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China economy pedals toward renewed growth; But sewing machines, wristwatches, etc., need to be of higher quality

After several years of tight fiscal constraints, China is once again heading toward economic growth - but with an emphasis on quality rather than on growth for growth's sake.

The economic plan for 1982 recently unveiled by Deputy Premier Yao Yilin projects a growth rate of four to five percent. ''Achieve four and strive for five'' is the slogan.

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The 1982 defense budget, 17.87 billion yuan ($9.93 billion), is a billion yuan more than 1981's. Capital construction is allocated 29.73 billion yuan, to 25 billion yuan the year before. This is the first time since 1979 that allocations for either of these budget areas have been increased.

But in terms of absolute figures, in 1982 China is spending less, both for capital construction and for defense, than it did in 1979.

Mr. Yao, like Premier Zhao Ziyang, advocates ''meeting society's needs,'' not in production for production's sake. Like Mr. Zhao, he has said sternly that there is still too much of the latter.

''Tap existing potential'' as much as possible, he says - don't rush out and blindly build new factories.

Agriculture remains the foundation of China's economy, and this year, as last year, the target for grain output is set at a high but not unattainable figure. Last year the target was 332 million tons. This year it is 333.5 million tons. Actual production last year was 325 million tons.

If this year's target is achieved, it will be the largest harvest in China's history. Cotton, oil, and sugarcane crops last year reached record levels, and the performance may be repeated this year.

Because of the government's incentives program, farmers are eager to grow these industrial crops. In fact, in some areas state grain procurement programs have had difficulty meeting targets because acreage was shifted too enthusiastically to industrial crops. These industrial crops in turn fuel light industry, which grew last year by 14.1 percent.

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Heavy industry, meanwhile, fell sharply - by 4.7 percent. This year Mr. Yao wants a more balanced growth rate of seven percent for light industry and of one percent for heavy industry. The purpose of heavy industry, Mr. Yao and other leaders say, is to serve the needs of agriculture, of light industry, and of consumers.

The manufacture of bicycles, sewing machines, wristwatches, television sets, and other consumer goods will continue to be encouraged - production is still far from sufficient to meet demand.

But here Mr. Yao and his planners confront another problem. They have given increased powers to local authorities as part of their program of decentralization of decisonmaking.

Many provinces have used this authority to go into making bicycles or washing machines or whatever else they think will make a profit, regardless of their capacity to turn out quality products. They have then used administrative measures to shut out higher quality goods from industrially advanced Shanghai and Tianjin.

This correspondent has seen locally made washing machines piling up in regional department stores while scarce supplies of well-known brand names from Tianjin or Shanghai are soon sold out.

Now the central government has issued directives forbidding local authorities from closing the door on products from other provinces, or offering their own products at an excessive discount. But the practice continues.

Steel production is still being cut back - this year by four percent to 34 million tons. As Mr. Zhao noted earlier, too much unusable steel is still being produced, and last year 20 million tons of rolled steel had to be stockpiled.

Energy is a severe bottleneck. Many factories have had to be closed down in order to conserve energy.

For a machine tool factory, for instance, it has proved more economical to close the plant, while continuing to pay full salaries to employees, than to keep it open, using up energy and producing tools that cannot be sold.

Coal production will be increased 3.9 percent over 1981 to 625 million tons, but oil production will be held steady at 100 million tons (equivalent to two million barrels per day). Onshore production is declining, and it will be the early 1990s before offshore production makes a significant contribution. Mr. Yao's speech on the 1982 plan was peppered with admonitions to save energy.

On the budget side, Finance Minister Wang Bingqian projects a three billion yuan ($1.66 billion) deficit for 1982. The real deficit will be larger, for on the revenue side he includes four billion yuan in treasury bond sales and five billion yuan in foreign loans.

Also on the revenue side, as the government gives more autonomy to enterprises, profits from enterprises decrease while tax collections increase.

This year, the government plans on obtaining 34.41 billion yuan as its share of enterprise profits, compared to nearly 50 billion yuan in 1979. On the other hand, tax collections have increased from 53.78 billion yuan in 1979 to 64.6 billion yuan today.

Expenditures for education, culture, health and science are 18 billion yuan this year, up by 780 million from last year and by nearly five billion compared to 1979.

In short, the outlook this year is for cautious expansion, with emphasis on quality and careful monitoring of prices to make sure unsatisfied consumer demands do not lead to a new inflationary spiral.

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