China Economy in 1992China Takes Jab at 'Leftists' and Nudges EconomyBy NICHOLAS D. KRISTOF,

Published: April 4, 1992

BEIJING, April 3— The National People's Congress concluded

its annual session today with a call to guard against the "leftism"

of hard-liners, in another sign that Deng Xiaoping and his allies

are gaining ground in their drive to step up the pace of economic

change.

The rubber-stamp legislature, in an implicit reproach of Prime

Minister Li Peng, amended the Government Work Report he

delivered two weeks ago. The amendments strengthened the

calls for rapid economic growth and added a warning about the

"leftism" that is widely associated with hard-liners like Mr. Li.

"To accelerate the reform and opening to the outside, it is

crucial for cadres at all levels to further enhance their

consciousness of implementing the party's basic line and guard

against 'leftist deviations' while watching out for 'rightist

deviations,' " the amendment said.

Leftism is a code word for neo-Maoist efforts to emphasize

ideology, central planning and traditional Communism, while

rightism refers to leanings toward democracy and capitalism.

Gentle Breeze of Change

Since January, Mr. Deng, who at the age of 87 holds no formal

position but remains China's most powerful leader, has

masterminded a campaign for bolder steps to increase economic

growth.

The aim of the campaign is clearly to sustain Communist rule

rather than undermine it. But many young Chinese still seem

delighted that the hard-liners are in trouble, and they hope that

a result will be changes that could make a real difference: less

political indoctrination, a diminished role for Communist Party

cadres in factories and offices, newspapers and television

programs that are less doctrinal and more entertaining,

encouragement for political exiles to return to China, and a

relaxation of restrictions on contacts with foreigners.

The amendments to the work report praised stock markets and

the private sector, said that markets could be used in socialism

as well as capitalism, and hinted that the economy could grow

more quickly.

While the National People's Congress session was a success for

Mr. Deng and his campaign, it showed that hard-liners were still

fighting back. "The reformists cannot get a 100 percent victory

over the conservatives," said a Western diplomat in Beijing. "The

wording today again points to a power struggle going on among

leaders of the party and Government."

Moreover, Mr. Deng's faction has not replaced the hard-liners

they have criticized, including Gao Di, the head of People's Daily,

Wang Renzhi, the head of Propaganda Department, and He

Jingzhi, the acting Culture Minister.

The Congress would have been a particularly suitable time to

change Culture Ministers, and the absence of personnel changes

suggests that the hard-liners are down but not out.

Important decisions in China are never made by vote, but rather

by a combination of consensus and power politics among the top

leaders and retired leaders, and Mr. Deng's campaign seems

intended to shape that consensus in the coming months. A major

opportunity for change will come at the end of the year at the

14th Communist Party Congress, the highest-level party

gathering since 1987. Communism With a Twist

The motivation for Mr. Deng's campaign seems to be that the

best way to insure Communist dominance of China is flexible

economic policies -- including elements of capitalism -- that raise

the standard of living. Mr. Deng appears to believe that the

hard-line strategy, with its emphasis on ideological purity and

harsh warnings against foreign subversion, may actually

increase dissatisfaction and the risks to the Government.

In another important action today, the Congress approved a

proposal to build a dam on one of the most beautiful stretches of

the Yangtze River in central China. The Three Gorges dam,

which would produce more electricity than any dam in existence,

was first proposed in the 1920's and in recent years has been

quietly opposed by some intellectuals. They fear that the

Government is undertaking a costly and dangerous prestige

project without allowing opposing opinions to be evaluated.

The proposal to build the dam was passed 1,767 to 177, with 664

abstentions. By Chinese standards, where Government-backed

measures are supposed to pass with virtual unanimity, the

number of no votes and abstentions was enormous.

Photo: The National People's Congress concluded its annual

session yesterday in Beijing, approving a proposal to build a

huge dam on the Yangtze River in central China. A delegate who

had arrived early was surrounded by teacups as he waited for

the closing session to begin. (Associated Press)

Economy Is a Pawn In China's Power GameBy SHERYL WuDUNN

Published: July 5, 1992

BEIJING— SECRETIVE power struggles have been a way of life

here for millenniums, but now the jousting is growing

particularly intense. China's octogenarian rulers must decide

within the next few months on a political platform and a roster of

leaders to be approved at the crucial 14th Communist Party

Congress late this year.

