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Article 57 deals with the commercial relations with foreign countries, this article focuses on the domestic trade.
The periodic market, the peddler, and the urban shop constituted the basis of the traditional commercial structure in China. Farmers paid in-kind the rents to the landowners. Merchant transported them to market towns. Transportation was difficult, caused by mud-clogged roads, poorly maintained waterways and railways and storage facilities were inadequate. Given poor road conditions and a chronic shortage of trucks, railways constituted the primary commercial artery linking cities with the countryside. This was especially the case because so-called “suburban” agriculture—supplying “locally produced vegetables” from areas surrounding Beijing, Tianjin, Shanghai, Chengdu, and Guangzhou—met only about 70 percent of urban demand in 1956–57, requiring the remainder to be transported over long distances. Such long-haul shipments were slow, as commercial freight trains stopped frequently en route. A direct freight run from Wuhan to Guangzhou, a distance of roughly 1,000 kilometers, typically took four to five days; when wagons were detached or added at intermediate stations, the journey extended to seven or eight days.
In 1937, key regions such as Sichuan and Yunnan lacked any railway infrastructure, and the primary east-west line terminated prematurely. Consequently, despite ongoing improvements, China's transport infrastructure remained fragmented, preventing the formation of a cohesive national market. Water transport presented a significant cost advantage, with junk transport being substantially cheaper than land-based alternatives. However, its practicality was limited by geographical factors, particularly in northern and western China, where navigable waterways were scarce. Railways offered a theoretical solution, but their development was severely stunted.
The non-existence of an national market gave the merchants a monopoly on information about market prices and they had the money to overcome difficult periods and wait for better prices. The lack of standardization in weights and measures, the difference in quality of goods and the absence of fixed prices gave the merchants plenty of possibilities to manipulate the market.

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While the proportion of the private sector in overall economic activity declined between 1949 and 1953, there was a notable rise in the absolute amount of private industrial production and retail trade. Some might attribute much of this increase in private enterprise to post-war recovery efforts. Nonetheless, the decision by the Communists to allow private industrial production to double in value and private retail trade to increase by 40 percent suggests, to some degree, their significant reliance on the private sector during this period. To tackle the problems, starting in 1949, the authorities tried to persuade private businessmen to join “joint public-private enterprises” see Article 31. The new regime deployed a divide and rule tactic by making a distinction between reliable traders and those speculating merchants. The latter are punished and during sanfan and wufan eliminated as a group. The shortage of cadres forced the government to employ private merchants as state trade cadres, especially in the southwest. These cadres used their old network and actions. "..., the behavior they employed included the range of 'corrupt practices -monopolizing, manipulating prices, speculating and hoarding, and tampering with weights and quality-that the still unmodernized economic and technological structure in the countryside permitted."
In April 1950, the Ministry of Trade,implemented a structured system of specialized state trade monopolies nationwide. At the central level, distinct internal trading companies were established, each focusing on specific commodities such as grain, colored cloths, miscellaneous goods, salt, and coal. These central entities also had direct super-regional subsidiaries. At the provincial level, support was provided by three companies specializing in grain, daily necessities, and indigenous products. In urban areas, state-owned wholesalers and retailers were organized based on regional divisions, although they did not function as specialized trade companies. To ensure financial oversight, all transactions between these trade entities were conducted through the People’s Bank.

