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New directions in China

Mrs. Margaret Thatcher [signed] an agreement over Hong Kong's future with a China very different from the politicised and threadbare country she first visited as leader of the Opposition in 1977. Then, just a few months after Mao's death and the fall of the Gang of Four, the process of dismantling Maoism had barely begun. Now, not only Maoism but even Marxism appear less and less relevant in the context of the new consumerism which the leadership has encouraged to motivate the drive to prosperity.

While Mao has retained his pedestal as founding father of the Chinese revolution, and Marx his status as its inspiration, the economic theories of both have been progressively shelved. The Chinese argue that the country remains socialist because the means of production -- land and factories -- are publicly owned, but small-scale capitalism, such as market gardening or the running of restaurants, is thriving.

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China's new rich are mainly the products of Deng Xiaoping's agricultural reforms which have allowed the peasants to grow and sell what they like.

The ``open door'' policy of attracting foreign traders and investors has blossomed beyond what could have been imagined in 1977. China claims a figure of around $8 billion worth of inward foreign investment since the policy was adopted five years ago. External trade has more than doubled. As important as the inward cash flow is the impact of foreign businesses and technicians on a wide range of Chinese people who previously were excluded from first-hand contact.

Deng's ideas are popular. It now seems most unlikely that in Deng's active lifetime China will switch back to Maoist ways.

Yet it is certainly possible that from now on the pace of change will slow. The most difficult innovations are still ahead. Deng's next step, announced in October, is to reform the urban economy, developing power and responsibility to factory managers, and revising China's topsy-turvy pricing system.

The Chinese have already said they will exercise caution in implementing these reforms. They have little experience of running the kind of urban economy they envisage, and they have not worked out in detail what they intend to do. The economic consequence of a bumpy transition to a new pricing system and new forms of management could include damaging shortages, inflation, and lack of employment.

These would severely shake the confidence of China's city dwellers. And the introduction of the planned hire-and-fire system, the new requirements for managers to go out and sell, and even the simple need to keep proper track of costs and profits could generate strains which might require course corrections.

So this reform programme, on top of ambitious plans for the development of energy, transport, and industry, contains plenty of potential pitfalls. With Deng alive and well, China may muddle through successfully to create the infrastructure needed for the 1990s. But without him, it is still a moot point whether any of his likely successors have the strength and charisma to keep China firmly on its present track.

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There is still a band of mid-level officials, recruited during the cultural revolution, whose ideas were formed in the radical atmosphere of those times. While they may not be ideologically committed to the extremes of Maoism, they are not likely to be efficient managers of a semi-market economy. Nor do they want to give up power to the technocrats. It is still too soon for Mrs. Thatcher to regard Deng's policies, with all their implied reassurance for Hong Kong after 1997, as permanent.

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