Deng Xiaoping already has launched his campaign -- a virtual

road show -- for swifter change across the nation, and he

remains the single most important political figure in China even

though he no longer holds any official posts. But there are a half-

dozen other octogenarian leaders who collectively also have

great influence. The result is a protracted bargaining process,

now under way behind the scenes, to determine the outcome of

the party congress.

A party congress occurs just once in five years or so, and this

one may be the last that China's octogenarians will be able to

control. Mr. Deng will be 88 next month, and his main rival,

Chen Yun, has just turned 87. Both are frail. "This is the old

man's last effort to push reform," a senior Chinese official said of

Mr. Deng.

Mr. Deng has committed himself to the position that China can

avoid the fate of the Soviet Union only by hastening economic

restructuring and improving the standard of living. But his

elderly colleagues, who include one nonagenarian, Peng Zhen,

don't all agree. So Mr. Deng, who for years had virtually

confined his movements to a few spots in China, has been

traveling around the nation for support for his policies and

proteges. "Deng doesn't really have any of his own people in the

leadership now," said a Chinese economist. "He may have

control, but he doesn't yet have full control. He has to fight

against all the other old hard-liners to get the people he wants

into the leadership."

Mr. Deng launched his campaign in January with a trip to the

southern province of Guangdong, setting off a wave of

enthusiasm across the nation for greater economic

restructuring. But Mr. Deng himself has been frustrated at the

ability of hard-liners to block his directives, and he is said to

have scolded the younger leaders -- who hold the formal titles --

for failure to follow through on his speeches.

"Everyone says that I am the master planner for economic

reform," Mr. Deng reportedly said during a two-hour visit in May

to Capital Corporation, a steel mill in Beijing. "But no one seems

to be carrying out anything."

The intrigues now under way were apparent a day after Mr.

Deng's visit to the steel company. His comments there were

recorded on videotape by the company, but the next day the

Central Committee General Office sent an envoy to confiscate

the tape, according to a Chinese with access to top officials. It is

not clear what one should make of this: perhaps Mr. Deng's

enemies were trying to block the distribution of the tape, or

perhaps his supporters were planning to edit it for television. Or

perhaps the Politburo members simply wanted to know what Mr.

Deng was saying behind their backs.

There are many signs that Mr. Deng is gaining in the power

struggles, although the disputes certainly are far from over. One

such sign is that Ding Guangen, his bridge-playing partner,

apparently is overseeing the preparation for the report that will

be presented at the 14th Party Congress. Mr. Ding is believed to

have peppered the draft with reformist phrases, such as "market

economy" instead of the previously used "commodity economy."

Another sign that Mr. Deng is pushing ahead is that the

Government has eased controls in many areas, such as prices,

rents and stock ownership. Many intellectuals are also rejoicing

at reports that He Dongchang, the hard-line party secretary and

deputy director of the State Education Commission, is being

pushed out. Still, while the political system is tilting toward Mr.

Deng, there have been no purges of major hard-liners yet.

Mr. Deng himself is said to have three prominent hard-liners in

his sights: Propaganda Minister Wang Renzhi, Acting Culture

Minister He Jingzhi and the director at People's Daily, Gao Di.

Mr. Deng criticized them by name in January, yet they remain in

their jobs. Apparently they have support from other

octogenarians.

The 14th Party Congress will approve the report, a platform for

the next five years, and choose a new Central Committee. The

Central Committee will then choose a Politburo to serve until

1997. Some reshuffling is expected, but the two most important

figures -- Prime Minister Li Peng and General Secretary Jiang

Zemin -- are generally expected to retain their Politburo seats.

Mr. Li may be vulnerable, however, to being "promoted" out of

his Government job next March when the National People's

Congress meets.

Mr. Deng appears to be supporting two Deputy Prime Ministers,

Zhu Rongji and Tian Jiyun, and they are among the possible

candidates to succeed Mr. Li if he is pushed out as Prime

Minister. Mr. Deng went out of his way to say that while he and

most other leaders do not understand economics, Mr. Zhu does

know something about the subject. Mr. Zhu was picked recently

to head a new super-ministry called the Economic and Trade

Office.

As part of Mr. Deng's campaign to boost reform-minded officials

and promote economic change, the Politburo recently released a

document that says Yangtze River cities and border areas will be

opened up to the outside world in the same way that coastal

cities already have been.