The increasing market share of state trading companies in grain, cotton, salt and near state monopoly on mass transportation facilities also squeezed the space for private merchants. Thanks to their national networks, the state trading agencies could acquire commodities wherever they were cheap and sell them where they were dear. By the beginning of 1950, state trading agencies dominated a substantial portion of the national supply chain: over 90 percent of salt, 70 to 80 percent of coal, 40 percent of cotton cloth, 30 percent of cotton yarn and rice, and 20 percent of flour. These figures witnessed rapid expansion in the ensuing months. For instance, within the initial nine months of 1950, the China Cotton-Yarn-Cloth Company procured 75 percent of the entire cotton cloth production.
The State Trading Companies acquired commodities from four primary sources:
Taxation in-kind: They requisitioned grain as a tax from the Ministry of Finance, a method carried over from Kuomintang rule.
Direct purchase from state enterprises: They bought output directly from state-owned manufacturing businesses.
Purchase from private producers: They acquired existing products from private producers in regions with lower prices, then sold them in areas where prices were higher. For instance, in the winter of 1950-51, the State Trading Companies bought grain at reduced prices from surplus regions like Northeast China and Szechuan, and subsequently distributed it to areas facing grain shortages.
Orders to private enterprises: They placed orders with private businesses for product acquisition.
November 14, 1950, the trade department of the GAC issued Instructions on Banning Speculative Trade: 'All those who practice the types of behavior listed below must be seen as speculators disturbing the market and such behavior must be severely banned:
(1) Engaging in commerce in goods outside the sphere that has been approved by the people's government;
(2) Doing transactions outside designated markets;
(3) Stockpiling and reselling raw materials, refusing to sell goods that concern the people's livelihood or that are daily necessities, seeking 'usurious profits,' or inducing inflation, thereby influencing the people's production or livelihood;
(4) Buying long and selling short and planning for a "usurious profit";
(5) Intentionally raising prices, creating a shopping rush or selling out certain goods and spreading rumors that will stimulate price inflation;
(6) Not respecting local people's governments' regulations on commercial administration methods and disturbing the market;
(7) Using counterfeit, forged, adulterated or illegal commodity specifications or any other kind of fraudulent behavior in seeking illicit profits;
(8) Engaging in any kind of speculative activities.' During the early 1950s, the CCP's state-building approach encompassed not only aggressive mass campaigns but also gradualist tactics aimed at challenging merchants, gaining influence, and ultimately regulating the market through state-owned enterprises. Local authorities established associations for individual grain merchants and itinerant traders to collectively procure rice in bulk from state-owned grain trading enterprises. This enabled merchants to retail rice at lower costs while sustaining their businesses. However, the central government deemed the actions of the local government inaccurate. The Central Party Committee viewed these groups as primarily competing with state-owned trading enterprises and cooperatives, thereby undermining state price policies. Mao Zedong remarked,

These organizations are not illegal... but if they engage in speculation, smuggling, tax evasion, or disrupt state-designed price policies, we will mobilize our economic resources to legally confront and prevail against them."

It was evident that Mao saw price manipulation as a means to confront private merchants in December 1951. Within a relatively short period, from mid-1951 to the conclusion of 1952, the CCP significantly expanded its network of state-owned retail outlets, reduced the price disparity between wholesale and retail, initiated the Three-Anti and Five-Anti Campaigns, and overhauled grain policy administration.
In June 1953, the CCP initially resolved to adhere to its long-standing policy of transforming the private retail sector according to the principle of 'paichu' (squeezing out), under which a fixed number of private retailers would be eliminated each year and replaced by state-owned or cooperative enterprises. As the policy was extended more broadly, however, Mao was compelled to revise this approach, at least on a temporary basis. On June 28, he decided to abandon 'paichu' in favor of a strategy of gradual elimination that would make use of state-capitalist forms, a shift that was formally confirmed in early September 1953. Mao argued that private retailing continued to serve a useful function. In reality, practical political considerations drove this reversal: the 'paichu' policy had yielded disastrous results and could not be sustained. Mao was particularly concerned that rapid elimination of private retailers would generate widespread unemployment and heighten the risk of social unrest.
On November 23, 1953, the GAC decided to follow the SU example and abolished the free marketing of major crops (grain, cotton and oil-bearing crops). Agriculture and consumer products were bought and sold at fixed prices. The government was the sole buyer of these crops. Production targets fixed basic quotas for a period of 3 to 5 years. All production above the targets shall also be sold to the government after negotiation, the free market being excluded. See also Article 38 The authorities started to train and instruct a selected group of cadres in keeping records and began standardization of scales and measures. In commerce, by the end of 1953, the proportion of state-owned wholesale had reached about 70%. The main part of private retailers could no longer rely on purchasing goods from private wholesalers or producers as before, but had to rely on state-owned commerce and cooperative commerce to maintain their operations. State-owned commerce and cooperative commerce not only had to organize the sources and supply of goods for the public commercial system, but also had to assume the same responsibility to private retailers. At the end of 1954 private wholesalers were responsible for only 10.2 percent of the total volume of business on the market. Industries, restaurants and food stands, which relied on grain were also dependent on state supply. They received their supply according to target or production plan.
Under the rationing system, access to consumer goods for registered urban residents was strictly determined by age and occupation, with allocations distributed monthly or annually. This approach sparked widespread dissatisfaction. When officials announced that grain rations would vary according to the perceived physical demands of different jobs—granting workers in large factories (with over 100 employees) nine kilograms of flour per month, while those in smaller factories received only six—many protested the apparent inequity.
Some party members questioned the fairness, asking, “If we are all part of the working class, won’t different ration levels undermine our unity?” Others expressed frustration, noting, “After liberation, our living standards improved. Why are they declining now?” The unified purchase system encompasses a second category covering a broad array of agricultural products—such as sugar, tobacco, pigs, wool, hides, and skins—as well as medicinal goods. Any production exceeding state targets in this category can be sold to the government through negotiation or on the open market.
A third category, which includes vegetables, fruits, and certain industrial crops, is not subject to compulsory quotas. However, since producers were prohibited from long-distance trade, government agencies maintained significant control over the marketing of these goods, particularly industrial crops, effectively allowing them to influence prices. See Article 40.
The Chinese industry has to rely on the internal market, because as seen above, the SU is limited in providing goods, and the Cocom restricts the import of essential goods. It is unsurprising that the CCP swiftly transitioned from a prior model of regional self-sufficiency to a strategy of relative national self-sufficiency. In border regions, the CCP advocated the slogan "sell native produce and boycott foreign goods," while in the early 1950s, the party emphasized "taking domestic sales as primary and foreign sales for support." The main policy focus was on developing domestic markets to absorb China's local products. The effective blockade of ports by the GMD exacerbated this shift. Cities like Tianjin, Shanghai, and Guangzhou heavily relied on maritime trade, but they were unable to access crucial resources such as coal, cotton, steel, or oil for their industries, nor could they obtain spare parts for machinery due to the blockade. Unable to engage in international trade, they were compelled to redirect all trade from foreign markets to domestic ones within the country.

