Chinese Leaders Move Cautiously on Key Price Reforms
Facing unprecedented inflation, panic buying and social discontent, Communist Party leaders have retreated from proposals for an immediate, radical transformation of China's centrally controlled pricing system.</br></br>Meeting at the seaside resort of Beidaihe, the party's ruling Politburo has approved a compromise draft document on reforming the system of prices and wages, effectively postponing difficult decisions on the issue.</br></br>China's paramount leader, Deng Xiaoping, had been pressing for price reform-seen by some Chinese as the key to the success of all other economic reforms implemented in the last 10 years-that would go far beyond any measures previously attempted by a communist country. But instead the leaders adopted a more cautious, step-by-step approach.</br></br>The aim of price reform is to allow most prices to reflect true production costs, thus increasing efficiency in systems dominated by arbitrarily set prices and subsidies. China's reform program has been aimed at restructuring its rigidly planned, Soviet-style economic system to one receptive to market forces.</br></br>Price reform is supposed to make it possible to determine profits and losses with greater accuracy and eliminate the widespread corruption in the country's two-tier system of state-set and floating prices. This results in part from profiteers, who, with the assistance of certain party officials, buy commodities at low, state-set prices and then sell them at higher prices on the free market.