* The author would like to thank Christopher Findlay and Andrew Watson for their helpful comments and suggestions, and acknowledges support through a grant from the Australian Centre for International Agricultural Research.

1 For a detailed discussion of the two-track system in China';s agricultural commerce, see T., Sicular, “Plan and market in China';s agricultural commerce,” Journal of Political Economy, Vol. 96, No. 2 (1988), pp. 283–307. Recent reforms in China';s grain markets and prices are discussed in Y. S. Cheng, and S. K. Tsang, “The changing grain marketing system in China,” The China Quarterly, No. 140 (December 1994), pp. 1080–104. The survey of China';s grain markets conducted by the author in 1995 found that, after the grain market reforms in the early 1990s, grain producers in some areas of the country are again required to deliver a certain amount of their grain to the Grain Bureau at lower than market prices.Google Scholar

2 The main difference between IOUs and the cheques which could not be cashed is that the latter, though they could not be converted into cash for a period of about three months, could be deposited in the Agricultural Bank to generate interest income. In the discussion below, both are referred to as IOUs. According to researchers from the State Council, the problems with the inadequate supply of funds for grain procurement emerged only after the reforms to the financial institutions and the Grain Bureau in 1985. See the Research Unit of the State Council, “Nongchanping shougou jijin gongqiu yu guanli wenti de yanjiu” (“Supply, demand and management of funds for agricultural purchases”), in Nongchanpin liutong tizhi gaigeyu zhengce baozhang (The Reform of the Agricultural Marketing System and Policies) (Beijing: Hongqi chubanshe, 1992), pp. 154–55. It was found by the author in Yancheng, Jiangsu province, that the local Grain Bureau and the Agricultural Bank issued IOUs as early as 1985

3 See Food Marketing and Trade Research Groups, China Long and Medium Term FoodGoogle Scholar Development Strategy Research Project, Shipin liutong jiage yujinchukou (Food Marketing, Prices, Import and Export) (Beijing: Nongye chubanshe, 1991), pp. 4–5.

4 See Johnson, D. G., “Does China have a grain problem?” China Economic Review, Vol. 84, No. 1 (1994), pp. 96–100.Google Scholar

5 Xiao Fuping, “Duofang chouj i jijin wanjie gongqiu maodun” (“To raise funds to reduce ihe gap between the supply of and the demand for funds for grain purchases”), Zhongguo shangye nianjian (Almanac of China';s Commerce), 1990, p. 122

6 The Ministry of Grain was part of the Ministry of Commerce between 1970 and 1979. In 1982, the Ministry of Grain was incorporated again into the Ministry of Commerce as the General Grain Bureau; see World Bank, Report 6, China';s Domestic Grain Trade, in China Managing an Agricultural Transformation, Part I - Grain Sector Review, Working Papers Vol. II, China Department, Agricultural Operational Division, Asia Regional Office, 1990, pp. 16–17. After 1982, the General Grain Bureau became responsible for state grain procurement and distribution. It has a strong national network which has provincial, prefectural and county branches, as well as more than 40,000 grain stations in rural areas. In this article its vast network is referred to as the Grain Bureau.

7 See Hsiao, K. H., Money and Monetary Policy in Communist China (New York: Columbia University Press, 1971), pp. 37–64, 99–100.Google Scholar

8 See Sicular, “Plan and market,” pp. 283–307; and T. Sicular, “Ten years of reform; progress and setbacks in agricultural planning and pricing,” in Kueh, Y. Y. and Ash, R. (eds.), Economic Trends in Chinese Agriculture: The Impact of Post-Mao Reforms (Oxford: Clarendon Press, 1993), pp. 47–96.Google Scholar

9 See Johnson, D. G., The People';s Republic of China 1978–90, Country Studies, No. 8, International Centre for Economic Growth, San Francisco, California, ICS Press, 1990, pp. 1–14.Google Scholar

10 Jinrong shibao (Financial Daily), 31 January 1989, p. 2.

11 See Xu Jinyong, “Lun woguo liangshi liutong tizhi de gaige licheng” (“On the procedures of reforms of China';s grain marketing system”), Liangshi jingji yanjiu (Grain Economic Research), No. 6 (1992), pp. 7–10; Sicular, “Ten years of reform,” pp. 47–96.

12 See Wu Shuo, “Zhongduanqi liangshi wenti de pouxi he duice” (“Exploring the prospects of long and medium term policy of grain in China”), Zhongguo nongcun jingji (Chinese Rural Economy), No. 12 (1989), pp. 15–21.

