Fractious Party Meeting Continues Chinese Reforms

Final communique masks internal discord over economy

CHINA'S ruling Communist Party is trying to quicken the pace of market reforms and boost its central economic clout by partially privatizing state enterprises and overhauling the tax system.

At the end of a four-day meeting heralded by officials as ``far-reaching'' but widely believed to be torn by factional bickering, the party yesterday announced measures aimed at furthering the economic reforms of paramount leader Deng Xiaoping and pushing through changes in enterprise restructuring, taxation, banking, investment, and foreign trade.

The meeting, which is called a plenum and could be the last major policymaking session to be held under the ailing Mr. Deng, issued a lengthy communique which provides a broad blueprint for China's transition to a market-style economy but is short on detailed prescriptions for resolving thorny economic problems, Western analysts say.

``The party central [leadership] had to assert itself now because soon Deng Xiaoping might not be around and Beijing might be unable to rein in the growing power of the provinces,'' says a Western diplomat in Beijing.

Just how Beijing will tackle the dilemmas of streamlining loss-ridden state enterprises and imposing tax and financial discipline on rambunctious regions remains to be seen.

According to Chinese analysts and reports in the Hong Kong press, the document issued after the meeting does not reflect party infighting over the high growth rate advocated by Deng, the revamping of state enterprises that could render jobless thousands of Chinese, and a new tax law aimed at curbing the taxing power of provinces and boosting central coffers. Limited success

Since imposing austerity measures last summer to cool China's overheated economy and end financial chaos, the government has scored only limited success with its efforts to curb stock and property speculation. Of late, government statistics show industrial production and the money supply are growing more slowly although inflation is still racing at almost 25 percent in cities.

In recent weeks, the authorities have slowed austerity measures and resumed lending to some cash-strapped provincial authorities and state enterprises.

Still, in a move that analysts believe is aimed at quieting political conservatives concerned that high inflation will ignite social unrest, the Chinese press has trumpeted Deng's commitment to rapid economic growth.

Recently, with great fanfare, the party launched the third volume of the ``Selected Works of Deng Xiaoping,'' emphasizing the leader's remarks on the pace of economic development.

Amid new rumors that the communist supremo is extremely ill, the publication was interpreted by Chinese and Western analysts as a reassertion by the Deng faction within the party.

``They are pushing Deng's ideology to counter the other forces,'' says another senior Western diplomat. ``This is positioning for post-Deng.''

The party meeting also sanctioned new efforts to transform state enterprises into Western-style shareholding corporations to revive the sagging public sector. While restating that the public sector will be the economic cornerstone, the party endorsed establishing ``a modern enterprises system which suits the requirements of a market economy, which is clear in property rights and in enterprise rights and responsibilities, [and] which separates government administration from enterprise management.'' Jiang Zemin, president and party general secretary, was quoted in the pro-Beijing press in Hong Kong as endorsing large-scale privatization in some economic sectors.

But analysts question government resolve in pushing its plan and risking the layoff of millions of redundant Chinese workers. ``At one point it seemed they wanted to cross the Rubicon on the issue and now it seems that they don't,'' says the senior diplomat.

Beijing also plans to put in place early next year a new tax system under which provinces will have to give more money to the center, risking the anger of rebellious provincial leaders. Since market-style reforms were launched 15 years ago, tax-raising and other economic powers have been decentralized and Beijing has bargained annually over how much each province would send to the center. New tax system

Under the plan, Beijing will establish central and local taxes and its own system of tax collection. That way, the central government will have control over the amount of money given to each province, and could reapportion revenues from wealthy coastal provinces to poor inland areas.

Rampant speculation by local officials using tax revenues was one of the causes of the economic overheating that triggered the austerity measure this summer. By more closely controlling the amount of revenues available to local authorities, Beijing is reasserting its authority but also risks igniting local resentment and possibly the political breakup that many Chinese fear.

``The decline of central power and the rise of local autonomy is the biggest danger facing Beijing,'' says a Chinese analyst. ``The tax system and Beijing's cash crisis is one symptom of this trend.''

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