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Party Wants Return to Limited Economic Reforms

THE Communist Party has called for reviving limited market-oriented reforms in an attempt to pull China's economy out of a recession and lure back foreign investment. In an internal document released last month, the party instructed the Chinese news media to publicize economic reforms, apparently for the first time since the June 4, 1989 crackdown, party sources say.

Senior leader Deng Xiaoping seeks to rekindle market reforms in order to improve China's image abroad and win back vital foreign credit, trade, and investment, say Chinese sources.

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Communist Party chief Jiang Zemin has also shown new interest in reform recently, requesting briefings from the State Economic Restructuring Commission, a reformist stronghold under ousted leader Zhao Ziyang, the sources say.

And in a July 11 speech to the State Council, Premier Li Peng stressed ``deepening reform'' while announcing measures to stimulate the economy following 18 months of austerity.

Western diplomats note, however, that while announcing limited economic ``adjustments,'' the leadership has not yet taken concrete steps to further free China's economy from state bureaucratic controls. ``The mechanisms remain the same,'' says a Western diplomat.

Rather, the driving motive behind the renewed discussion of reform appears to be the leadership's concern over the sluggish state of the economy, diplomats say.

Economic statistics for January to June this year paint a grim picture of an economy struggling to recover from a strong dose of austerity.

The number of state-owned enterprises running in the red rose to 34 percent, while their total profits plummeted 59 percent, as thousands of factories operated under capacity.

Poor performance by state companies further depleted state coffers, leading the government to run a mid-year deficit for the first time since the communist regime came to power in 1949.

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Price and management reforms that would improve efficiency and reduce massive government subsidies are thus ``attractive to a government that's feeling financially pinched,'' says a Western diplomat.

Nevertheless, concern among the leadership that reforms will generate political instability remain a fundamental obstacle to radical economic restructuring, diplomats say.

Officials worry that freeing prices will fuel new inflation, while forcing companies to compete will lead to bankruptcies and more unemployment.

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