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Controls

 

The marketization of China’s prices may reach 65% by end of the Ninth 5-Year Plan and 75% by end of the Tenth 5-Year Plan, approaching a mature market economy.

The government is still determining prices or has control of prices of major commodities and labor, for instance the purchase price of grain and cotton, railway and aviation transportation prices, crude oil prices, refined oil prices, the gold price, prices of pharmaceuticals, prices of books, prices of various public utilities, and tuition.

These prices have a great effect on other prices. It is estimated that the marketization degree of these major commodity prices is around 45%; these prices react slowly to market changes.

China’s urban land is monopolized by the state. Distribution in the real estate market is mainly conducted through administrative means. State-owned land, which should take the lead in market operation, is only in very small part transferred by open invitation of bids, while the majority is transferred according to agreements.

The majority of public housing has not truly become a commodity; rent is only 2.9% of urban residents’ spending (in normal market-economy countries, whether developed or developing, rent usually occupies one-fourth to one-third of consumption).

The official prices of real estate can be 1 to 10 times that of the market price. The field of urban real estate is the most corrupt, where the planned economy still dominates. Urban land is occupied and used at no cost to their holders (excluding illegal transfers); the marketization degree of land is estimated to be only 30%.

China has not formed a medical market yet. On the one hand are hospitals run by organizations, other the other hand are hospitals run by governments; the proportion of private hospitals is still very small. Employees have no right to choose hospitals, and the proportion of medical bills born by employees themselves is decided by administrative rules.

Medical reform is the slowest among all reforms in China, and the public is most dissatisfied with it. On the one hand many employees have no money to go to hospitals, and on the other hand a small number of people seriously squander public medical funds.

Medical institutions in China are still non-profit organizations. Even tough hospitals are surviving mostly on their own incomes, their degree of marketization is not high, far lower than the banking sector. The national average is estimated at 35%.

China’s foreign currency prices are still controlled by the government; the exchange rate is monopolized by a government department (the Foreign Currency Management Bureau). Because China’s import-export total has already reached ¥320b, the exchange rate is playing a more and more important role.

China’s stock market prices are only freed up in terms of public shares and a small number of corporate shares, while the bit part, the state shares, have not entered the market, and there is not a true market price.

Prices of bonds are also basically not freed up. Royalties from intellectual property are not close to their actual value. Therefore the marketization degree of prices of this type of commodity is estimated around 40%.

To sum up, prices truly freed up and determined by the market in China won’t exceed 60% and reach the so-called 90%. This is because first, even prices of developed market-economy countries are not 90% determined by the market.

Second, the marketization of prices is not restricted to consumer goods; one must take into consideration investments and services. Third, 60% is not a low level, transition is basically accomplished. Based on this, the marketization of prices in China can reach 65% by the end of the Ninth 5-Year Plan and 76% by end of the Tenth 5-Year Plan, by which time it will approach a mature market economy.

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