13 See Xu Zhongren and Wang Xuanshe, “Jiaqiang liangshi guanli gaijin liangshi shichang” (“To strengthen grain management and improve grain marketing”), Zhongguo shangye nianjian, 1990, pp. 14–16.

14 Since the mid-1980s, the central budget has been generally responsible for chajia butie and the provincial budget has been mainly responsible for tijia butie. Yi zhuan pingjiage butie was shared between the two; the central government paid 0.128 yuan of subsidy for each kilogram of yi zhuan ping grain and the local budget was supposed to supply the rest. See Deng, Yiming, Liangshi liutong: shichang zhuti yunxing guojia hongguan tiaokong (Grain Marketing: Market Operation and State Macro Control) (Beijing:Jingji guanli chubanshe, 1993), pp. 178–181.Google Scholar

15 Ibid.

16 For a detailed discussion of the state subsidies to the Grain Bureau, see Wang Zhigao, “Liangshi qiye caiwu guanli” (“Financial management of grain enterprises”), Zhongguo shangye nianjian, 1990, pp. 111–12, and Chen Dehong etal., “Jixu shixing liangshi gongxiao diaobo he caiwu baogan” (“The fulfilment of fiscal quotas for grain enterprises”), Zhongguo shangye nianjian, 1989, pp. 114–15.

17 Food Marketing and Trade Research Groups, Shipin liutong jiage yujinchukou, p. 68

18 Jiang Nengxian, “Gaige liangshi caiwu tiji zhenqiang qiyi huoli” (“To reform the accounting system of the grain system”), Zhongguo shangye nianjian, 1988, p. 134.

19 Xiao Fuping, “Duofang chouji jijin wanjie gongqiu maodun,” p. 112.

20 Deng Yiming, Liangshi liutong, p. 177.

21 Ibid

22 Zhao Zhongzhi and Pan Dianzhou, “Guanyu nongfu chanpin shougou jijin zhuanhu guanli de jige wenti” (“Some issues concerning the managment of funds for grain purchases”), Zhongguo nongcun jingji, No. 6 (1991), pp. 35–38.

23 Chang Shouping and Zhou Liangwei, “Liangshi shougou jijin xunhuan guaiquan yu duice” (“The strange circle of grain procurement fund circulation and the countermeasure”), Nongye jingji wenti (Problem of Agricultural Economy), No. 12 (1989), pp. 20–22.

24 Ibid.

25 Deng Yiming, Liangshi liutong, p. 182

26 The pressure from grain producers was caused partly by the central government. It was not unusual for grain producers to ask the local Grain Bureaus to purchase more grain at a high price by showing them the relevant central documents or the editorials in Renmin ribao (People';s Daily). Local officials found it difficult to explain to peasants that the central government did not provide money for the purchase.

27 See Cheng and Tsang, “The changing grain marketing system in China.”

28 Zhongguo xiangzhen qiye bao (China';s Town and Village Enterprise News), 24 February 1988, p. 1.

29 Jinrong shibao, 19 November 1987, p. 1.

30 Jinrong shibao, 5 October 1987, p. 1.

31 See Food Marketing and Trade Research Groups, Shipin liutong jiage yujinchukou, p. 70.

32 Chang Shouping and Zhou Liangwei, “Liangshi shougou jijin xunhuan guaiquan yu duke,” pp. 20–22.

33 See Food Marketing and Trade Research Groups, Shipin liutong jiage yu jinchukou, pp. 69–71.

34 Cheng, Enjiang, The Reform of the Rural Credit System in the People';s Republic of China, unpublished Ph. D. thesis, University of Melbourne, 1993, pp.,176–187Google Scholar

35 Chang Shouping and Zhou Liangwei, “Liangshi shougou jijin xunhuan guaiquan yu duice,” pp. 20–22.

36 Zhongguo shangyibao (China Commerce), 8 October 1988, p. 1.

37 Jinrong shibao, 15 June 1988, p. 1.

38 Cheng Enjiang, The Reform of the Rural Credit System in the People';s Republic of China, p. 160

39 Ibid. p. 176.

40 Pan Kaizhi, “Qieshi jiaqiang zhuanhu guanli quebao shougou jijin gongying” (“To strengthen the management of the purchase funds and ensure the supply of funds for agricultural purchases”), Zhongguo nongcun jingji, June 1991, p. 39.

41 Zhongguo shangye bao, 20 October 1988, p. 1.