketization of Housing

Shortly after the founding of the P. R. C., China carried out a housing construction, administration and utilization system, under which houses were built, distributed and used at low rent mad under unified control, i.e., a low rent welfare system. In 1980, the program of the commercialization of housing was brought forward in the Report Outline of the National Basic Construction Work Meeting. In 1986, the Housing Reform Leading Group was established under the Sate Council. In 1988, the Notice of the State Council on Pushing Forward the Housing System Reform Program in Urban Areas in Installments and Batches was enacted, and the objective of commercialization of housing was reaffirmed. In addition, in 1998, the State Development and Planning Commission pointed out that a stress should be laid on the development of housing services of urban residents, and a housing development and operation system established and perfected by speeding up the commercialization of housing, and strengthening the development of economical and practical houses and the enforcement of comfortable housing project. By 2001, the traditional welfare house distribution mechanism has faded out and the market price formation mechanism for house price and rent has been initially established.

2. Marketization of Medical mid Health Care Services

In 1978, the initial stage of the reform, the medical and health care service system featm-ed welfare. In 1988, the implementation of Opinions on Relevant Issues of Expanding Medical and Health Services launched the reform of price of medical mad health service. In 1997, Decision of the Central Committee of the CPC and the State Council on Health Reform and Development was promulgated aiming at pushing forward the reform of medical system based on the principle of "three concurrent reforms", that is, concurrently carrying out reforms in medical insurance system, health system and drugs circulation system. By 1999, file reform of medical system was carried out nationwide, and after the reform patients began to enjoy more freedom in medical care. In 2001, the General Office of the State Council forwarded the Notice Opinions on Guiding the Reforms in Urban Medical and Health System prepared by the System Restructuring Office of the State Council and other governmental organs, which defined the direction of the reform in medical and health system. Meantime, 13 supporting policy papers were also issued, including systematic control over medical institutions in cities and towns, control separately over income and expense of hospital drugs, related taxation policies on medical institutions and subsidy policies on health facilities etc. With the promulgation of these supporting documents, China' s reform in medical system entered a new stage of practical operation.

3. Expansion of Education Charging Items

The years after the reform and opening-up witnessed that the proportion of a resident' s expenditure in education in his or her total consumption has increased. According to relevant provisions of the Education Law of the People ' s Republic of China (1995), China carried out the policy that incidental expenses should be collected for the compulsory education arid tuition fees for the non-compulsory education. In 1996, the State Education Commission, the State Planning Commission and the Ministry of Finance jointly formulated the Provisional Measures on Administration of Charges in Compulsory Education Schools, the Provisional Measures on Administration of Charges in Ordinary High Schools, the Provisional Measures on Administration of Charges in Secondary Vocational Schools mad the Provisional Measures on Administration of Charges in Institutions of Higher Learning. Since 1994, in the higher education, the system of guarantees for education and employment has been changed into a system of "self-paid study, self employment"; in 1997, there was only one single national enrollment quota program for universities or colleges reserved in the national education system, canceling the dual programs of state quota and regulated quota (finance supported by some community and self-supported in finance); by 2000, the government has basically completed the transformation of the enrollment mad employment system involved in the reform of the higher education, and the government financed student has become a history in the higher education.

(China.org.cn November 7, 2003)

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