China's Rural Market Development in the Reform Era

Him Chung

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9780815388043
• eBook ISBN: 9781351161749
• Topic: Physical Sciences
• Subtopic: Geography
• Index: Geography

The rural market in China is not only the venue where 60 per cent of the country's 1.3 billion inhabitants buy their daily necessities and sell agricultural products, but also a key area of conflict between government control and liberalization policies. Previous research on the topic has adopted a purely economic perspective, focusing on macro issues such as price control and grain procurement. This book focuses instead on peasants - the major participants in rural marketing activities. Illustrated by two comparative case studies with a diverse level of development from the Pearl River Delta - one of the most prosperous regions in coastal China - this book investigates the market hierarchy, its change of functions and the interactions between peasants and market outlets. In doing so, it shows how China's rural market district has changed since the Reform, and how these changes affect the marketing activities of peasants.

Chapter 1
Market-place, Geography and Space

23 May, 1998, Deqing

It was a big day for Mr Li¹, who had just seen his maize mature and was ready to sell at the rural market. Living on the edge of Xijiang River, Mr Li cultivated a variety of crops for his own consumption and sale. Taking advantage of the fertile alluvial soil and the dry season, he grew maize in the riverbed which is submerged during the rainy season. Good weather during the past few months had resulted in a high yield this year - about 300 jin - so Mr Li anticipated greater returns at the market.

As on busy farming days, Mr Li woke up at day break. He cut some maize and put it in the bamboo basket hanging on his bicycle. Around seven o 'clock in the morning, he arrived at Jiushi market which is situated 5 km east of his home. There were already dozens of peasants selling similar products in the market-place but Mr Li was not surprised at this. He was confident about his products and set his price at 0.4 yuan per jin, which was quite low, expecting that this would attract customers.

The rural market was not as busy as usual, even though this time of the year was generally regarded as the slack season in Deqing. While waiting for customers, Mr Li chatted with other peddlers. These conversations were probably the only way to exchange market information. Most customers — urban residents living in Jiushi town-government seat and peasants from nearby villages — came after nine o 'clock. They liked to negotiate a lower price but not many of them accomplished a satisfactory deal. There were uniformed Industry and Commerce Management Bureau officials patrolling the market-place and levying fees —a combination of administrative costs and rent — from peddlers. Occasionally, peddlers were asked to move if they blocked walkways. Peddlers, mostly peasants, were afraid to offend them because they had jurisdiction over the market-place.

During the afternoon the market was much quieter, despite the rain stopping. However, Mr Li did not leave until four o 'clock. After nine hours in the market, only half of his maize was sold. After deducting the market fee, only 20 yuan profit was made. Looking at the unsold maize, Mr Li was a bit worried. After a couple of cigarettes, he decided to take the maize to Decheng Central Market the following day, the county's only daily market which is situated 20 km from his home. The longer distance and the presence of a toll station implied transport costs and toll fee would be higher. However, hoping that the maize would be bought by restaurant buyers and mobile traders, Mr Li said he did not mind paying if he could sell his products.

This study investigates the relationship between the Chinese state and economic forces in shaping rural market development during the reform period since 1979. Economic reform has changed China's economy from a rigid, planned system to a more market-oriented one. Initially, China's economic reform was guided by the paradigm of the 'birdcage economy' which emphasised the planned economy as primary and the market system as secondary (Yabuki, 1999). During the 1980s and 1990s, this model was transformed into the 'market adjusted planned economy' and the 'socialist market economy' that placed more emphasis on market forces and guidance.² In rural areas, this shift resulted in peasants having more control over agricultural production and marketing. Consequently, agricultural performance and productivity have increased and the number of rural markets and their turnover value have grown markedly.

Neither economic reforms nor membership of the World Trade Organisation (WTO), however, have given free rein to market activities in the countryside, despite the rapid growth in the number of outlets. Rural markets are established and managed by government. Important crops, such as rice, cotton and other special local products, are still subject to state procurement and price control. Although marketing channels have been opened, peasants still find it difficult to find outlets for their crops (Chen, 1997; Mei, 1998; Gong, Kang, Su and Wu, 2001). Further, the use of trade barriers to regulate commodity flows during the 1980s, and the reissuing of grain coupons in big cities during the 1990s, prove that government regulation still plays an active role in marketing activities. Moreover, the level of market liberalisation varies between places (Gong, 1997; Ding, 1998; Xie, 1998).

