China had postponed wide-ranging plans toreform its economy because of financial difficulties and
pressure from powerful conservatives within the ruling
Communist Party, western diplomats said.
    But they said that although the conservatives were critical
of aspects of the current open-door policy they had no
alternative economic program. That meant that the strategy
begun by top leader Deng Xiaoping in 1978 was likely to go on,
but at a slower pace, they said.
    Deng has led China's overhaul of the Stalinist economy
built during the rule of Chairman Mao. Since Mao died in 1976
living standards have risen sharply and China has become a net
exporter of grain for the first time.
    A western diplomat said China's leaders had been
sufficiently encouraged by their success last year to order the
drawing up of plans for more reforms for 1987. These included
changes to the country's price system.
    But he said the biggest reforms had been shelved since
economic problems appeared in late 1986 and the resignation of
Communist Party chief Hu Yaobang in January.
    The diplomat said the most ambitious reforms would not be
on the agenda for a major party meeting later this year.
    The main economic reform proceeding in 1987 is a system
under which factories sign contracts with the government. They
can keep any profit over and above the contract amount.
    "This is a modest reform, a repeat of what China did in the
early 1980s," the diplomat said.
    "It is regarded as second best by the reformers who drew up
the more ambitious plans. But these are impractical in the
current political and economic climate," he said.
    A Chinese source said that a month ago Premier Zhao Ziyang
decided the media was giving too much coverage to the drive
against bourgeois liberalism and not enough to explaining the
proposed reforms. Some of these reforms, like price increases,
were very unpopular.
    Zhao ordered the media to give more coverage to the reforms
and why they were necessary, the source said.
    One of China's top economists wrote in the People's Daily
last week, "Failure to answer people's questions about the new
prices has caused great anxiety."
    In March, China announced budget deficits for 1986 and
1987. It has had two years of trade deficits, and capital
spending and wages are rising fast.
    On the political front, the conservatives in the Party have
been on the offensive since January when Hu resigned. He
allegedly failed to fight the growth of western democratic
ideas, which the Party has called bourgeois liberalism.
    A nationwide drive against bourgeois liberalism has been
under way since January in the Party and the media. The latter
has given wide coverage to those in the leadership who have
warned against the errors of all-out westernisation.
    The economist said, "Although reform in any country
inevitably causes anxiety and is often risky, it has been
proved that, where reform is more daring, commodities are more
abundant and people's living standards higher."
    "But in the countries that are more rigid, the market is
stagnant, goods are in short supply and rationing is common," he
said.
    The diplomat said the reformers wanted to complete their
unfinished overhaul of China's pricing system.
    The diplomat said the reformers wanted to make factories
independent of the government which would use taxes, credit
supply and other indirect means to regulate them instead of
administrative diktat as in the past.
    "But to enact such far-reaching measures they need a stable
economy, contented workers and surpluses, to give them
manoeuvring room. These conditions do not exist now," he said.
    Another diplomat said that conservatives within the
leadership, though critical of some results of the reforms, had
no alternative economic strategy.
    "The last eight years of opening to the outside world has
shown everyone how poor China is and how it has fallen behind
other countries," the diplomat said.
    "Everyone is agreed on the objective that China become a
major world power by the early 21st century," he said.
    "For this, it needs a strong and modernised economy. Where
there is disagreement is over the pace of the reforms and the
details of some of them."
    The Chinese source said the debate over the pace and extent
of reforms was still going on.
    (See ECRA for spotlight index)
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