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In the early 1950s, the Chinese government transformed retailing to align with socialist ideals, creating institutions like the China Department Store Company to manage consumer goods. These state-run stores expanded rapidly, introducing practices like pre-orders and credit sales to make consumerism accessible to a wider audience. The goal was to "massify" commerce, shifting it from elite-focused bourgeois practices to serving the "masses."
Private stores like the "Four Great Department Stores" in Shanghai struggled due to supply shortages, new state competition, and policies emphasizing affordability over luxury. Campaigns like the Three/Five-Antis and political interventions further redefined consumerism, curbing conspicuous consumption and enforcing fixed prices. The state’s emphasis on frugality and service to the people often clashed with consumer expectations, leading to resistance, especially against the ban on haggling. The prices of state-controlled consumer goods aren't set by market demand, but rather by how quickly planners want to sell them. This approach often leads to shortages and repressed inflation. As a result, consumers face queues and informal rationing in what are essentially seller's markets, often having money they can't spend due to the lack of available goods.

Despite efforts to reshape commerce as socialist, state policies prioritized capital accumulation over customer satisfaction. Retail stores became tools for political campaigns, with window displays repurposed for propaganda. Ultimately, the government controlled and mobilized consumer demand to suit its goals, creating a retail environment marked by shortages, inefficiencies, and political oversight, rather than genuine consumer service. The regime significantly restricted the availability of foreign goods, particularly those from capitalist countries. This was achieved through a multi-pronged approach: Subtle policies aimed at discouraging imports: These measures included tariffs, exchange controls, and outright bans, similar to those employed in market economies. Nationalization of industries: This involved taking control of both foreign-owned and domestically owned companies, effectively transforming the market to prioritize domestically produced goods. This strategy resulted in a highly autarkic economic system where consumers primarily had access to goods produced within China. This not only served nationalistic goals but also ensured that the market aligned with the communist ideology. The Party-state actively worked to dismantle the ideological foundation of the individualistic market economy. Their goal was to replace personal consumption—previously the primary measure of individual achievement—with a collective pride in national production.