The considerable scholarly attention given to China's rural market development predates the Pacific War.³ In 1940, Spencer published probably the earliest paper in the western world on China's periodic markets. Focusing on Sichuan province, Spencer (1940) provided a detailed description of the area's rural market fair, its operations and schedules. Then, Yang (1944) produced another detailed study on Shandong Province's periodic markets, and their relations with the regional economy, based on fieldwork conducted in the 1930s. The most marked advance followed Skinner's (1964, 1965a, 1965b) application of central place theory to the rural market system in the Chengdu plain of Sichuan province. Particular attention was paid to the hierarchy of market-places, their distribution, evolution, and relationship to the administrative system. Skinner's perspective on how rural China is organised and how the market system is supposed to change over time has become the classic work in geographical studies on China.

Chinese historians have also demonstrated their great interest in rural market development. Based on over 400 local gazettes and historical materials, Gao (1985) and Li (1989) have studied this system in Sichuan and Guangdong respectively. Gao carefully examined Sichuan's periodic markets and their characteristics —market days, pattern, hierarchy and functions — during the mid-Qing (1700-1800) dynasty. He argued that periodic market systems, rather than rural households, were the basic components of Sichuan's regional economy. Li's (1989) study on Guangdong's markets between the mid-Ming (1500s) and mid-Qing dynasties highlights rural market development during different imperial empires. His detailed examination of changes in market numbers, taxes levied and local government management also shows the rise and fall of periodic markets in Imperial China. Other historical studies on this subject include: Wu's (1983) work of national market hierarchy during the Ming dynasty (1368-1644); Cong's (1995) examination of specialised market towns between the late 1800s and 1930s; and Zhu's (1997) general analysis of rural markets and their relationship to modern transport technology during the early twentieth century, with a particular emphasis on railways.

During the reform period, rural markets as an area of conflict between state control and market forces have also attracted the attention of scholars. Many of them have been concerned with the reforms and their impact on marketing activities in the countryside. Economists, notably Findlay, Watson and Martin (1993), have examined policy shifts since 1978 and their impact upon the country's rural market activities. By analysing the state distribution system since 1978, Watson (1988) provides a detailed study of market changes during the reform era. Based on the distinct growth in rural market numbers and their turnover value, these studies have regarded the liberalisation of rural markets in 1983, the abolition of unified purchases and sales in 1985, and the deregulation of the price system in early 1990s, as a complete victory for market forces. Consequently, they argue that the traditional market system driven by market forces, has been revived. Skinner (1985a, 1985b) has also joined the post-reform discussions by making a similar contention in his mid-1980s papers, work which completed his study of rural market development during different periods of China's history.

Despite this matter having been addressed over time, these earlier works have been unsatisfactory. Although studies by geographers have identified spatial structure and hierarchy in rural markets, they have been preoccupied with Imperial China. Chiu and Leung (1983), Liu (1991) and Shi's (1995) papers offer rare contributions on the reform period. In Guangdong, Chiu and Leung (1983) examine the marketing attendance of peasants in Shaping and Gulao communes and document the spatial organisation of periodic markets on the eve of economic reform. Although they observe the significant impact of the commune boundary on people's choice of market, they fail to put it in the Chinese context. Thus, the underlying reasons for the observable morphology have not been fully exposed. Also, the relations between the market pattern and its local socio-economic conditions are not clear. Using the Liucheng city of Shandong and the Baoji city of Shaanxi as case studies, Liu (1991) and Shi's (1995) respective studies produce detailed examinations on market days, hierarchies and spatial patterns. Despite their geographical perspective, their discussions focus on what Smith (1979, p.473) has termed "spatio-temporal synchronisation". This notion assumes there is a positive correlation between market days and market location — the closer their site, the closer their schedules. Although the concept of spatio-temporal synchronisation deals with space, it focuses on the correlation between periodicity and market venue. The external relationships between rural markets and their socio-economic contexts are ignored. Also, variations generated by different rural market levels, size and functions have been oversimplified. Market densities have been overlooked. Moreover, the role of participants — traders, producers and consumers — and their interactions with rural markets have rarely been addressed.

