# _14 How Fast_ **_Has_** _Chine_ **_Inditay Oroww?_**

constant (GVIO) prices probably understate changes in the sales price of coal received by the producers. Specifically, we anticipate that, Jf t indicates time, the ratio of annual output data CVIO(t)/GVIO(t) is too low.

Inconsistency among several data series raises the question of which is most likely to be in error. The conclusion that the ratio CVIO(t)/GVIO(t) is probably too small is based on the judgment that figures for average coal cost, which come dirctly from records of financial and material transactions maintained by large, well-establishri units, are less subject to distortion than ynthetic calculations of output value. If the distortion is contained in the output figures, the previous discussion suggests the constant-price figures (GVIO) as the probable locus of difficulty.4 This reasoning is not foolproof, but it appears that the most likely explanation of inconsistency between coal costs to the power industry and the 1VTO and CVIO data relating to coal production is that the series of output value at fixed w faster than the real value of industrial output in the coal industry.

Inconsistency between information about inflationary patterns and the price indexes implicit in China's industrial output statistics is not limited to the coal industry. More general difficulties become evident when one compares the implicit price indexes derived from output data for **the** state and collective segments of industry.

Despite the progress of economic reform, markets for Chinese indistrial output remain heavily regulated. Many firms are obliged to sell substantial portions of their output at low controlled prices. Even when firms are allowed to sell output at 'negotiated' or "imarket' rather than plan prices, they encounter numerous controls [Ishihara, 1989]. Government agencies set maximum prices, as when the State Price Bureau issues 'upper price limits for means of production outside the plan," including petroleum products, aluminum ingots and steel products [frice Thcy 3 (1988): 51-53). Extra-plan sales of steel and non-ferrous metal products are also restricted to designated commodity exchanges [rinc TheoX _5_ (1988): p. 57]. These measures are clearly designed to contain and restrict the rise of industrial prices. "law-boning," or personal official advice intended to limit price increases, has the same effect.

Each of these measures is directed primarily toward, and applied most forcefully to the activities of large, stateowned enterprises. Under conditions of excess demand in which govemment struggles to prevent prices from rising to market-clearing levels, it is difficult to doubt that small, widely dispersed collective enterprises encounter less restriction on product pricing than large, highly visible firms in the state sector. For this reason, there is a strong presumption that the rate of price increase for commodities produced in the collective sector will tend to outpace comparable inflation rates for similar products in the state sector.

> 4. **Itis also pouible that riing makups** by **_cooomeil intennsdiarim_ have widenod** Xw p **berwes tbe primes oseved** by ooal produm **and the price** paid by **oal user** for **_the_** powing porton of **astha oocur oute** X **pia** frmwork. However, **Jcfkon. RAwWi nd Zheng** find **no evidence** of **_A_ genral ris in markups** for industrial **intemediat** goods.