Formation and Characteristics

A traditional understanding of a `buyer's market’ and a `seller's market’ associates them with a certain type of economic system, asserting that a market economy systems inevitably result in a buyer's market and a planned economy systems bring about a seller's market. This paper introduces a new concept – the `policy-buyer's market’ or more fully the policy-created buyer’s market. It points out that apart from the systematic factors, the changes of various economic policies can also lead to a buyer's market. By means of analysing the formation of the supply-demand relationship and its characteristics, this paper concludes that the current situation, where supply exceeds demand in China, is a policy-created buyer's market and that the right way out is transforming the policy-created buyer's market into a systematic (real) buyer's market of the kind associated with a market economy. UEL Department of Economics, Working Papers, No.30, August 2000