"Clearly at the moment we are in a Deng-ist high tide," said a

Western diplomat. But no one knows whether the tide will go out

again, particularly after Mr. Deng's death, leaving the landscape

unchanged.

Photo: Deng Xiaoping: Traveling to push his ideas. (Chine

Nouvelle/Gamma-Liaison)

China to Free More PricesPublished: September 2, 1992

BEIJING, Sept. 1— China announced steps today to further

liberalize its economy by freeing prices on almost 600

production materials.

The decision, effective immediately, was announced on the

nationally televised evening news and reported by the state-run

New China News Agency.

The liberalization of prices on 593 materials leaves only 89

others still controlled by the state, the press agency reported,

adding that the Government expected to free prices on the

remaining products after the economy developed further.

The agency warned that anyone hoarding or speculating in the

products would be severely punished and said the Government

would guard against attempts to monopolize the materials.

"The central Government will step in when prices fluctuate too

much because of the imbalance between demand and supply," an

unidentified official with the State Price Bureau was quoted as

saying.

The official said market demand would determine prices for 571

items used in producing goods. Prices for 22 other kinds of

production goods will be determined by local governments.

The products affected by the steps include petroleum asphalt,

black lead, oils used as raw materials, some steel products and

most machinery and electronic products.

China Above Growth PlanPublished: December 28, 1992

BEIJING, Dec. 27— Premier Li Peng, who advocates slow

economic growth for China, has conceded for the second time

this year that the economy is growing faster than he had

planned, according to official reports today.

Mr. Li acknowledged at a national conference on the economy

last week that the annual growth rate for 1992 would reach 12

percent, the state-run television network reported.

In his annual state-of-the-union address in March, Mr. Li set an

annual rate of 6 percent for 1991-1995. But a much higher

growth rate has resulted from calls by the senior leader, Deng

Xiaoping, early in the year for bolder economic reforms.

For months, experts have been predicting an annual growth rate

of 12 percent or more. In June, Mr. Li conceded that maintaining

the 6 percent target was unlikely, but he urged that growth be

kept below 9 percent to avoid overheating the economy.

Prices in China's 35 largest cities rose nearly 13 percent in

November from a year earlier, and industrial production in the

first 11 months grew more than 20 percent from the

corresponding period in 1991.

The official Xinhua News Agency said Mr. Li had stressed the

need next year to improve product quality, break up government

monopolies or industries and enact price reform.

China Leaders Stress Both Market and OrthodoxyBy NICHOLAS D. KRISTOF,

Published: October 13, 1992

BEIJING, Oct. 12— The Chinese Communist Party opened its

14th congress today with a call for an economic "revolution,"

linking the country's future to the development of a market

economy and placing priority on economic growth rather than

ideology. But the key speech at the gathering made clear that

the party wants free markets only for goods and services, not for

ideas.

Nearly 2,000 delegates gathered for the congress, held in the

Great Hall of the People. Under a 150-foot red banner reading

"Long live the great, glorious and correct Chinese Communist

Party," they listened as the party's general secretary, Jiang

Zemin, delivered a two-hour speech that is supposed to establish

the party line until 1997.

Party congresses are held at five-year intervals, and today's

gathering is widely regarded as Deng Xiaoping's last opportunity

to give staying power to the course now being steered by China.

Mr. Deng, who is 88 and feeble, holds no formal post but

remains the nation's paramount leader.

Mr. Jiang's speech, which was vetted in advance by the entire

national leadership, formalized the Government's embrace of

economic restructuring along free-market lines and underscored

the sinking fortunes of the hard-liners and the rise of those who

wish to extend China's experiments with capitalism.

"Reform is also a revolution, a revolution whose goal is to

liberate the productive forces," said Mr. Jiang, a portly 66-year-

old. "It is the only way to modernize China. If we cling to

outmoded ideas and remain content with the status quo, we shall

accomplish nothing."

"Poverty," he said, "is not socialism." Strengthening Dictatorship

But Mr. Jiang also called on the Government to "strengthen the

people's democratic dictatorship" and "crack down on the

activities of hostile forces." He also said that China must

"resolutely eliminate all factors that might lead to unrest or

turmoil."

The result was a speech that seemed contradictory, as if the

liberal faction had written the economic sections and hard-liners

had contributed the rest. The apparent aim of Mr. Deng has

been to create a sort of free-market totalitarianism.

