Peking bureaucracy stifles progress on China's Hainan Island

Gold Bull Mountain looms above the citizens of Shilu on Hainan Island as both a blessing and a bane, providing them with work but symbolizing a massive bureaucracy that hinders greater prosperity. The mountain has been a bountiful source of jobs for three decades and it promises to yield some of China's highest-grade iron ore for two decades more. It has made Shilu a one-company township, furnishing the livelihood for 60 percent of the population of 50,000.

But the mountain also represents the Peking bureaucracy that has operated the mine with the inertia typical of a command economy. The entrenched control of these distant bureaucrats is a chief threat to a new plan of more pragmatic leaders to speed the development of Hainan Island with looser curbs on the economy, according to Western diplomats.

The dead hand of central planning has weighed heavily on all sectors of the Hainan economy, from its rubber, sugar, and tea plantations to its manufacturing and mining. It has prevented the tropical island from developing at the breakneck pace of Taiwan, its capitalistic neighbor to the northeast. The $5,000 per capita annual gross national product of Taiwan is more than 20 times greater than the figure for Hainan.

The Japanese opened the mine in the 1930s to sidestep a foreign embargo on strategic goods and to secure iron for their invasion of China. The colonizers employed Chinese labor at the mine and hauled the ore 128 miles by railway to Basuo port on the Tonkin Gulf.

Since the Japanese withdrawal, the communist government has increased annual output to 4.6 million tons and expanded the work force but done little more to change the mine, according to the diplomats. The Peking-appointed managers of the mine use the same Japanese-built railway, port, and hydroelectric generator to move the ore from broad tiers on the mountain to ships in the gulf.

The Chinese could profit from management lessons from the founders of the mine: The Shilu iron mine is woefully inefficient, said the diplomats. ``The mine is definitely a highly centralized operation that has changed very little in the last 30 years, even during the reforms since 1984,'' a Western diplomat said on condition of anonymity.

The most obvious sign of such mismanagement is the high number of idle laborers. ``There is stupendous underemployment. The managers can't even find work for many of them,'' the diplomat said after a visit to the mine.

In an effort to tap this rich deposit of dormant labor, the mine administrators have opened three hotels and launched a construction company and rubber processing plant, said Jiang Huixing, director of the mine's propaganda department.

The mine introduced a new system last year of paying workers according to the level of their production, Jiang said. He declined to describe the old method of determining a worker's salary and said it was too early to tell whether the reform has increased productivity.

The mine has sought overseas investment through newspaper advertisements and meetings with foreign businessmen. Jiang offered an open welcome to these foreign investors, particularly US businessmen who plan to visit projects on the island in a tour sponsored by the US Embassy beginning March 20.

However, in a demonstration of how lingering Maoist orthodoxy can block China's ``open door,'' Jiang suddenly grew anxious that he had shared some of the above details. He detained a correspondent for more than an hour and was only dissuaded from seizing the correspondent's notes by the director of the mine.