1. Zhang Shaojie, “Economic behaviour of enterprises operating along ‘two tracks,’” mimeographed paper, Economic Reform Institute of China, Beijing, March 1986.

2. See C. Findlay, “Developments in China's open-door policy and integration with the world economy: implications for further reform,” paper presented to the Asian Studies Association of Australia Bicentennial Conference, Canberra, February 1988.

3. There is some variation between sources in the figures cited for imports because of the difference between customs and foreign trade departments figures. Ai Yunhang, “Wo guo yangmao gong qiu fangmian de zhuyao wenti ji qi duice” (“Major issues in wool supply and demand in China and the appropriate policies”), Nongye jingji wenti (Problems of Agricultural Economics), No. 7 (July 1988), pp. 30–34, says 1986 imports were 180,000 tons. The Zhongguo fangzhi ribao (China Textile News), 6 October 1988, in an article entitled “Wo guo maofang hangye mianlin yanzhong kunnan” (“China's wool industry faces serious difficulties”), gives 1987 imports as 160,000–170,000 tons. Data in Table 1 for those years are the official customs figures.

4. Tongjiju, Guojia (ed.), Zhongguo tongji nianjian 1986 (China Statistical Yearbook 1986) (Beijing: Zhongguo tongji chubanshe, 1986), pp. 669, 676. and 687.Google Scholar

5. See Ray Byron, “Income and demographic influences on household demand in China,” mimeo, Australian National University (ANU), Canberra, for analysis of the share of clothing in household budgets within China; see Kym Anderson and Young-il Park, “China and the international relocation of world textiles and clothing activity,” mimeo, University of Adelaide, for analysis of the shares of various fibres in consumption of clothing and textiles.

6. Bingxiu, Wang, “Wo guo yangmao gongqiu zhuangkuang ji qi duice de tantao“ (“Wool supply and demand and the appropriate policies for China”), Nongye jingji wenti, No. 3 (1987), pp. 11–14.Google Scholar

7. The link between spindle capacity and raw wool demand is complicated by a number of technical factors, including the type of spindles (for fine or coarse wool) and the actual utilization rate. For our purposes, however, it provides a broad measure of the growth in wool demand.

8. Liu Deyou, “ ‘Yangmao dazhan’ ji xu pingxi” (“The ‘wool war’ urgently needs calming down”), Jingji ribao (Economics Daily), 15 November 1986, pp. 1 and 2.

9. Ai Yunhang, “Major issues in wool supply,” p. 30, estimates that of the 1985 output of 178,000 tons only some 120,000 were actually available to industry when the amount used by the peasants is deducted.

10. Zhao Zekun, “Yangmao shichang: qi shi lu” (“The wool market: a revealing story”), Nongmin ribao (Peasants’ Daily), 29 December 1986, p. 2.

11. Interviews, Yulin prefecture, August 1988.

12. Estimated by Li Ze using data on spindles required per unit of wool output and the total number of wool spindles, “The Chinese wool textile industry,” mimeo, ANU, Canberra, September 1988.

13. See, e.g., Zhou Guohua, Qu Weiying and Feng Cheng, “Xibei ‘yangmao dazhan’ tichu de xin keti” (“New issues raised by the ‘wool war’ in the north-west”), Liaowang (Outlook), No. 8 (1986), p. 31, and Liu Deyou, “The ‘wool war,’” p. 1.

14. Ai Yunhang, “Major issues,”.p. 30, and Zhongguofangzhi ribao, 6 October 1988.

15. J. Copland, “The development of China's wool industry,” mimeo, Australian Centre for International Agricultural Research (ACIAR), September 1986, estimates the clean yield from greasy wool in China is in the range of 40–45% compared with 45% in the Soviet Union, 63% in Australia and 74% in New Zealand. Chinese sources, however, suggest that there is considerable local variation with a rate of 30% in provinces like Henan and Shaanxi and 50% in Inner Mongolia, Xinjiang and Qinghai. Significantly there was until recent times little or no variation in the raw wool price levels between these different regions to reflect the differences in quality. Gao Xiaoming, “Kexue yang yang kaifa wo guo yangmao ziyuan” (“Raise sheep scientifically, develop China's wool resources”), Jingji ribao, 13 March 1984, p. 2. As discussed below, one result of the wool war has been a significant decline in clean yield.

16. For a further discussion of the animal husbandry regions of China see Economic Geography Research Section, Geographical Research Institute, Chinese Academy of Sciences (ed.), Zhongguo nongye dili zonglun (A General Outline of China's Agricultural Geography) (Beijing: Kexue chubanshe, 1983), pp. 281–308.Google Scholar

17. For a discussion of these three types of areas as they exist within Shaanxi province see Huang Deji et al., “Cong yangyangye de shengchan tedian kan yangmao gouxiao zhidu de gaige wenti” (“The reform of the wool purchase and sales system from the point of view of the characteristics of sheep production”), Zhongguo nongcun jingji (China's Rural Economy), No. 5 (1987), pp. 27–29.