In contrast, the majority of post-1979 rural market studies employed an economic perspective, concentrating on the effects of policy changes on growth and examining the income and consumption power of peasants. Macro economists, notably Watson (1988) and Findlay, Watson and Martin (1993) have highlighted the connections between state policy directions and rural market development. However, they have omitted the impact of policy ignorance and distortion at the local level, and the role of local governments is inadequately acknowledged. Thus, their assessment of rural market development is flawed. Similarly, focusing on policy formulation, Chinese economists employ a normative perspective to investigate the function of rural markets. For instance, Shu (1999) regards them as a key element to achieve long-term domestic growth. A series of measures is suggested to improve the current market system so as to release the huge economic capacity of the Chinese countryside. Du (2001) further argues that China's rural market network and the country's urbanisation process are interdependent. Hence, improvement of the rural market network accelerates the process of rural transformation and, eventually, eliminates the inequality between urban and rural areas. Despite their insight on China's rural market system, their analyses remain superficial. The suggested measures are vague with no serious consideration on the country's structural problems.

Most micro-economic perspectives have been contributed by Chinese scholars, notably Zheng (1999), Jiang and Liu (2000) and Yan (2002). They have argued that the income of peasants and their purchasing power have been the key factors stimulating rural market development; accordingly, future market planning should focus on increasing such income. Still, they failed to recognise that income levels were not the only factors generating market development - transport costs and level of agricultural productivity were also important.

G. William Skinner's mid-1960s economic perspective has provided a more comprehensive framework for studying China's rural markets. However, due to the Cold War between the western and communist countries and the political turmoil within China during the 1960s and 1970s, Skinner's notion on market hierarchy was tested in Taiwan and different results were found (Knapp, 1971; Crissman, 1976a, b; Sangren, 1980, 1985). Economic reform since 1979 has given scholars the first opportunity to justify Skinner's theories in China. Jiang (1993) revisits Skinner's fieldwork site in Sichuan and attempts to identify the changes in the market system since 1949. Although his relatively sophisticated qualitative analysis pinpoints the mathematical mistakes in Skinner's work,⁴ the investigation is limited to the spatial pattern and hexagonal networks of rural markets. Hodder (1993) has questioned the significance of such a framework to understand China's marketing activities. He argues "if patterns are looked for, they can be found" (Hodder, 1993, p.36). Therefore, whether a marketing area is circular, square or a hexagonal shape is not important. It is the arbitrary assumption of a causal relationship between patterns and process that is subject to criticism. Investigating private trade and markets during the reform era, Hodder goes on to question the assumptions given to the relationship between market hierarchy and settlement, and the arbitrary division of a rural market system. His critique of Skinner's thesis focus on the latter's perspective - marketplaces are merely an allocation network and argue that markets are "an expression of the institutionalisation of trade" (Hodder, 1993, p.32). These criticisms not only suggested an alternative to Skinner's dominant framework, but also demonstrated that these studies on China's marketplaces are "dated and limited" (Hodder, 1993, p.31). Indeed, new challenges to the validity of Skinner's thesis have resulted from changes in social, political and economic sectors since reform, which have modified the relationship between rural market development and its local context.

One of the most distinct characteristics of China's reform era has been the decentralisation of economic decision-making power. Indeed, this process has transferred the state's command structure to local government (Chung and Tang, 1997). The decentralisation of power has increased the role of local government which, in turn, has had important repercussions for China's political economy and regional development. Initially, greater autonomy enabled local government to play a more active role in economic development. Economic strategies were formulated and a variety of models devised such as the Sunan and Wenzh...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• List of Illustrations
• Preface
• Acknowledgements
• Note on Measures
• Dedication
• 1 Market-place, Geography and Space
• 2 China's Rural Market District: The Central Place Theory and Skinner
• 3 China's Rural Market Development Since 1979: Has the Traditional Market System been Revived?
• 4 Local Market Pattern and Hierarchy: Case Studies of Deqing and Dongguan
• 5 Beyond the Preoccupation of Transport: Economic Factors and Their Impact on China's Rural Market Development
• 6 Invisible Hand versus Invisible Wall: Administrative Parameters and Rural Market Development
• 7 Deqing, Dongguan and Spatial Variations
• 8 Skinner, Rural Market Development and Economic Reform: A Conclusion
• Appendix
• Bibliography
• Index