Mr. Jiang emphasized that China would continue to subscribe to

Marxist and Maoist thought, and he warned against "decadent

capitalist and feudal ideologies" in carrying out the economic

revolution.

"This revolution is not intended to change the nature of our

socialist system but to improve and develop it," said Mr. Jiang,

who dressed in a Western suit for the occasion. In the next

sentence, he added: "It is no minor patching up of the economic

structure but a fundamental restructuring of the economy."

The party congress, the first since 1987 -- and thus the first since

the 1989 Tiananmen democracy movement and the first since

the collapse of Communism in Eastern Europe -- will choose a

new Central Committee and establish the policies that China is

supposed to take until the next congress. The delegates were

carefully picked for their loyalty and obedience, and so the party

congress is less an exercise in democracy than a theatrical

performance.

Most of the delegates sat stony-faced in their chairs throughout

the speech, following the texts in front of them. On the stage

behind Mr. Jiang, the 200 members of the congress presidium

sat in places of honor -- a stark reminder of the party's

reputation as a gerontocracy, for most were elderly and some

had to be helped to their seats.

In the crowd of balding or graying heads, overwhelmingly male,

one member of the presidium stood out: 22 year-old Gao Min,

winner of a gold medal in the women's diving championships at

the Barcelona Olympics. Ms. Gao is not known for her party

activities.

The People's Daily today listed Mr. Deng and several other top

party elders as members of the presidium, but they were not

present today. In an attempt to quiet rumors that Mr. Deng is

seriously ill, the official New China News Agency carried a brief

item today quoting his daughter, Deng Nan, as saying: "My

father is hale and hearty." 'Socialist Market Economy'

Today's address was more supportive of change than most

official statements since 1989, but it was not nearly so ardently

liberal as the main speech at the 13th party congress in 1987.

That speech, by General Secretary Zhao Ziyang, who was purged

after the Tiananmen crackdown, was a vigorous call for renewal

and a major breakthrough for those favoring far-reaching

changes.

A central theme of Mr. Jiang's speech was the call to build a

"socialist market economy," which apparently means a free

market economy with a large public sector. But instead of

mentioning specific changes the party will make, Mr. Jiang

simply emphasized the need for bolder restructuring.

"To accelerate economic growth we must further emancipate our

minds, speed up the reform and opening to the rest of the world,

and not get bogged down in an abstract debate over what is

socialist and what is capitalist," Mr. Jiang said.

But Mr. Jiang also said that socialism is bound to replace

capitalism and he referred to the 1989 pro-democracy movement

as "counter-revolutionary rioting" -- a phrase that was added at

the last minute.

A confidential draft of the speech that circulated earlier

described the movement as only a "disturbance." The change

was one of the few that was made in the final speech, according

to a Chinese journalist.

Mr. Jiang also used hard-liner language in calling for vigilance

against "peaceful evolution," supposedly a plot by Western

countries to subvert China bit by bit until it wakes up capitalist.

He delivered a lengthy tirade against "any big, strong or rich

country" -- by which he clearly meant the United States -- that

uses human rights issues to coerce or humiliate other nations.

Mr. Jiang added, still obviously referring to the United States:

"Any country that overreaches itself or rides roughshod over

others will be denounced by the peoples of the world."

Photo: Nearly 2,000 delegates gathered for the opening session

of the Chinese Communist Party's 14th Congress. Jiang Zemin,

left, the party's general secretary, and Prime Minister Li Peng

stood for the national anthem. (Agence France-Presse)

SUPPORT GROWING IN CHINA FOR SHIFT TO FREER MARKETSBy NICHOLAS D. KRISTOF,

Published: June 28, 1992

BEIJING, June 24— Advocates of economic change appear to

be gaining ground in the power struggles here, and a result is

that China is aiming to step up its drive toward free markets.

Spurred by a new, still unpublished speech by Deng Xiaoping,

the senior leader, Chinese officials are planning to allow foreign

companies to play a greater role in the service industry. Officials

are also stepping up plans to privatize housing, decontrol prices

and even convert a large share of state industry into

stockholders' companies.

Economists are discussing new ideas with an openness and

giddiness not seen since the hard-liners reasserted themselves

in the crackdown on the democracy movement in Tiananmen

Square in June 1989. No Signs of Political Freedom

"The reformers haven't yet won the battle, and the power

struggle is still going on," said an economist helping to plan the

transition to a market system in China. "But there's no doubt but

that at this point we're winning."

