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China reins in private enterprise. New restrictions seen as gain for critics of economic reform

By Julian BaumStaff writer of The Christian Science Monitor / August 24, 1987



Peking

Critics of China's economic reforms appear to be having their way this summer as the government reimposes some price controls and hardens the rules for private enterprise. These moves hint at the political limits Premier Zhao Ziyang faces at the 13th Party Congress, expected to mee in October. The evidence this summer suggests that any proposals to adopt more market-oriented policies will face an uphill struggle within the party.

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One sign of this is the price inspectors who are patrolling free markets in major cities, lookng for what the official press calls profiteers and speculators.

One day last week, with the help of 5,000 citizen volunteers, inspectors in Peking put some 800 street peddlers out of business. Some were charged with speculation, swindling, tax evasion, or not having a license. Hundreds more were suspended in Canton, according to reports.

To keep prices down, maximum prices for produce and meat are now posted in urban free markets, where farmers are allowed to sell directly to the consumer. These moves have been popular because of widespread complaints about price rises.

China's retail price index rose 6.3 percent during the first half of this year compared to 1986. In Peking and some other cities, the price of lean pork has doubled since last summer. Such increases have a greater political impact than in developed countries because in China families spend more than half their income on food.

``It is normal for prices to fluctuate with changes in supply and demand,``said Yuan Mu, a spokesman for the governing State Council, ``but we will not allow sharp price increases.

In a weekend report from the offical New China News Agency, Mr. Yuan noted that wage increases outpaced the price rises by two percent during the first half of the year, but that the standard of living of some workers had declined. ``We will take measures to correct this, '' he said.

The government also has issued its first national law regulating private enterpris which will take effect Sept. 1. It affects more than 18 million privately employed workers, including some 4 million in urban areas.

The new law codifies existing regulations which have been in force for several years.These rules, especially a ceiling on the number of employees, impose limits that have restricted most private businesses to the service industry, cottage handicrafts, small-time commercial farming, and animal husbandry.

As in the past, private eterprise is under assault because it requires some open markets in which to operate and can generate inequality.

A commentator in the Peasant's Daily earlier this month complained that leftist thinking, fear, and jealousy in the rural areas wee having negative effects. As prosperous households have become more numerous, they are a bigger target for jealous neighbors and for any officials who see socialism threatened, the commentator said.

The critics of free market practices have tended to make their points indirectly. The conservative Peking Daily recently railed against ``rackateers'' - ``...those who make illegal profits by reselling everything from socks and cigarettes to steel, cars and fertilizers. They do not care about laws or the interests of consumers,'' the newspaper said.

This definition of racketeering covers a wide variety of business activities in an economy where much of what is sold by private businessmen is produced by state-run industries.

The most politically sensitive issue, however, is pricing. The readjustment and deregulation of prices has been a key item on the reform agenda since 1979. But as the pricing system was reformed, it became more complex. A multiple pricing system - with one price for items produced within the state quota and a higher, often much higher, price for the extra-quota production - has sent confusing signals to industry and the consumer.

But Peking observers see few signs, price reforms can be taken up again this year. To do so, Premier Zhao will have to bargain with the man on the street as well as with hardliners in the party.