China Emerging_ 1978-2008 - Xiao-bo , Wu [26]
The State Price Control Bureau noted in its Price Yearbook of China that prices rose faster in 1988 than in any year since 1950, and that inflation was intense. Prices rose by over 95% among the 383 commodities by which the state calculated the retail price index.
The buying frenzy brought on by inflation also created unprecedented shortages in raw-material inputs for production. In May, the supply of coal for electric power generation in Shanghai was down to two days. Hundreds of thousands of enterprises were living from breath to breath. The wave of buying reached its peak in Shanghai on August 28, when the municipal government had to take emergency measures. It resumed the distribution of food, salt, and fuel on the basis of coupons. You were only allowed to buy a cooking pot if you brought your old one in for exchange, or if you had a marriage certificate and evidence of your Shanghai residential status. On September 26, Business Week published a report titled “The Twists and Turns of China’s Reforms.” “China’s reforms are losing control,” it noted. “Price reform was frozen last month in order to deal with the crisis. The sudden about-face in government policy has brought uncertainty to both Chinese and foreign investors. China is at present implementing emergency controls, and an economist in the Australian Embassy has said, ‘We are witnessing a blanket movement to restore consumer confidence.’”
InOctober1988,thepolicydecisiontoreleasepricecontrolswasdeclared a failure. It was later judged to have brought on the greatest loss of economic controlsincereformsbeganin1978.Thecentralgovernmentinitiatedpolicies to address the situation; these were known as “macro-adjustments, and harnessing and rectifying.” The phrase was to resonate through the next few years. Panic buying and price inflation had characterized the episode, but the release of price controls had not led to a wholesale collapse of the economy. It had a negative influence on the macroeconomy, but production still went on. Perhaps a more serious consequence was the dampening of people’s enthusiasm for reform.In addition, there was now a growing hatred for those
A modern arts exhibition in Beijing that generated much dispute in 1989.
officialswho“usedtheir position to trade on the two-track system.” There was an increasing recognition that some were getting rich, while thecommonpeoplehad to face hardship due to inflation. From this pointonward,therewas a growing impression in China that reform was creating a radically unequal society.
The Chinese socialist economy now entered yet another uncertain period. “Allowing prices to break through the pass” had not simply been a setbackforeconomicpolicies—socialunrestnowcontinuedtoextendintothe future.Whenpeoplerealizedthatreformwasnotgoingtobetheprescription that solved all problems, a groundswell of opposition began, just waiting to break out.
Harnessing and Rectifying
P
eople opened their People’s Daily on New Year’s Day of 1989 to read the following message from the government. “We have come up against unprecedented and grave problems. The most outstanding of these is inflation in our everyday lives, but there are also some negative and
corrupt phenomena in the party and government, and in society at large. All of these are of great concern and alarm to the people.”
The Chinese New Year holidays had just passed when a wave of millions of migrant workers began flocking to cities. This happened in February 1989, and it galvanized