The Third Plenum of the 18th Party Congress revealed an ambitious plan to make market forces the driving factor behind China’s economy. However, questions still remain about the reform proposals and whether or not they adequately address many problems prevalent in the Chinese economy.
In this podcast, hosted by Carnegie–Tsinghua’s Paul Haenle, Carnegie–Tsinghua’s Shi Han discussed the phenomenon of haggling prices up (or “reverse haggling”) and how it ultimately leads to higher prices for consumers and downstream industries. Han explained that many companies in upstream industries purchase goods or materials at higher-than-market prices in order to generate more revenue in kickbacks and bribes, leading to higher costs for manufacturers and consumers at home and abroad. While the Third Plenum addressed the importance of market forces and competition in previously monopolized sectors of the economy, “reverse haggling” is especially difficult to address because both buyers and sellers have much to gain from raising prices and the ultimate cost of the damaging practice is difficult to identify.
Shi Han is a resident scholar at Carnegie–Tsinghua Center for Global Policy concentrating on international business issues. His economic research addresses challenges arising from interactions between American and Chinese businesses and the competition and cooperation between state and non-state economic entities.
Paul Haenle is the director of the Carnegie–Tsinghua Center. Prior to joining Carnegie, he served from June 2007 to June 2009 as the director for China, Taiwan, and Mongolian Affairs on the National Security Council staffs of former president George W. Bush and President Barack Obama.