To be sure, there is no sign that economic liberalization will lead

to political freedom. And even if they win, the backers of change

face a growing challenge from disgruntled workers who are

upset about layoffs and rising prices. Some officials believe that

because of antagonism among workers, the Government will be

unable to introduce layoffs or price increases as quickly as it

would like.

But since China is not a democracy, the authorities need pay less

heed to disenchanted workers than do the leaders of Russia or

Eastern Europe, and some economists here favor ramming

through even unpopular measures. Others suggest delaying any

bankruptcies or layoffs, but speeding up other kinds of

restructuring. Orchestrated by Deng

The drive for more rapid change is orchestrated by Mr. Deng,

who is believed to be traveling now in the northeast of China,

rallying support for his policies. Late last month, he visited the

Capital Steel Corporation and complained that the Communist

Party had not adequately carried out his calls for faster

economic growth and reform.

Chinese officials say that Mr. Deng bluntly criticized the Beijing

Communist apparatus for refusing to allow the steelworks to

manage its own affairs and undertake new ventures.

"I don't understand economics," Mr. Deng reportedly growled

during the two-hour visit. "But I know a good economy when I

see it."

Mr. Deng's apparent meaning -- that the important thing is to

make people rich, not to worry about the ideological correctness

of the methods used -- has particularly caught on in the

provinces. Local officials have seized upon Mr. Deng's calls for

change as an excuse to push for stock exchanges, special

investment zones, horse-racing tracks, and other quasi-capitalist

measures they have dreamed of for years.

In Hainan Province, for example, Governor Liu Jianfeng has told

people he is considering making the entire province a duty-free

zone in which the official currency would be Hong Kong dollars.

Earlier this year, Hainan opened up a stock exchange, calling it

"internal" so that it would not have to win approval from Beijing.

A Deputy Prime Minister flew down from Beijing to order the

exchange closed, but after he left it reopened and it continues to

operate unofficially, without a sign.

Some plans, like using Hong Kong dollars as the official currency

in Hainan -- are unlikely to win approval from Beijing, and a

Western economist said that many of the new ideas were more

imaginative than sensible. But the ferment is in striking contrast

to the torpor of the last few years, when economists who

yearned to be architects of a better system found themselves

nothing more than interior decorators for Communism.

"There are almost no limits now," said an economist who advises

top officials. "The discussions are about what is good policy, not

good ideology."

Of course, the Government still insists that it is building

socialism, not capitalism, and the experimentation could

disappear if hard-liners -- who now are gnashing their teeth in

the wings -- come out on top in the power struggle.

Yet even now, China is in most respects more of a market

economy than Russia. Most farmland in China is divided into

quasi-private plots; in the former Soviet Union, most of it is still

collectively farmed. The overwhelming majority of industry in

Russia is state-owned; in China, only half is state-owned. In

Russia, most trade until lately has been effectively conducted

through an exchange rate that overvalues the ruble by 100

percent; in China, businesses last year exchanged $20.4 billion

at essentially free market rates, and even the official exchange

rate is overvalued by only 15 percent or so.

China also has growing experience with joint ventures, with

share issues and stock markets, and with trading of bonds,

commodities and futures. The scale of stock trading is becoming

significant: In the Shenzhen Stock Market in southern China,

more than $250 million worth of shares trade hands in a good

week. Doing 'More' Than Russia

"In Russia, they keep talking about reform, but they don't

actually do anything," said a Chinese economist who recently

visited Moscow. "We're doing a lot more than they are."

Most of the items on the Chinese agenda have been proposed for

years. What is new is the concerted drive to move ahead:

Experiments with stock issues will be extended on a much

broader basis. According to one plan now being informally

developed, more than half of state-owned companies -- all except

those that are in strategic industries, are owned by the army or

are particularly prestigious -- will issue stock over the next five

years or so. About 20 percent of the shares would go to

individuals and the rest to companies, universities and

Government departments.

*More state-owned companies may be forced to merge, lay off

workers or even close down rather than lose money indefinitely.

These steps are controversial within the Government because of

the antagonism that they generate, but the Government reported

a few days ago that it had already laid off 1.4 million workers.

That is equivalent to about 1 percent of the urban labor force,

and more layoffs are expected.

