| In 1978, the Communist Party of China (CPC) held the historic Third Plenary Session of the Eleventh Central Committee, which ushered a new historical period of reform and opening up to the world. In the past thirty years, China's economy has experienced a rapid economic growth, and its social developments have been also amazing. However, when the growth rate of the aggregate economy increased rapidly, problems of the economic structure turned out more and more serious, challenging the country's sustainable economic development. It is important for us to review the course of developments of reform and opening up entirely, and to summarize the experience and lessons of development in the period of China's economic transforming systematically. It is also important for us to practice the idea of the Scientific Outlook on Development, so as to build a moderately prosperous society, and to rejuvenate the great Chinese nation.The reform and opening up represent a great new revolution carried on by the people under the Party's leadership in a new era. The aim of it is to release and develop the productive forces, modernize the country, bring prosperity to the Chinese people and rejuvenate the Chinese nation; to promote the self-improvement and development of China's socialist system and to build and develop socialism with Chinese characteristics.Changing the ways of resource collocation is the essential demand and core of the reform, which aims at transforming a highly centralized and planned economy into a robust socialist market economy, and at making the market become the base of the resource collocation and making price become an effective carrier for transferring economic information. The collocation of resources is the collocation of various productive factors in essence, which decides the economic development level and its running efficiency directly, then decides the distribution of fruits of developments and social equity. Factor price is the important medium and basic means of resource collocation, and its determining mechanism is the essential tool for the realization of the resource collocation. A sound factor price determining mechanism is the institutional guarantee for the rationality of the factor itself.With twenty years'progress of the reform, the market can now decide price for various products in China. However, the development of factors market lags behind largely, and the formations of factor prices suffered institutional division and became a great unbalance as such. Market guides the collocation of labor and part of technology factors, while government guides the collocation of resources (soil, energy, etc) and of the price setting for capital. In this background, factor price determining mechanism must be distorted, and can't ensure the efficiency of resource collocation. Since this distortion will transmit to product market, there will be various imbalances of economic structures, such as in the industrial structure, demanding structure, and distribution structure. The essence, the aftereffect, and the improvement of the distortion of the factor price must be surveyed and answered seriously in the period of China's transformation and reform.Using both theoretical and historical method, this paper focuses on a systematic research into China's factor price determining mechanism, then points out a theoretical yardstick as well as an empirical standard for identifying the rationality of factor price. The theoretic meaning of this research lies at improving the theoretical research of transforming economic system, prompting modern economic theories with respect to China's situation, and pushing forward a cross-subject research of economics and statistics. The practical meaning of this research lies at reviewing China's reform from the viewpoint of price reform, so as to provide a reference for correcting the imbalance of China's economic structure at the moment, and to provide helpful theoretical hints for carrying out the newly policies made by the 17th National Congress of CPC. The arrangement of this paper is as follows:Chapter One: Introduction. The opening chapter gives a general overview of the subject. Firstly, the background and meaning of the theme are introduced and the development and relative research literature are reviewed. The research target, philosophy, approach and the framework of the paper are also presented. The difficulties in this field and innovations of this paper are shown at the end of this chapter.Chapter Two: Analysis framework of basic theory. This chapter aims at establishing a basic theory framework for China's factor price determining mechanism. General equilibrium theory is introduced in the first place and is treated as a basic theoretical foundation for further investigation. In the end, the way of identifying price determining mechanism and price adjustment is introduced. The main process is to describe relative price system in terms of national primary distribution, and to make a complementary co-test of it with regard to the fluctuant of obvious relative price relations based upon microeconomic aspects.Chapter Three: Relative price adjustment: International experience and historical evidence. Based on the theory framework, this chapter tries to look at the historical data of price determining mechanism and price adjustment in America and some European countries during the Industrial Revolution, which can provide referential experience to China's price determining mechanism. The research is based on a great deal of data and uses the historical method. The author selects wheat price as an indicator of the long-term trend of general price according some early research. The author tries to find the rules in the relative price of products and factors in the developed countries and obtains a few significant conclusions.Chapter Four: Evolution of factor share: empirical mode and statistical regularity. The factor share is the macroeconomic embodiment of the primary distribution of the production factors. Based on Chapter Two and Chapter three, this chapter tries to review the arguments about"the stability of factor share"and some of the research findings are shown here