China revives state sales, marketing co-ops as emergency logistics system: analysts

Greater state control of supply chains and prices will shore up the domestic economy in case of war or emergency.
By Gu Ting for RFA Mandarin and Xiaoshan Huang and Chingman for RFA Cantonese
2022.10.31
China revives state sales, marketing co-ops as emergency logistics system: analysts A sales clerk at a state-run store prepares food for sale after posting new prices, March 31, 1994.
AFP

China is rebooting a Mao-era institution that once functioned as a pillar of the socialist command economy to prepare for future "decoupling" from the global economy, analysts said.

Heralding a major step away from the market-oriented economic policies of the last 40 years, the 20th Chinese Communist Party congress earlier this month saw the elevation of Liang Huiling, who heads a state-run system of "supply and marketing cooperatives," to the party's Central Committee, amid other signs that leader Xi Jinping is steering the country away from market economics and closer to a state-dominated economy.

"This is a return to the [state-run] collective economy," economic commentator Chen Jun told RFA. "It's pretty scary -- they don't want an economy any more. They may decide they don't want private companies any more."

Chen cited recent losses on the Shanghai stock market, as well as plummeting prices of luxury apartments in the city.

"They are also controlling the movements of the population around the country using the pandemic [tracking app]," Chen said. "They are transferring energy consumption to heavy industry and military-linked companies."

"They don't care about the economy -- [they think] ordinary people will be fine if they get enough to eat," he said.

A senior Chinese media executive who declined to be named for fear of reprisals said the supply and marketing co-op system, which used to run general stores in rural areas as late as the 1980s, was never abolished, even though the market economics instigated by late supreme leader Deng Xiaoping in 1979 eventually replaced it with commercial supply chains and distribution networks.

He said he expects the government to use it as a fall-back logistics and supply system to ensure emergency preparedness and food security in the event of worsening relations and further economic decoupling with the rest of the world.

"The supply and marketing cooperative system has always existed, and never died out this whole time," the executive said. "They aren't very efficient, but nonetheless they are a national supply and logistics channel."

"Its first job is to ensure daily supplies of certain goods, but it has another purpose, which is to ensure supplies in extreme circumstances," the media executive said, adding that the system could be used if the country was at war, particularly engaged in a military invasion of the democratic island of Taiwan.

"They already have one set of extreme circumstances in mind, which is that they will attack Taiwan one day," the media executive said. "Then, we will have to be self-reliant when our connections with the rest of the world are cut off."

Quiet comeback

Hunan-based current affairs commentator Li Fang said the government has been quietly restoring funding to the supply and marketing cooperatives in recent years, hiring new people, but without trumpeting the plan in the state-run media.

"They are making a quiet comeback, from the central government down to provincial governments, without much fanfare," Li said. "Maybe once our relations with Western countries have completely broken down, the economy will decouple and go back to being the planned economy of days gone by."

"They know that it could come to that," he said. "Maybe they haven't felt the time was ripe to talk about this before now."

Official budgets show a massive boost in funding for the supply and marketing co-op system since Xi initiated a reboot in 2016, reaching 2.3 billion yuan (U.S. $315 million) in 2016 and 2.87 billion yuan (U.S. $393 million) in 2017.

While the All-China Federation and the regional supply and marketing co-ops have published detailed regional budgets since then, RFA has been unable to locate a nationwide spending figure for more recent years.

But an official who requested anonymity for fear of reprisals said the actual funding flowing to the nationwide supply and marketing cooperatives system has been several times as much listed in official budgets.

One of the aims is to bolster domestic supply chains to weather international sanctions of the kind imposed by the rest of the world on Russia after its invasion of Ukraine in February, the official said.

The government plans to use the supply and marketing cooperatives to prepare for economic emergencies and combat readiness, the official said.

Xi wrote in the official ideological journal Qiushi in July: "We need to deepen the comprehensive reform of supply and marketing cooperatives, improve the system and optimize its functions, changing its way of working."

Meanwhile, guidelines issued in June 2021 called for a comprehensive financial and logistics platform to serve rural credit needs and supply chains, with local governments ordered to make the reconstruction of the marketing and supply cooperatives -- which are effectively state-run entities despite the name -- a political priority.

A resident of the central city of Wuhan who gave only the surname Cai said most supply chains currently run pretty smoothly, with a range of goods readily available in supermarkets, chain stores or via online shopping.

He said the government reboot of the supply and marketing cooperatives suggests the government is preparing for shortages at some point in the future.

"They have to protect their regime first and foremost, and you can see they are maintaining stability, no matter what it costs," Cai said. "They don't care about disrupting the lives of the people for a party congress, so do you think they will care about it [in future]?"

State news agency Xinhua reported in July that supply and marketing cooperatives reported steady sales growth in the first half of this year, citing figures from the All-China Federation.

Nationwide sales rose by 19.1 percent to nearly three trillion yuan (U.S. $435 billion), with online sales of agricultural products and sidelines rising by 33 percent compared with the same period a year earlier.

Translated and edited by Luisetta Mudie.

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