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Price Distortion in the Transition Process: A CGE Analysis of China's Case

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  • Xu, Dianqing

Abstract

The correct evaluation of price distortion is a prerequisite for designing the correct price reform policy which is of tremendous importance in the transitions process from a centrally planned economy to a market economy. The purpose of this paper is to investigate the advantages and shortcomings of various criteria for evaluating price distortion. Based on the characteristics of a two-tiered planned-market system in Chinese economic reform, a computable general equilibrium (CGE) model had been built to evaluate quantitatively the degree of price distortion in the prevailing price system and the effects of price adjustments in order to propose a reasonable price reform policy. The difference between the planned price and the equilibrium price seems to be a better indicator for evaluating the degree of price distortion than others. Furthermore, this difference provides more accurate feedback for price reform policies in order to ensure a stable and controllable price reform process. Copyright 1993 by Kluwer Academic Publishers

Suggested Citation

  • Xu, Dianqing, 1993. "Price Distortion in the Transition Process: A CGE Analysis of China's Case," Economic Change and Restructuring, Springer, vol. 26(2), pages 161-182.
    • Handle: RePEc:kap:ecopln:v:26:y:1993:i:2:p:161-82
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    Cited by:

    1. Tsang, Shu-ki & Ma, Yue, 1997. "Simulating the impact of foreign capital in an open-economy macroeconomic model of China," Economic Modelling, Elsevier, vol. 14(3), pages 435-478, July.
    2. Garbaccio, Richard F., 1995. "Price reform and structural change in the Chinese economy: Policy simulations using a CGE model," China Economic Review, Elsevier, vol. 6(1), pages 1-34.

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