18. Zhongguo fangzhi ribao, 6 October 1988.

19. The following description is based on Copland, “China's wool industry.” For a more detailed analysis of the ecology and economic geography of the pastoral areas see Economic Geography Research Section, Geographical Research Institute, A General Outline of China's Agricultural Geography.

20. Chinese observers identify three main types of natural disaster in sheep farming: summer drought, which reduces both current feed and stored feed; heavy winter snow, which prevents sheep from grazing winter grass; and lack of winter snow, which leads to overuse of winter grass. See Xiangjin, Lin, Woguo xumuye jingji (China's Animal Husbandry Industry) (Beijing: Nongye chubanshe, 1982), p. 143.Google Scholar

21. A brief summary of these changes can be found in State Council Rural Development Research Centre (ed.), Nongcun zai biange zhong qianjin: lai zijiceng de diaocha baogao (The Countryside Advances in the Midst of Change: Survey Reports from the Basic Level) (Beijing: Nongye chubanshe, 1987), pp. 45–53.Google Scholar More detailed descriptions of the precise forms of household contracting and the way they changed can be found in the various regulations published by central, provincial and autonomous regions governments. See, e.g., the Inner Mongolian reports and regulations for animal husbandry and pasture management in China Agricultural Yearbook Editorial Committee, Zhongguo nongcun fagui 1983 and 1984 (Laws and Regulations for the Chinese Countryside, 1983 and 1984) (Beijing: Nongye chubanshe, 1985 and 1986).Google Scholar

22. See Andrew Watson, “The family farm, land use and accumulation in agriculture,” Australian Journal of Chinese Affairs, No. 17, January 1987.

23. State Council Rural Development Research Centre, The Countryside Advances, pp. 45–46.

24. China Agricultural Yearbook Editorial Committee, Laws and Regulations 1984, p. 338.

25. S. Chey, “The Chinese raw wool production industry,” mimeo, ANU, Canberra, November 1987.

26. The following discussion is based on Liu Delun and Li Zhengqiang. “Mian yang shengchan guanli wenti tantao” (“A study of the problems in the management of sheep production”), Zhongguo nongcun jingji, No. 5 (May 1987). pp. 22–26, and State Council Rural Development Research Centre (ed.), The Countryside Advances.

27. As noted above, the allocation of sheep to households has led to some underreporting to the State Statistical Bureau and the size of the decline may be slightly overstated in the national figures.

28. Liu Delun and Li Zhengqiang, “A study of the problems,” p. 23.

29. Qinghai Animal Husbandry Bureau Management Division, “Qinghai caoyuan; xumuye jingji xiaoyi qian tan” (“A brief discussion of economic results in pastureland animal husbandry in Qinghai”), Nongcun caiwu kuaiji (Rural Financial Accounting), No. 4 (1988), pp. 23–24, reports that in Qinghai labour costs account for over 60 percent of sheep rearing costs.

30. State Council Rural Development Centre (ed.), The Countryside Advances, p. 50.

31. Ibid. p. 49.

32. See the national and provincial regulations cited in China Agricultural Yearbook Editorial Committee, Laws and Regulations 1983, pp. 230–46, and 1984, pp. 318–42.

33. This issue is examined in a more general way in Findlay and Watson, “Efficiency and risk, contracting in the Chinese countryside,” paper presented to the Wool Project Workshop, Australia-Japan Research Centre, ANU, Canberra, 14 October 1988.

34. The following discussion is based on Commercial Economics Research Institute, Ministry of Commerce (ed.), Xin zhongguo shangye shigao (The History of Commerce in New China) (Beijing: Zhongguo caizheng jingji chubanshe. 1984), pp. 1–51.Google Scholar

35. Ibid. pp. 137–41.

36. Ibid. pp. 33–34.

37. State Statistical Bureau, Zhongguo tongji nianjian 1983 (China Statistical Yearbook 1983) (Hong Kong: Jingji daobaoshe, 1983), p. 482.Google Scholar

38. Commercial Economics Research Institute, The History of Commerce, p. 389.

39. See Andrew Watson, “The reform of agricultural marketing in China since 1978,” The China Quarterly, No. 113 (March 1988), pp. 1–28, for discussion of the timing of the policy changes.

40. See Wang Bingxiu, “Wool supply and demand,” for a discussion of this issue.

41. In principle it would be possible to do some econometric work to isolate the contribution of shifters of the supply curve and movements along the supply curve to the change in sheep numbers. It seems unlikely, however, that producers were able to operate on their supply curves before 1978. In other words the problem would be to model the bureaucratic procurement system. After 1978, when household responsibility was introduced, the standard models become relevant but the length of the time series of data available, at this stage, only at the national level, is not sufficient.

42. Wang Bingxiu, “Wool supply and demand,” p. 13.

43. The only other major contributing factor not considered here is the possibility of a major natural disaster affecting the wool producing areas over this period. While the variable climatic and natural conditions in the producing areas mean that such problems are a regular occurrence (see, e.g., the discussion in Lin Xiangjin, China's Animal Husbandry Industry), none of the authors cited in this article raises this as an explanation for the fluctuations in wool production in recent years.