too. Then, the boundary of application of stability of factor share is defined, which is based on ultra-long term observations from the evolution of factor share in the developed countries. Finally, by investigating the internal relations between the development of factor share and stages of economy development, the determinants and rules of the evolution of factor share are indicated.Chapter Five: Research on the development of China's price determining mechanism. This chapter centralizes on the background and rationale of China's price determining mechanism and the resource allocation efficiency. First, by making an investigation of the background, reasons, processes, impacts and influences of the price determining mechanism of planned economy, this paper discusses its contribution and loss of efficiency to China. Second, it reviews the background and target of the early price reform, and indicates the features and impacts of double-track price system and points out the change of the price mechanism. Last, it investigates the form and the development of market price mechanism, discusses emphatically the sequel of unbalanced development of product market and factor market and analyzes the existing problems and their possible direction of reforming.Chapter Six: The Structure of China's primary distribution and identifying of price rationality. Referring to the historical data of developed countries, this chapter tries to make an investigation of features and trend of China's factor share, to make a comparison between China and other countries, and to take the structure of primary distribution and factor share as the tool of identifying the rationality of China's price system. Firstly, based on the GDP data of income method, this paper makes a quantitative estimate about the structure of primary distribution of hundreds of countries and regions, making comparison between China and other economies in terms of national economy and industry level. Secondly, it tries to estimate China's factor share in the early period and makes a comparison of China and the developed countries between factor share evolution and economic development stages. Thirdly, it unveils the national economy factor share formation mechanism, and decomposes its changes to industrial factor share and industrial value-added proportion, and researches the function and the infection of relative product price and relative factor price. Lastly, based on an extended triangle model about distribution of increment benefit, it makes a policy simulation of effects of changes with price system to factor share.Main innovations of the paper are as follows:Firstly, this paper researches systematically the intrinsic link between the equilibrium determining price and price adjustments. By taking the path of price adjustment as a bridge between the theoretical equilibrium price and practical price system, we can reduce complexity and enhance the maneuverability. Again by extending the triangle model about distribution of incremental benefit, the interface of parameters is clearly pointed out, which can be used as the basis for making policy simulation accordingly.Secondly, it ravels systematically the background and core arguments of "the stability of factor shares", reveals the essence and the meaning of the stability of factor shares. The bound of application of the stability of factor shares is pointed out based on the ultra-long term observation from the evolution of factor share in representative developed countries. This paper also makes a deep analysis of the intrinsic link between evolutions of factor shares and stages of economic development, and explores the basic characteristics of the underlying decisive power and operation rules.Thirdly, based on a few economic theories, this paper looks at the empirical standards by making the analysis of long-term historical data, and uses it as an important measure of rationality of the real prices. With the combination of micro-price and macro-distribution, it researches the rationality of price changes through investigating changes of representative price relations, and researches changes of factor price relations and product price relations by using macro-distribution data. The combined method helps to overcome difficulties in the use of micro-data alone, and reduces the loss of information through the use of macro-data alone.Fourthly, this paper indicates the national economy factor shares formation mechanism, which is a weighted average process of industrial factors share as the weight of industrial added value. By using the breaking down method for index system analysis, it decomposes national economy labor shares in China from 1952 to 2005, and clearly distinguishes long-term and short-term reasons of decreasing of the labor share, also discusses some policy meanings of the trend. Hence, it also researches on the function of relative product price and factor price to this mechanism.Fifthly, this paper synthetically uses a few kinds of methods and tries to overcome difficulties aroused from of data collection. The main innovation is present by estimating of missing data, especially conducting a comprehensive estimate and calculating data of China's labor share in the period of 1952-1977 systematically, which provides an important base of data for this field. This paper also does hard and meticulous jobs of the test of credibility and the adjustment of comparability. For example, when labor shares in the developed countries are carried out as the series, this paper verifies the results from those data that come from different sources. In evaluating the structure of China's initial macro distribution in 1933, this paper makes full use of the micro-enterprise income and expenditure data for complementary testing. When making price comparisons and the evolution of factor shares, it refers to researches already accomplished; different data from different countries and periods are converted to metric units and common currency as well. All this work ensures comparability among data, and has the advantage of revealing inherent economy laws among the variables concerned.
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