The Law of Value and the Price System in China

That price is determined by the law of supply and demand has long been taken for granted in the Western world. The theory has been working well in explaining the phenomenon of price. However, is it also applicable in a socialist country such as China? Is the Chinese economy an exception to this law? What is the price mechanism in the country? These answers are unknown even to an ordinary person living in China. In the socialist China for many years, the price change has slipped people's notice. What people heard was the propaganda slogan: "Stabilize price, guarantee supply, and improve people's livelihood." People were used to accepting prices as they were; they did not bother to look at the price mechanism which is thickly veiled behind the propaganda slogan and controlled by the government. The importance of price in an economy is beyond question. But can it function without a guiding theory? Or is there a theory of which we are ignorant? If one does exist, what is it? How does it work, and does it work well? To answer these questions, research on the theory and practice in price determination was conducted through an investigation of nonstaple food prices in Shanghai.