44. Gao Xiaoming, “Guanyu yangmao shougou zhong de jige zhengce wenti” (“Some policy issues in wool purchasing”), Nongye jingji wenti. No. 7 (1984), pp. 54–55.

45. Ibid.

46. Zhao Zekun, “The wool market.”

47. See the Central Committee and State Council document on “10 policies for further enlivening the rural economy,” 1 January 1985.

48. Liu Deyou, “The ‘wool war,”‘ p. 2.

49. Zhongguo shangye bao (China Commercial Paper), 3 July 1986, gives a list of the price increases in different regions after 1984.

50. Liu Deyou, “ ‘Yangmao dazhan’ ru he pingxi?” (“How to calm the ‘wool war?’”), Jingji ribao, 17 November 1986, p. 2.

51. Ibid.

52. Liu Deyou, “The ‘wool war,’” 15 November 1986, p. 2.

53. Beijing Agricultural College Research Group, “Gaige he wanshan wo guo yang mao liutong tizhi de tantao” (“An exploration of the reform and improvement of China's system of wool circulation”), Zhongguo xumuye fazhan zhanlue yanjiu (Research into the Development Strategy for China's Animal Husbandry Industry) (Beijing: Zhongguo zhanwang chubanshe, 1987), pp. 292–302.Google Scholar

54. Liu Deyou, “ ‘Yangrong da luan’ neng fou zhili?” (“Can the ‘cashmere chaos’ be cured?”), Jingji ribao, 4 January 1988, p. 2.

55. For a more comprehensive discussion of these issues, see Andrew Watson, “Investment choices in the Chinese countryside,” The Australian Journal of Chinese Affairs (forthcoming). Useful Chinese summaries of these reforms can be found in Yinong, Tian, Fulin, Zhu and Huaicheng, Xiang, Lun zhongguo caizheng guanli tizhi de gaige (On the Reform of China's System of Financial Administration) (Beijing: Jingji kexue chubanshe, 1985);Google ScholarBi, Han and Fukang, Mai (eds.), Guojia yusuan cankao ziliao (Reference Materials on the National Budget) (Beijing: Zhongyang guangbo dianshi daxue chubanshe, 1984); Xiang Huaicheng, “Zai gaige zhong qianjin de zhongguo caizheng” (“China's financial administration advancing through reform”), Caizheng yanjiu (Financial Research), No. 2 (1987), pp. 1–9; and Zhongguo jingji nianjian (China Economic Yearbook) (Beijing) 1981, p. 11–130, and 1983, p. VIII-56.Google Scholar

56. Wang Xukai and Lang Zuoshi, “Maofangye de weiji yu yangyangye de kunjing ji chulu” (“The crisis in the wool spinning industry, the problems of sheep rearing and the solution”), Nongye jingji wenti, No. 3 (1987), pp. 15–17, report that in 1985 Suzhou City alone added 10 factories of 5,000 spindles exceeding the total Jiangsu province Seventh Five-Year Plan target of 15,000 spindles. And in Shanxi province wool yarn consumption rose by 87–7% during 1984.

57. Zhongguo shangye bao, 23 August 1988.

58. Ai Yunhang, “Major issues in wool supply,” p. 31.

59. Beijing Agricultural College Research Group, “An exploration,” p. 297.

60. Zhou Guohua, Qu Weiying and Feng Cheng, “New issues,” p. 32.

61. Liu Deyou, “The ‘wool war,’” 15 November 1986, p. 2.

62. Zhongguo fangzhi ribao, 6 October 1988.

63. Ai Yunhang, “Major issues in wool supply,” p. 32.

64. Ai Yunhang, “Major issues in wool supply,” p. 31. The version of this article published in Xinjiang caijing (Xinjiang Finance and Economics), No. 6 (1987), pp. 7–11, gives more detail on the methods used.

65. Liu Deyou, “The ‘wool war,’” 15 November 1986, p. 2. See also, Zhou Guohua, Qu Weiying and Feng Cheng, “New issues,” p. 32.

66. Liu Deyou, “The ‘wool war,’” 15 November 1986, p. 2.

67. Beijing Agricultural College Research Group, “An exploration,” pp. 293–94.

68. Ai Yunhang, “Major issues in wool supply,” p. 31.

69. Liu Deyou, “The ‘wool war,’” 15 November 1986, p. 2.

70. Ai Yunhang, “Major issues in wool supply,” p. 32.

71. China Daily, 28 August 1988, p. 1, and Renmin ribao (People's Daily), 29 September 1988, p. 1.

72. Zhongguo shangye bao, 6 October 1988.

73. Ibid.

74. Liu Deyou, “The ‘wool war,’” 15 November 1986, p. 2.

75. The poor quality of local processing, often using obsolete machinery is stressed in Zhongguo shangye bao, 6 October 1988.

76. Liu Deyou, “The ‘cashmere chaos,’” 4 January 1988.

77. Ai Yunhang, “Major issues,” p. 31.

78. “Maofang yuanliao jinque duanqi nan yi jiejue” (“It will he hard to solve the major shortage of raw materials in the wool textile industry in the short term”), Jingji xiaoxi (Economic Information), 25 March 1988, p. 2.