*Apartment rents have doubled or are about to in most Chinese

cities, and rents are scheduled to quadruple by 1994. Many

cities are also introducing plans to force occupants to buy their

own homes, finally lifting key controls on rent after years of talk

but little action.

*Irrational prices continue to be adjusted to levels closer to the

market. The price of a jin of noodles, enough for about two

bowls, rose in April to 12 cents, compared with 7 cents two

years earlier. In Shanghai, electricity and water rates jumped by

up to 50 percent this month, and coal prices around the country

reportedly will rise sharply from their absurdly low levels. Some

citizens are grumbling, but for now the Government seems

intent on continuing to decontrol prices.

*Foreign investment will be allowed in new areas of the Chinese

economy, particularly the service sector. The first joint venture

will be allowed soon in the insurance industry, a Japanese

company is being allowed to open a joint venture department

store in Shanghai and foreign banks will be allowed to open

branches in several cities. The authorities in the southern city of

Guangzhou, also known as Canton, are even talking about letting

foreign banks accept deposits and make loans in local currency.

*The special policies to encourage foreign investment will be

extended to the interior of China, instead of simply the coastal

areas where investment has already been encouraged. All

provincial capitals and the cities along the Yangtze River will be

authorized to offer tax breaks and other preferential terms to

foreign investors.

Many of the plans now under discussion, including the stock

one, are similar to those that were debated in 1988 and early

1989, before the army attacked the Tiananmen pro-democracy

movement and the hard-liners rose to power.

"Nobody can say so aloud, but basically we've gone back to

where we were before Tiananmen," said a middle-ranking official

responsible for finance. "In economics, things are going ahead

again."

Photo: The price of noodles, a staple of the Chinese diet, and of

other basic commodities have risen sharply as the Government

pushes to decontrol prices and speed the country's transition to

a free-market system. In Beijing, a family eating a meal of

noodles from a street vendor. (Agence France-Presse)

China Plans Big Layoffs Of Coal Mine WorkersBy NICHOLAS D. KRISTOF,

Published: December 29, 1992

BEIJING, Dec. 28— China has laid off 100,000 coal workers

and will lay off hundreds of thousands more in the coming years,

as part of a broad effort to modernize its energy industry, an

official report said today.

The layoffs suggest that the Communist Party is finally grappling

directly with the enormously complex and painful problems of

industrial revamping.

Until now, the Government has resisted such layoffs for fear of

provoking worker unrest -- the same kind of anxieties and

outrage that erupted in Britain in October when the Government

there proposed laying off 30,000 coal miners.

The Communist Party here sees the problem the same way that

the Conservative Party perceives it in Britain: some mines

cannot be operated economically at current prices. But the

British Prime Minister, John Major, was forced to scale down his

program in response to the public outrage, while the self-

professed leaders of the Chinese working class seem determined

to expose the miners to the discipline of the market.

The official China Daily said the China National Coal

Corporation, a huge state-owned conglomerate that employs

three million people, would close 30 inefficient mines in 1993

alone and lay off 30,000 miners and 70,000 workers in related

jobs.

The newspaper said the company planned to reduce the number

of its coal workers by 400,000 by the time the current five-year

plan ended in 1995. The report added that another major state-

run coal company, which it did not identify, also planned

"massive layoffs to increase efficiency."

The China Daily also said that 100,000 coal workers had already

been laid off, although it did not say when that had happened. It

said that most had found other kinds of jobs, and the

Government apparently also will help employees laid off in the

future to find jobs in new companies in the service sector.

The Energy Ministry refused to comment today. The coal

corporation directed phone calls to Tan Enli, its director of

policy research, and he declined to discuss specifics. But he did

say that the article in China Daily was premature and should not

have been allowed to be published.

"We'd like to do these things," Mr. Tan said, referring to the

prospective layoffs for 1993 and subsequent years. "But first we

need approval. In January the company will hold a conference to

decide whether to go ahead with these plans."

In China, if a conference is called to debate a topic, that usually

means that the aim is to build a consensus and legitimacy for a

decision that has already been made. A Big Headache

State-owned corporations like the coal company have been a big

headache for China's leaders. While the overall economy is

booming at a 12 percent growth rate this year, the main

beneficiaries are private and collective enterprises.

Among state companies, which account for about half of

industrial output, only a third are earning profits, with another

third showing losses and the rest breaking even. Coal mines

have particularly suffered, because their costs have gone up

while the price of the coal they sell is fixed at artificially low

prices by the state.

