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Why China Has No Inflation | |
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| Source | massline.org |
This is a pamphlet published by the Foreign Languages Press in Peking (Beijing) in 1976, during the Mao era. The complete text of the pamphlet is given here, although the collection of photographs of people at market places, etc., which was included in the original pamphlet, is omitted here. —Scott H.
An Introduction
ALL OVER the world, the capitalist economy is in turmoil. Ordinary people and their families are haunted daily by inflation. How to get rid of the menace has become a most widely discussed problem in many parts of the world. In sharp contrast is the situation in the People’s Republic of China. In the quarter of a century since its founding, thanks to the continuous growth of China’s socialist economy based on the policy of independence and self-reliance, and to the full display of mass initiative, the people’s livelihood has steadily improved. A remarkable feature in this respect is the stability of Renminbi [RMB] (People’s Currency)—the Chinese yuan.
How did China overcome the aftermath of the runaway inflation that prevailed on the eve of the liberation? Why is her currency immune from the monetary crises that have wrecked the capitalist world in all these years? How does the stability of RMB affect the daily life of her people? Answers are given in this booklet, based on a survey by the writer who had visited a number of families, checked with markets and interviewed government departments in charge of finance, banking and commerce.
These facts are presented in the hope that they may help the foreign reader to a better understanding of New China’s financial and monetary systems, her economic policy and the life of her people.
1. People Are Free from Inflation Worries
MONEY IS an indispensable medium in daily life. Through it we obtain food, clothing and so on. This is true of every country in our era of monetary economies. Therefore, ups and downs in the value of money are of concern to everyone. Yet people I spoke to during this survey gave little thought to possible changes in the value of RMB. Many housewives don’t even know what “inflation” means.
Why? At the Statistical Bureau of the Peking Municipality, a table attracted my attention.
| Year | 1965 | 1966 | 1968 | 1970 | 1973 |
|---|---|---|---|---|---|
| For Goods | 100 | 100.22 | 100.52 | 101.32 | 101.57 |
| For services | 100 | 102.23 | 102.52 | 102.52 | 103.20 |
These figures tell us that 100 yuan at their 1965 value could buy 101.57 yuan worth of goods in 1973; and in services (rent, water, electricity, bus fare, etc.) they could buy 103.20 yuan worth. Thus, the value of the yuan is not only stable, but shows a slight upward trend.
The Peking scene is representative of the whole country. China’s yuan remains stable today despite the inflation raging in the entire capitalist world.
Stable Price Level; Improving Livelihood
The level of prices is an important indicator of a nation’s economy. It reflects the purchasing power of money, and serves as a yardstick of the people’s livelihood. Below is a worker’s family budget in China.
The Chang Family’s Budget
“You see, food, clothing and other necessities have cost the same all these years,” the 36-year-old textile worker Chang Pao-chih said to me when we talked of what he spends. “My family doesn’t have a high standard of living, but our income covers our needs and we don’t worry that our money will buy less.” His words clearly demonstrate the stability of prices in China, which in turn contributes to a secure life for her people.
Chang is a production team leader in a workshop of the Peking No. 2 State Textile Mill. His wife Chang Shu-hua, also 36, tends a cone-winding machine there. Their combined monthly income is 154 yuan. They have two children, one in primary school, the other in a day-nursery. The Changs breakfast and dine at home and lunch in the factory’s dining hall, which is located near their home. They are a rather typical family in China.
For an understanding of the impact of price level on the life of the people, I tabulated the family budget of the Changs.
| Item | 1965 | 1970 | 1974 |
| Grain | 23.60 | 25.45 | 25.45 |
| Meat, vegetables, etc. | 22.50 | 30.00 | 30.00 |
| Dining out | 12.00 | 12.00 | 12.00 |
| Sugar, fruit and refreshments | 10.00 | 10.00 | 9.50 |
| Clothing | 16.75 | 21.35 | 21.35 |
| Rent | 0.84 | 0.84 | 0.84 |
| Water | 0.30 | 0.30 | 0.30 |
| Electricity | 1.05 | 1.05 | 1.05 |
| Gas | 1.60 | 1.60 | 1.60 |
| Bus fare, stamps | 0.96 | 0.96 | 0.96 |
| Recreation | 1.20 | 1.20 | 1.20 |
| Haircuts, baths | 0.50 | 0.50 | 0.50 |
| Day-nursery | 3.50 | 3.50 | 3.50 |
| Contingent outlays | 5.00 | 5.00 | 5.00 |
| Total | 99.80 | 113.75 | 113.25 |
Apart from spending on food and clothing, which increased in these ten years due to the birth and growth of the children, all other amounts have remained the same. So the family is able to put aside more than 40 yuan a month in the bank. With this money, the Changs have bought a radio, a TV set, two wrist watches and some furniture. Their home is adequately furnished.
On Sundays, they all have their meals at home, and the groceries cost about 2 yuan. What do they get for this money? According to Peking retail prices from 1965 to November 1974, 2 yuan could buy the following: