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State struggles with restructuring programme that goes against the grain

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The gaps between his teeth giving a good view of the black tobacco stains, Liu Qiang ran his hand through the grains of rice in the rattan basket on his street stall.

This is rice fresh from the northeast, 1.40 yuan (about HK$1.30) per jin, or about half a kilogramme, he said with a big smile, a cigarette hanging from his mouth.

This is what Beijing people like to eat, not the stuff they sell in the state grain store down the road. There, the rice can be one or two years old.

In towns and cities all over China, vendors like Mr Liu have taken over the market for grain, selling tastier varieties and a bigger selection than were found in the state shops of Mao Zedong's era for 0.2 yuan a jin - as long as you had a coupon.

The shops are part of a giant state grain distribution system, set up by Mao, that has become increasingly marginalised by the market, but attempts to downsize it are strongly resisted.

Many state shops have closed, been leased out or switched to selling other products. But the sector still employs 4.1 million people, despite needing just a quarter of them, and, by the end of last year, it had run up bank debts of 110 billion yuan.

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