The solution is twofold: to raise coal prices and to lay off surplus

workers. But the Government has worried that consumers might

protest rising prices for coal, which is used for both heating and

cooking, and that miners might protest the layoffs.

Now the authorities appear to be moving on both fronts, not only

in the coal industry, but throughout the economy. Price of Coal

to Be Raised

In addition to laying off surplus coal workers, China has said it is

raising coal prices gradually so that they will reach market

levels within the next few years. This year, for example, the

National Coal Corporation is allowed to sell 20 percent of its

output at market prices, and in 1993 the figure will rise sharply.

Elsewhere in the economy, state-owned companies are also

revamping and laying off workers.

In the central Chinese city of Chongqing, for example, the local

Foreign Affairs Office says a state-owned knitting mill was

declared bankrupt in September, costing 3,000 workers their

jobs. At the time, it was the biggest single bankruptcy ever

allowed in China, the local officials say.

Until recently, the state normally bailed out such money-losing

factories indefinitely, because of the fear of worker unrest. In

the spring of this year, the Government was deeply worried by a

series of wildcat strikes and attacks on change-minded factory

managers.

As a result of those incidents, the leadership cooled down the

talk about how beneficial layoffs were for economic efficiency.

And now, while going ahead with the restructuring, it appears to

have decided to provide as many sweeteners to the workers as

possible.

Each laid-off coal worker will be eligible for a no-interest loan of

up to $1,720 to help start a business or find work elsewhere. The

Government will also give the coal corporation a $340 million

loan to allow it to start service companies that can absorb some

of the laid-off employees.

Photo: China National Coal, which employs three million people,

plans to reduce its work force by 400,000 by 1995, the official

China Daily reported. Workers loaded coal in Shanxi Province.

(Eastfoto)

Chinese Leaders Back Deng on Economic ChangePublished: March 12, 1992

BEIJING, Thursday, March 12— Top officials of China's ruling

Communist Party rallied behind the call of the country' senior

leader, Deng Xiaoping, for bolder economic change, according to

official news reports today.

The decision came at a meeting of the party Politburo, the top

decision-making body in the country, on Monday and Tuesday. It

appears to make Mr. Deng the winner in a prolonged struggle

with hard-line leaders over the path of the Chinese economy.

Mr. Deng, 87 years old, who began shifting China toward a

market economy in 1978, feared the hard-liners would undo his

policies in the name of protecting China from bourgeois

contamination. Chinese living standards have risen sharply since

the move toward market economics began.

The hard-liners maintained that the shift toward the market was

leading China toward capitalism and that the "open-door policy"

of maintaining contact with the West was bringing in drug use,

Western cultural influences and crime. Decision of Politburo

The official New China News Agency said the Politburo decided,

"to judge whether a move is 'socialist' or 'capitalist' will depend

mainly on whether it will benefit the development of the

productive forces under socialism, the enhancement of the

comprehensive national strength of our socialist country and the

promotion of the living standard of the people."

Mr. Deng stepped down from his last party and government

posts in 1989 and 1990, and was not mentioned as attending the

meeting. It is more likely that he conveyed his views through the

party General Secretary, Jiang Zemin, or other Politburo

members.

The official press agency said the Politburo "stressed that it is

imperative to firmly carry out the party's basic line of making

economic construction the central task and to seize the current

opportune time to accelerate the pace of reform and opening to

the outside world."

It called for more attention to education and science and

technology and said the party would not waver in its line "even

for 100 years." Democractization Opposed

The meeting called for "vigilance against right deviation,"

meaning moves toward Western-style democracy, but said that

"main attention should be paid to guarding against left

deviation."

This appeared to be a direct attack on Mr. Deng's hard-line

enemies.

"Left deviation" means excessive emphasis on class struggle,

egalitarian wages and other policies of the late Mao Zedong.

He Preaches Free Markets, Not MaoBy NICHOLAS D. KRISTOF

Published: May 11, 1992

DONGGUAN, China— For anyone who thinks of Communist

Party bosses in China as old ideologues in Mao suits, Liu Shuji

comes as a surprise.

A 43-year-old dynamo who favors well-cut business attire, Mr.

Liu uses his tiny Motorola cellular telephone not to mount

"political study" campaigns but to recruit foreign investors. One

of his favorite economists is Milton Friedman, the American

proponent of free markets, and Mr. Liu's aim is to spread wealth

rather than revolution.

