Even before the completion of land reform, the Communist regime had introduced in most parts of China the two new institutions through which it planned eventually to socialize rural trade, namely the state trading companies and the supply and marketing cooperatives. The former, wholly owned by the state and controlled by governmental departments of commerce, were normally established in cities and central market towns. Each company specialized in certain lines—e.g., grain, edible oils, marine products, stationery supplies—and established branches in nearby market towns as required for sales or purchases. With few exceptions, free competition obtained between the state trading companies and private firms until November 1953, when the companies began to acquire official monopolies of important commodities. By the end of 1954, state concerns had absorbed a number of larger private firms and captured a major share of the wholesale market.

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