China's Economy Advances Briskly

THE bloody crackdown on democracy demonstrators in Tiananmen Square in 1989 has not stopped economic progress in China.

"There doesn't seem to be much correlation between political repression and what is happening to the economy," says Thomas Gottschang, a professor of economics at the College of the Holy Cross in Worcester, Mass. "It does not seem that democracy is essential for economic growth in China."

China has doubled its standard of living in 10 years. The number of Chinese living in "absolute poverty," with barely enough food to sustain physical activity, has plunged 135 million since 1980 to about 90 million today. That reduction exceeds half the population of the United States.

The life span of the average Chinese, less than 35 in the 1950s, has reached 70 years. This compares with approximately 58 years in India. Measures of health, such as infant mortality rates, are better than those for Washington, D.C. Illiteracy has declined from 80 percent of the adult population in the 1950s to about 30 percent at present.

"It is very impressive for a developing country," says Javed Burki, head of the World Bank's China and Mongolia department.

Frank Vogl, who recently completed a study sponsored by the Chinese government on the impact of World Bank lending there, holds that media attention to Chinese politics may have left a false impression that the economic reform process stopped.

With the labor force growing by 2.5 percent a year, there is "an enormous imperative" to keep the economy and job-creation growing at a considerable rate, says Mr. Vogl, a former World Bank spokesman.

Indeed, last month Deng Xiaoping, China's senior leader, called for accelerated economic reforms.

China remains a poor country. The average income is about $1 a day. However, based on the purchasing power of that money inside China, the nation's per capita annual output is about $2,000.

In the 1980s, real gross national product grew 7.9 percent a year on average. Faced with high inflation, the government slowed that growth to about 6 percent in 1989 and 4 percent in 1990. But last year growth bounced back to 7 percent.

China, with a population of 1.1 billion, has a GNP of around $444 billion, a little larger than that of Brazil. Government projections call for growth of 85 percent for this decade, or 6.5 percent a year.

"We feel they can do even better than that," Mr. Burki says.

Vogl calls China "the next tiger" - though it has a long way to go to catch up in per-capita terms with other fast-growing Asian "tigers" such as South Korea, Taiwan, Hong Kong, Singapore, and Thailand. "Success has come through the provision of opportunities to individuals to use their initiative and enterprise to boost their productivity," Vogl says.

NE phenomenal success has been "township and village enterprises" (TVEs), which for the most part are factories owned by rural farmers and employing labor no longer needed in agriculture as mechanization spreads. These now account for close to 20 percent of China's GNP, employing more than 100 million people.

Vogl says these collectively owned TVEs may provide jobs for an additional 100 million Chinese in this decade. "They will assuredly be the single most dynamic form of enterprise on the Chinese scene," he says.

By now, TVEs produce nearly 80 percent of all bricks in China. They account for almost 20 percent of total cement production, three-eighths of silk textile output, nearly a quarter of paper and cardboard, around 30 percent of phosphate fertilizer, and 26 percent of coal, notes Vogl. TVEs are increasingly active in electronics.

For the government, the success of the TVEs has also been helpful in preventing further overcrowding in China's cities.

However, the TVEs are increasingly competing with and infringing on the monopoly of China's state-run enterprises, notes Gary Jefferson, an economist at Brandeis University in Waltham, Mass. By being more efficient, the TVEs have managed to offer lower prices and take market share from state enterprises.

The state-run firms used to provide about 80 percent of government revenues. With that source shrinking, the Chinese central government has had difficulty balancing its budget. This has limited the ability of the government to subsidize industry and education, Mr. Jefferson says.

In 1980, state enterprise accounted for about 80 percent of industrial output. By 1990, that proportion was 56 percent. The government has not decided to privatize its state enterprises, but wants to make them more profitable. About one-third lose money.

The state is loosening its grip on the economy. Only half of all commodity prices are state-controlled, down from almost all in the late 1970s. About 55 percent of retail shops were owned by the state before 1980; the number is only 38 percent now and is declining fast. Private enterprise - including joint ventures with foreign companies - have grown from about 1 percent of industrial output to 9 percent.

The experts note that China is certainly not without problems. One of these is making the state enterprises more productive. Another is the political succession to Deng. If that goes smoothly, China should continue its rapid growth. "Most people are less worried about the succession problem ... because the economy seems so much more a powerful driving force than it did before," Professor Gottschang says.