China limits economic reforms
China appears to be reversing some of the economic freedoms introduced in recent years, as Peking attempts to regain firm control of the national economy. Since the National People's Congress was held in June, several measures tightening the liberal economic laws introduced under Deng Xiaoping have been announced.Skip to next paragraph
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Measures banning unauthorized capital investment, restricting the availability of capital, and severely curtailing the activities of unlicensed private businesses have been introduced. The official press has strongly criticized the ''money incentives'' that form the basis of China's new ''job responsibility system.'' Major cities have stepped up control of prices and the ''shake-up'' of enterprises has been urged by senior officials.
Despite a state policy favoring light industry, Peking was not able to curb massive growth in heavy industry last year, when production in that sector jumped by 9.9 percent to 274 billion yuan (about $137 billion) compared to a 4.7 percent drop in 1981.
The adoption of a three-tiered economy last year, when a wide range of industrial production was freed from compulsory planning, and a spate of capital investment by collectives and enterprises has largely been responsible for the blowout by the heavy industrial sector.
With production by heavy industry already up 12 percent for the first half of this year, despite a growth target for the year of only 3.9 percent, the State Planning Commission has announced tough new measures to curb capital investment in that sector.
On Wednesday, the minister in charge of the commission, Song Ping, ordered checks on every capital investment project in China to be submitted to the commission by the end of August.
Mr. Song said the commission planned to stop all large and medium-size projects not included in the state plan and would conduct a feasibility study on those in the plan.
He said that capital investment for the first five months of this year had already jumped by 37.3 percent over the same period last year. ''Capital investment has increased steadily in the first half of this year, but we have seen no major progress in key projects,'' Mr. Song said. ''It is urgent that we stop blind capital investment on unnecessary projects.''
In other moves last week, the People's Bank of China announced that controls on loans for working capital were to be tightened, to ensure that enough funds were available for state projects.
A spokesman for the bank said that districts and enterprises applying for loans would have to prove that their project was not in the area of excess production, duplicating production elsewhere, or likely to incur high production costs or produce low quality goods. He said any enterprise that was about to be merged or shifted or that produced obsolete goods would be ineligible for loans.
At the same time the secretariat of the Communist Party's Central Committee issued a joint circular with the state council demanding the ''shake-up'' of key enterprises. The action follows criticisms by Premier Zhao Ziyang, in his report to the National People's Congress last month, on the ''appalling'' waste and corruption in Chinese enterprises.
''Economic results are still unsatisfactory and the waste of manpower, materials, and financial resources is appalling. All departments, localities, enterprises, and institutions should unfailingly cut down on production costs. . . . All enterprises that run at a loss due to poor operation must reverse this trend within a given limit. Otherwise, they must be ordered to shut down, suspend operations, amalgamate with others, or switch to the manufacture of other products,'' Premier Zhao said.
More suprising than the moves to control capital investment and bring production into line with state priorities was a front-page editorial in the official newspaper of the Communist Party, the People's Daily, which strongly attacked the ''money incentives'' used in China's ''job responsibility system.''
The editorial said there was a misconception that the monetary incentives were the main force behind China's current economic reforms. ''But, in fact, it is a corrosive agent and saboteur of the reform movement and of socialism as a whole,'' the People's Daily editorial said. It was one of the strongest attacks ever on China's liberal economic laws.
Rural and peasant incomes have soared under the new system, which links a worker's income to his labor for the first time in nearly 30 years.
In another indication that the activities of peasants involved in sideline production may be curtailed, at least Shanghai and Peking have brought in tough new rules to enforce the control of vegetable prices - a move that will directly affect the profits of many peasants selling their produce in the nonstate ''free markets.''
Peking has also ordered peasants to sell certain produce directly to the state fruit company and directed any private fruit sellers to purchase these goods only from two state wholesale outlets, effectively reinstating the state monopoly that the economic reforms had demolished.
A recent commentary in the official press accused private businessmen of illegal ''profiteering'' and called for the strict control of individual enterprises. ''Urban businesses operated by school students, state employees, and itinerants should be banned. Peasants engaged in unlicensed business in the cities should be persuaded to go back to their home town to apply for a license with which they can transport goods between city and countryside,'' the Jingji Ribao said.