The Disintegration of Production

The Disintegration of Production

Firm Strategy and Industrial Development in China

Edited by Mariko Watanabe

In the past two decades, China has experienced rapid industrial and economic growth. This fascinating book explores the unique Chinese business strategy of vigorous market entry and low prices, which has been the key feature of this accelerated industrial growth.

Chapter 9: Grains: marketing systems and agricultural technologies for low prices

Hisatoshi Hoken

Subjects: asian studies, asian development, asian economics, development studies, asian development, development economics, economics and finance, asian economics, development economics, industrial organisation, institutional economics


Compared with the rapid development in China’s manufacturing sector, the steady growth in China’s agricultural sector attracts less attention. However, China is one of the world’s major agricultural countries; the total amount of rice and wheat, as well as other agricultural products such as fruits and meat products, ranks first in the world. As is well known, the GDP (gross domestic product) per capita in China with PPP (purchasing power parity) adjusted is much higher than that with exchange rate adjusted, and this is due to the fact that goods and services that do not enter into trade are much lower than those that do enter into trade (Naughton 2007: 225–226). Some of the most representative non-tradable goods are agricultural products, which are mainly consumed within the country. The low prices of agricultural products appear to contribute to the restriction of a rise in the total expenditure, resulting in one of the major sources of low factor price for industrial development. During the socialist era (1949–78), the livelihoods of the urban residents were supported by rationed foods distributed by state agencies, and the wages of urban workers were institutionally restricted to a low level. The mechanism of capital accumulation through low-wage labor continues to work even after the economic reforms implemented since 1978, as discussed in Chapter 10. Low-price foods are essential to urban residents, especially to the low-income groups and the migrant laborers.

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