Consumer Policy (China)

Since 1949, consumer policy in China has been closely connected to the ideological direction of ruling Communist Party elites. After the establishment [Page 282]of the People's Republic of China, a command economy was established that went much further toward controlling all aspects of everyday life than found in the former Soviet Union. On gaining power, the Chinese Communist Party nationalized urban land and businesses and collectivized farmland. In addition, all citizens were limited in their movements by strict residency laws (known as the hukou system) that defined where a person could live and work. Within urban areas, production was organized around work units (danwei), distinct spatial compounds designed to house, feed, entertain, educate, care for, and monitor residents. In addition to their role as the state-in-practice, work units served as the primary social web for members and as a foundational aspect of identity, according to Joe C. B. Leung. In rural areas, social control was centered on communes. However, unlike urban residents, rural peasants did not receive access to subsidized basic goods and services.

At its height, this command economy transformed all consumer products and services into planned productive sectors, with access primarily via a ration system. This system was strained by the side effects of the Cultural Revolution (1966–1976), during which time production of both foodstuffs and consumer products was disrupted by political in-fighting and ideological campaigns. Following the death of Mao Zedong in 1976 and the ascendancy to power of Deng Xiaoping, economic reforms aimed at dismantling the command economy were instituted. Known in Chinese as gıigé kıifàng (reform and opening), these ongoing policies have encouraged foreign investment, effectively privatized agricultural production, pushed state enterprises to be competitive, allowed private production, and eliminated production and price controls. These policies have also aimed at shifting welfare provisions, particularly housing, from work units, communes, and cooperatives to private citizens.

Housing reforms in urban areas began with an experimental program in Xian and Nanjing in 1979 to construct and sell new housing at cost. This policy failed because few people could afford to purchase a new apartment at cost, according to Xing Quan Zhang. Next, a subsidized program was tried in Zhejiang and Hubei Provinces in 1981 to 1982. Under this program, new housing stock was jointly funded by the central government, work units, and individual occupants, with each contributing one-third of the construction cost. This program was rapidly expanded to approximately three hundred cities by 1986, including Beijing. In 1988, state ownership of land was legally separated from individual use-rights. This law was further revised in 1990 to allow anyone who held use-rights to transfer or sell these. In a 1991 decree, the State Council institutionalized the tripartite investment structure for new housing stock between central government organs, work units, and work unit members.

These initial reforms focused on increasing the supply of housing not through privatization but through what the government termed commoditization, in which private citizens became, in effect, partners with their work units and central state ministries. This joint funding program enabled residents without access to subsidized housing to gain access to a different sort of subsidized housing, in which they held limited use-rights, in exchange for a third of the cost of this housing. More complicated was how to apply housing reforms to already-existing state housing, most of which was located within state-owned enterprises (SOE). Beginning in the early 1990s, work units transferred use rights of apartments to their occupants at fixed prices. In 1995, the State Council legalized the construction of commercial housing (shangpin fang) for sale at market prices as well as “economical” housing (jingji fang) for lower-middle-class residents. In 1997, new regulations required that work-unit-funded housing units be sold at “cost price,” which carried full property rights for buyers. Finally, in 1998, all state-affiliated enterprises and institutes were prohibited from constructing any further housing.

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