The following note was originally intended to be part of our Lu Xun symposium (in issue No. 91). Tang Tao, a disciple of Lu Xun in the latter's last years, is now Research Fellow at the Institute of Literature, CASS – Editor.

In the wake of the watershed events of 1967, most of the analysis of Chinese domestic politics has focused on the fallen “four,” subsequent purges of Leftists and their replacement by “pragmatists,” and the no longer guarded “reassessment” of the old Chairman's role in the Chinese revolution. This discussion has usually been directed at the personnel in the capital. This article will take a look at what has been happening in one part of the hinterland of late, as it elaborates a framework for interpreting central-local elite behaviour. It will develop this framework on the basis of a close reading of the events in one province, Yunnan, over the decade or so of the Cultural Revolution and its aftermath.

The level of grain consumption per head is by far the most important indicator of human welfare in China. It is therefore not surprising that the provision of food grain dominates official discussions of economic policy. Since 1978 the demand for grain has been raised significantly by the acceleration of incomes, following 20 years of stagnation, although the effect of this has been mitigated by the decline in the rate of growth of population, from 2·4 per cent per year (1970–74) to 1·2 per cent (1978–80). The demand for grain for direct consumption has not yet reached saturation in most parts of China and consumption rises with income per head. The demand for fine grain (rice, wheat and soya) is more income elastic than that for coarse grain such as millet, maize and especially sweet potatoes. In addition, the Chinese people are pressing to improve their diet by consuming more livestock products, the production of which requires large quantities of grain. In spite of the fact that grain is rationed, restricted “demand” as laid down by the Government cannot be met from domestic production and China is a large grain importer. Accurate estimates of food grain consumption are thus essential if we are to assess correctly the current state of the Chinese economy and its future trends.

The economy of the People's Republic of China is undergoing a sweeping transformation at the present time. Drastic changes are being made in its objectives, developmental strategies and the basic economic structure. The national objectives are no longer high speed industrialization and socialization at all costs, but an increase in economic efficiency and a rise in the people's standards of living. In terms of strategies, the country is shifting from a policy of unbalanced growth to a more balanced approach, while at the same time it opts for international co-operation instead of isolation. In other words, heavy industry no longer receives an overwhelmingly large share of state investments; now light industry and agriculture are given their fail shares. Besides, instead of emphasizing economic self-sufficiency, it now actively seeks foreign trade and foreign investment in an attempt to modernize the country. Meanwhile, the economic structure is also being fundamentally overhauled. The price mechanism is being allowed to function alongside planning; basic productive units, farmers and enterprises alike, are receiving more autonomy; pecuniary incentives in the form of bonus and profit are being reinstituted; a limited degree of competition is encouraged; and direct, administrative controls are giving way to indirect, economic controls. In sum, the economy is becoming more decentralized, with prices, markets and profits playing important parts. Under these circumstances, it is inevitable that the role of money and banking would be affected. The purpose of this paper is to examine changes in money and banking in China. In the following, I shall first briefly summarize the Chinese money and banking system inherited from the 1950s, then investigate recent changes and developments, and conclude with a generalization about the new role played by money and banking and its prospect.