Direct Selling News August26^th (Direct selling New Ouyang Wenzhang) Market is a kind of mode to allocate various resources which used for production and consumption through the effect of law of value. In the process of resource allocation, market will adjust the supply and demand of commodity according to fluctuation of commodity prices, further to affect the economic behaviors of commodity producers and consumers, thus regulate the operation and development of economy. What is called the decisive effect of market, means to play a decisive role in resource allocation through the market mechanism such as competitive mechanism, price mechanism, supply & demand mechanism. Therefore, the resource allocation of Chinese direct selling industry should be determined by market.

The problems of direct selling industry resource allocation under the fundamental effect of market

In 1992, the 14^th Congress of the Communist Party of China has firstly confirmed the reform goal of Chinese socialist market economy system and clearly specified that market has played a fundamental role in resource allocation.After that, Chinese market-oriented reform has been developed thrivingly in every field. Till the end of last century,China has initially built up the socialist market economy system. While the rising of direct selling industry has just formed in this process.

What is the meaning of fundamental effect? In general,its meaning is mainly performed in following aspects: First,it has been thought that fundamental effect has performed as that market is the most important, most basic or most primary means in resource allocation; Second, the fundamental effect has performed as that market resource allocation is the primary means of allocation; Third, it has been thought that the fundamental effect of market allocation is the leading role, while planning allocation just plays a supporting role; Fourth, it has been thought that the fundamental adjustment is the first adjustment while governmental adjustment as the second. Under this knowledge, there occurs lots of problems in the process of resource allocation in direct selling industry.Mainly shows in below:

Firstly, government has too much intervention of the resource allocation in direct selling industry. Generally speaking, in order to achieve maximum benefits and optimization of efficiency, promoting resource allocation should base on market rule,market price and market competition. However,the most prominent problem of present Chinese direct selling industry is that government has too much direct allocation on resources. First is too many limits. Government has overly limited the operation region or the kinds of sales products, especially for the banning of multi-level direct selling, which has badly harmed the positivity of direct selling enterprises and largely affected the rapid expansion of direct selling industry. Second is the rent-seeking supervision. In order to pursue the partial department benefits, some supervision departments have frequently claimed the so-called fine of violations or suspicion of pyramid schemes to direct selling enterprises, which makes them angry but dare not speak up.Some officers have even traded power and money and profited illegally. Third is the lacking of service. At the same time, government didn’t do well enough in the aspects of providing basic public service, maintaining a fair competition market environment or fighting against pyramid schemes for direct selling industry, even without setting up the Association of Direct Selling Industry,all these have made direct selling enterprises encounter many problems for their development.

Secondly,It’s very difficult to form a market environment with a fair competition because of the unsound direct selling market system. At present, the market system of Chinese direct selling industry is still not perfect, this is manifested in the low level of marketization of production factors and resource product price, existing different degrees of distortion which has related to the prematuration of market. Economics suggests that production factors are the necessity of all kinds of social resources when proceed social production and business activities and the fundamental factor to maintain the running of national economy and the operation management of market subject. When production factors proceed with market exchange,it will form various factor prices and systems. But the factor price of direct selling industry is a bit chaotic,for example, the price of human resources is often distorted,professional manager has frequent ob-hopping, which has affected the development of direct selling development. Meanwhile, the market environment with fair competition is also not perfect.Some places take the measure of market blockade which means to protect the local direct selling enterprises and elbow out outside ones. Therefore, any direct selling enterprise which has been investigated and dealt with almost has been done by outside government rather than local government.