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See for the political role of Overseas Chinese Article 58 In 1950, there are about 11 million overseas Chinese. On the mainland, there are about 30 million qiaojuan (Overseas Chinese dependents and/or relatives). Right from the start, the new government takes control over the flow of funds, the ‘foreign exchange market’ and the circulation of gold, silver, diamonds, and foreign currency. The PRC government recognized the significance of overseas Chinese remittances both for individual households and the broader international balance of payments. Strict rules are introduced. In order to incentivize citizens to deposit foreign currency into the Bank of China (BOC), the government introduced coupons instead of remittance receipts. These coupons entitled the holder to purchase valuable goods such as bicycles, cooking oil, and other consumer products from state-run stores typically reserved for Party officials and foreign visitors. The Overseas Chinese Affairs Commission (OCAC) chairwoman, He Xiangning seeks the revitalization of huaqiao remittances and tries to persuade them to buy ‘Chinese People’s Victory Bond'. As of 1952, the BOC and the People's Bank of China had the cash flow under control. "However, the private remittance agencies in China were not totally eliminated even in the latter half of the 1950s. In 1951, the proportion of overseas Chinese remittances handled by the remittance agencies in Guangdong was 44 percent; more important, in the hometowns of overseas Chinese, remittance agencies were dominant, handling 81 percent in Shantou, 91 percent in Hainan, and 60–65 percent in Taishan." The OCAC takes measurement to improve the cashflow of the Overseas Chinese to the homeland. One of these measurements is the establishment of Overseas Chinese investment companies. These companies intensified their oversight of remittances. Additionally, during the 1950s, there was a consistent flow of commercial and industrial delegations from Overseas Chinese visiting China to explore trade and investment prospects. Referred to officially as "sightseeing delegations," they typically comprised representatives from Overseas Chinese commercial and industrial circles. While many hailed from Hong Kong and Macao, their ranks gradually expanded to include individuals from other regions, notably Indonesia, Singapore, Burma, and even the United States and Canada. The remittance agencies in Hong Kong were used because of the technical difficulties of sending foreign exchange directly to China. This special position of Hong Kong became even more crucial toward the mid-1950s. Trust grounded in local ties was essential to the operation of remittance networks linking overseas workers with their families at home. Yet these transactions were also meticulously documented through receipts, courier contracts, bank draft certificates, and similar records. While long-standing personal relationships shaped Chinese business practices, the systematic use of written documentation raises the question of how far contracts and records functioned as an institutional foundation, reinforcing reliability and stability within these business networks beyond interpersonal trust alone.
Foreign countries, with the US and Canadian authorities taking the lead, impose restrictions on financial transactions with China. These actions have major effect on the amount of money Overseas Chinese send to the People's Republic of China. The members of the family who stay behind on the mainland, are often obliged to hire manpower to be able to exploit the farmland. There are considerable differences in the size of the Overseas Chinese agricultural land, ranging from 34 mu to 2500 mu. During the land reform campaign, their class status is determined as “landlord” and they are often the victim of popular fury. The frequency of violent persecution targeting Overseas Chinese seemed to escalate notably after the arrival of the northern cadres and the subsequent "rectification" of the provincial Party apparatus, which commenced in April 1952. The subsequent month, Hong Kong newspapers disclosed that authorities in Taishan county had issued orders for the execution of approximately thirty landlords, "including numerous Returned Overseas Chinese." Over the ensuing weeks and months, Hong Kong newspapers consistently reported on the execution of landlords who were Overseas Chinese and on suicides among distressed members of the Overseas Chinese community. See for the position of the women left behind Article 6. Some local authorities tried to protects these families, but in the early months of 1952, Mao Zedong sent Tao Zhu to Guangdong to end this safeguard and to accelerate the Land Reform in South China. More than 6000 cadres are dismissed. In the 1950s, the qiaowu practitioners faced a competition that was not primarily with ideological factions within the leadership of the CCP, but rather with its local membership. During most of the 1950s, the upper echelons of the CCP leadership approved of prioritizing economic considerations in qiaowu, which pertained to overseas Chinese affairs. However, the conflict between qiaowu and the "ideological approach" mainly existed at a lower level due to local cadres and officials who struggled to accept or comprehend policies involving preferential treatment (youdai). Consequently, the competition was not so much between qiaowu and more ideologically inclined factions within the CCP, but rather arose from the CCP's attempt to implement qiaowu and youdai policies that contradicted its own ideological motivations. Thus, it was not a case of the CCP having conflicting approaches to qiaowu, but rather the party-state's qiaowu practices conflicting with its own pursuit of socialist transformation. December 1954, the class status of the Overseas Chinese families is changed to ‘middle farmers’. February 23, 1955, the government decides to validate the remittance and the acceptance of this money has no consequence for the class status of the recipient.

The political and economic significance of the Overseas Chinese has progressively diminished, partially influenced by the Land Reform of 1950-1953. This reform arguably had the most profound impact, as it significantly undermined the cohesion of the community by abolishing the ownership of extensive land holdings, particularly clan-owned land, and seizing land owned by overseas families. As lineages began to break apart, the loyalty of Chinese emigrants to their families and lineages started to erode its fundamental basis. The Zhenfan (see Article 7), the Sanfan (see Article 18), and the Wufan (see chapter 4) also have a great negative impact on the value of the remittances that are sent to the PRC. See Figure 37.5.

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