Basic Commodity Distribution in the People's Republic of China

Abstract

The functions of any commodity distribution system include balancing of supply and demand and allocating available supplies among individual consumers on the basis of some acceptable criterion. In an unregulated market system, both functions are handled by the free movement of price. Short supply relative to demand results in higher market prices which both reduce demand and stimulate increased supply. The criterion upon which available goods are allocated is purchasing power as determined by income level. As prices rise those with relatively low purchasing power will be deterred or will purchase inferior substitute commodities to fulfil their needs. In poor countries in which basic commodities require a high proportion of household income, fluctuations in the prices of these commodities of the magnitude required to balance availability with requirements often have serious consequences for the welfare of poorly endowed groups.