Chinese leaders reaffirm state's control over the economy

With economic turmoil eroding their credibility, China's leaders are strengthening state controls in an effort to curb harmful offshoots from market-oriented reform. Voicing the concern of some high-ranking leaders, China's premier has expressed impatience with attempts to restrain runaway economic growth and inflation, according to official press reports Tuesday.

``There are many problems in the overall arrangement of next year's national economic and social development because overheated development and high consumption trends have not yet been curbed,'' said Premier Li Peng, according to the China Daily.

Comments by Mr. Li and Vice-Premier Yao Yilin at a meeting on national economic planning Monday reflect an effort by cautious leaders to bolster central controls over the economy despite the decade-old effort to reduce such socialist planning, Asian and Western diplomats say.

Much is at stake in what the Communist Party calls its effort to ``rectify the economic order.'' Party leaders have said the economic tumult imperils their ability to govern and their credibility in the eyes of many Chinese.

Facing widespread panic buying and bank runs, the leadership last August reined in China's invigorating, market-oriented reforms as part of a broad, two-year plan of economic retrenchment. Li and Mr. Yao have advocated stronger state controls, although it is too early to gauge the success of current efforts to reduce rapid economic growth and an inflation rate exceeding 20 percent, diplomatic experts on the economy said.

``The concept of central planning seems to be back in force, and there's little opposition to it, particularly since there are no numbers in the economy to support any resistance,'' an Asian diplomat said.

For example, Mr. Yao called for a ``readjustment'' of the ``economic set up by forming a clear industrial policy'' that will guide investment, production, consumption, and the organization of enterprises, according to the China Daily.

Although such a policy has characterized China's command economy for decades, advocates of swift reform in recent years have tried to steer the state away from such central economic planning.

The Communist Party newspaper People's Daily Tuesday echoed the view of Li and Yao. Government control of the economy should be further strengthened as part of the effort ``to straighten out China's tangled economic web,'' it said in a front-page commentary.

Since August, the party has flexed central controls by cutting government investment in fixed assets by 20 percent, limiting bank credit, and dispatching price inspectors nationwide to combat profiteering.

In the clearest sign of its retreat from bold reform, the party has frozen state-controlled prices of ``essential goods'' for the next two years, halting the price decontrol that economists say is the linchpin of the effort to streamline the economy.