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China torn between rhetoric and economic realities


BEIJING -- The first Chinese Communist Party national congress since the fall of communism in the former Soviet Union finds the party here caught between its own rhetoric and China's economic realities.

The party seems to want to have its cake and eat it. The result is a batch of contradictions and brewing conflicts that defy immediate resolution and could spin out of control of the party's tight security apparatus.

The chief contradiction is the party's new vision that China should develop a "socialist market economy."

What party theoreticians mean by that oxymoron is to sharply reduce Stalinist-style central planning, push moribund state enterprises to operate according to market principles and give freer play to the rapidly growing, non-state sector of China's economy.

The party decided to launch this "new revolution" after its senior leader, Deng Xiaoping, arrived at a hardly startling conclusion, albeit a new one for Chinese communism.

Planning is not unique to socialism and markets are not synonymous with capitalism, Mr. Deng decided. Both political systems can employ both economic means.

Deng's lessons

Mr. Deng was driven to dramatically free up the Chinese economy by the lessons he drew from events last year in the former Soviet Union. China originally imported communism from there, but it died there because the Communist Party failed to deliver a rising standard of living. Mr. Deng also had the successes of his own, more-limited, market-oriented reforms over the last 14 years in China to help affirm the validity of his thesis.

The Communist Party remains in power here because it firmly maintains internal security and, just as significant, because most Chinese are living better than ever. Their lives are richer because many have more choices than ever about how to make and spend money.

In that sense, the party's sudden endorsement of the capitalist marketplace is simply an attempt to catch up with powerful forces already well in play in China.

The dynamic portion of the Chinese economy -- the most rapidly growing sector providing more choices and better lives -- is the one least under state control: Private enterprises, foreign-funded firms and the many so-called collectives that essentially are privately owned.

In China's most booming areas -- such as southern Guangdong Province, which boasts the world's fastest growing economy -- state-run enterprises already account for less than half the industrial output. And the dwindling role of state-run enterprises is spreading quickly as a fact of life throughout much of the rest of China.

What's in a word?

The fly in the soup for the party, though, is the "socialist" part of the new economic equation.

The word has to be there, if only so that the party can claim some consistency with its own history. It has to be there because China's leadership has not yet broken with so cialism's central concept, state ownership of major industrial enterprises.

Socialism no longer gells with the day-to-day experience of a growing number of Chinese. Already, it is difficult to find anyone in urban China who still admits to truly believing in the party's ideology, save those who enjoy the considerable perquisites of party membership.

But such political fiction is not new to China, and by itself may pose little threat to the party's power here. After all, the Chinese Nationalist Party still maintains its hold on Taiwan despite the virtual irrelevancy of its ideology.

What ultimately may prove very threatening for the Communist Party, though, are its plans to intensify the reform of state-run enterprises according to market forces.

These 11,000 or so large companies, most in urban areas, are sinking in red ink. The party admits a third of them are in deep debt. The true percentage is widely believed to be about two-thirds.

But many still are turning out low-quality products to fulfill state production targets, further adding to already huge stockpiles of unsold goods. The firms' payrolls still are twice as large as necessary.

Cradle-to-grave security

These dinosaurs survive only because of huge state subsidies. The state continues to cough up this money because they are social welfare systems first and foremost. One hundred million workers and their families rely on them for cradle-to-grave security -- not only lifetime jobs, but heavily subsidized housing, medical care, food and education.

Pushing them into the real-world of a market economy, leaving them to sink or swim on their own, means confronting something with which the party has had no experience and which runs counter to the core rhetoric of socialism: cutting adrift unneeded workers.

The effort risks social and political instability precisely where the party always has the most to fear, urban China.

Limited attempts so far to reform these lumbering giants already have produced signs of spreading discontent among Chinese workers unable to wean themselves from the state's benevolence.

There have been a spate of reported incidents in which individual workers literally have attacked enterprise managers. The Chinese army last winter was rumored to have been called out to quell the unrest at a state watch factory in the northern China city of Tianjin, a rumor that gained some credence after it was denied by a state-run newspaper.

For the consumption of both the Chinese and foreign press, party leaders express confidence that necessary "adjustments" can be made over time to slowly transform state-run companies without social or political ramifications.

But privately, they are plenty scared, according to an internal party document obtained here this week by a Western news agency.

"Security work should be strengthened at factories, mines, oil fields and other large and medium enterprises and key state projects," the party directive says. "During the reform of enterprises, internal security work cannot be weakened."

The party must "be alert to the appearance of factors that could lead to instability and prevent people with ulterior motives from stirring up workers to riot," it said.

"Security work" is an all-too-familiar method for the party in retaining control of China.

The party came to power through the barrel of a gun, as Mao Tse-tung put it. It used force to suppress the 1989 Tiananmen Square protests. And though it has become more sophisticated as a result of that debacle, the party remains prepared to maintain its rule of China in the same way if necessary.

In the brave new world of a "socialist market economy," force still may be an effective means of forestalling threats to the party's power. But force did not do away with the tensions within Chinese society that led to the Tiananmen protests. And force alone cannot finally resolve the deepening contradictions that the party now has set before itself.

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