Mr. Liu, the Communist Party secretary for the urban area of

Dongguan, one of the richest cities in southern China, is an

example of the new breed of Communist officials emerging in

towns throughout the nation. Reared in the fervor of the Maoist

era, and turned off by it, they today prefer practical policies to

promote economic growth through contact with the West. Lens

on Local Government

"The Communist Party and the Republican Party and the

Democratic Party are the same in some ways," Mr. Liu said in

his elegant second-floor office overlooking the main street of

Dongguan. "You can't pressure people to stay in power. You've

got to give people a better life and improve the economy. If the

economy doesn't improve, then the Communist Party is in

trouble."

The party is often a very different creature at the local level than

at the center, and nowhere is this more true than here in

Guangdong Province, adjacent to Hong Kong. Mr. Liu's

pragmatism seems fairly typical of his generation, and in many

ways he offers a window into the minds that run the nation's

local governments.

Mr. Liu, a soft-spoken man with a boyish face and a mischievous

grin, was born to a peasant family in Guangdong. As a university

student during the Cultural Revolution, the tumult that lasted

from 1966 to 1976, Mr. Liu was one of the millions of Red

Guards who made revolution on a daily basis. He became a

leader of a Red Guard faction in the provincial capital, Canton,

and battled rival groups.

That experience apparently sapped his revolutionary ardor, for

Mr. Liu was already a committed pragmatist in the early 1980's

when he worked as a local official in the farm town of Humen.

The challenge in those days was to apply a national policy that

as an experiment allowed the breakup of agricultural communes

in backward areas.

"We saw that the experiment worked very well," Mr. Liu

recalled. The new individual farming plots were far more

productive than the communes. So, without waiting for Beijing's

approval, Mr. Liu and other local leaders extended the

experiment across the board and allowed the peasants in almost

all areas to divide up the communes.

The central Government eventually affirmed that this was the

right thing to do.

"We don't resist central policies," Mr. Liu said. "But we can

implement the policies flexibly, creatively and practically."

Mr. Liu's flexibility is evident in the remarkable changes in his

appearance that have taken place over the years.

In an interview four years ago, when he was deputy mayor of

Dongguan, Mr. Liu wore a simple tunic and looked like an

ordinary Chinese worker. These days, reflecting the increasing

wealth and sophistication of Dongguan, Mr. Liu wears stylish

wool suits and is driven around in a red Mercedes-Benz 200 that

is scented with Kiss car cologne. His cellular telephone is never

more than a few feet away.

The job of Communist Party Secretary includes responsibility for

all Government and party activities, but Mr. Liu devotes most of

his time to economic development. While the national leadership

fulminates about "hostile foreign forces," Mr. Liu strives to

increase business with those forces -- particularly with Hong

Kong.

Many of Dongguan's 1.3 million people have relatives in nearby

Hong Kong, and the backbone of the local economy is the

network of Hong Kong-financed factories that make toys, shoes

and clothing for export. Some of the factories are partly owned

by the city government and generate profits that the city

authorities have used to buy Canadian real estate and to set up

several dozen companies in Hong Kong.

When he is asked if all this contact with Hong Kong is subversive

of Communist rule, Mr. Liu seems horrified at the question.

"We shouldn't be afraid of such contact," he said. "There are

many things about other countries that we must study." Favors

Slow Liberalization

In particular, Mr. Liu believes that China must study Western

management practices and market economics. He said that

while socialist countries have done well in reducing gaps

between the rich and poor, they generally have poor service and

low efficiency.

Like many moderate officials, Mr. Liu favors political

liberalization, but very slowly, to avoid instability that might

threaten economic growth.

"Reform has focused on the economy, and political change has

lagged a bit," he said. "Chinese go along with that. We

remember the Cultural Revolution, and we don't want that chaos

again. People want to see prosperity and democracy both, but in

a stable way. Westerners maybe don't understand that very

well."

In other parts of China, political study classes are held every

week or so in most factories and offices and include readings of

speeches by national leaders. There is not much of that in

Dongguan.

Pressed for an example of whether city workers still go through

some political study, Mr. Liu paused.

"There've been some special study sessions," he said. "Hygiene

and manners, for example. Now the staff know that they have to

wear nice clothes and can't wear sandals to the office."