Before the reform and opening was introduced, most commodities on the Chinese market were priced by the state. But since the start of the reform and opening, along with the expansion of the commodity market scale and the change of the relations between commodity supply and demand, the state has carried out price reform step by step and according to plan. The fixing of prices by the state follows three forms: the fixing of price by the state, state guiding prices and market regulatory prices. The market regulatory price has been gradually relaxed-By 1999 the pricing of 95 percent of consumer goods and 80 percent of investment goods had been relaxed. These prices were regulated mainly through the relations between market supply and demand. A socialist market pricing mechanism is gradually taking shape.
In the pricing system the irrational state of basic product prices being too low has been improved, and the pricing structure is becoming more rational, step by step. Comparing 1998 with 1978, the index of the retail sales prices of rural industrial products increased by 3.88 times; and the index of the synthetic relative prices between industrial and agricultural commodities was 59.7 percent. Besides, the price scissors in the exchange of industrial products for agricultural products were alleviated. In 1998, the prices of agricultural products increased by 5.83 times, compared with those of 1978, and the prices of industrial products by 2.95 times, and their price ratio was 0.6 : 1. In accordance with the requirements of the socialist market economy, China has been establishing a pricing mechanism macro-regulated and controlled by the government, and fixing prices through the market.