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New Chinese leaders roll back tide of reform


BEIJING -- For the past 15 years, China's leaders have been saying that reforming their country's mammoth economy is like crossing the river by feeling the stones: slowly but surely.

But after nearly two years of stagnating reforms and an economic plan released last week that calls for more government control over the economy, even the measured pace of reforms seems to be coming to a halt.

To get an idea of how quickly the reformers have lost their influence, consider the case of Wang Xiaodong, an editor at the neo-conservative magazine Strategy and Development.

In 1992, when leader Deng Xiaoping unleashed an economic boom with capitalist-style reforms, Mr. Wang published an article in a Beijing newspaper calling for more central government involvement in the economy.

The article was fiercely criticized by Mr. Deng's allies, who said Mr. Wang was advocating a retreat from the paramount leader's decade of reforms. For a while, Mr. Wang found it hard to get published.

Now, however, Mr. Wang has not only been allowed to start a magazine to promote his thoughts, but he finds his ideas in the ultimate insider's document: the Ninth Five-Year Plan, the central government's blueprint for development from 1996 to 2000.

An outline of the Five-Year Plan released last week gives a good idea of how China's new generation of leaders viewsthe country's future. For the first time since China abandoned communism for economic reforms in 1978, the plan was drawn up without input from Mr. Deng, who, at 91, is now seriously ill.

Instead of speedy growth, the new plan calls for measured growth and no new reforms. Price controls are back in favor, as are egalitarian policies to reduce the widening gap between rich and poor, a problem acknowledged in a five-year plan for the first time since Mr. Deng's reforms started 15 years ago.

Mr. Wang and other analysts see the influence of President Jiang Zemin, Mr. Deng's more cautious successor. Along with a half-dozen other leaders all educated in the former Soviet Union, Mr. Jiang has been leaving his mark on foreign policy, politics and the economy.

"Jiang Zemin is not at all like Deng Xiaoping. Jiang believes the market will solve some problems, but not all problems," Mr. Wang said.

The "neo-conservatives" -- people who favor a return to stronger state control over the economy -- began to gain influence after Mr. Deng's 1992 push for faster economic growth also led to severe inflation. As Mr. Deng's health faded over the past couple of years, they used the opportunity to reimpose price controls and roll back Mr. Deng's emphasis on reforming China's way out of economic difficulty.

Over the past year, for example, price police have been out in force in China's cities, poking through the peasants' once-free markets, looking for farmers who are asking prices deemed to be too high.

Ration coupons have been reintroduced to give subsidized grain to some city dwellers.

And -- in the clearest sign that Mr. Deng's economic influence has waned -- a debate has been allowed to take place in the party-controlled press over the future of China's "special economic zones," showcases of capitalist policies on China's coast. These are are closely identified with Mr. Deng.

Over the summer, the government mouthpiece Economic Daily published a series of articles on the most famous zone, Shenzhen, which lies just across the border from Hong Kong. Predictably, the zone was praised, but, in a new twist, it was also damned for being a hotbed of corruption, vice and inefficiency.

Neo-conservatives have proposed direct government intervention to fight poverty, which the Five-Year Plan says will be eliminated by 2000. In the past, impoverished areas were told to wait patiently until the prosperous coastal regions acted like a locomotive and pulled the entire country to prosperity.

Besides a return to egalitarianism, the new climate in China sees a return to favor of the famously inefficient heavy industrial enterprises built under Mao Tse-tung, China's leader from 1949 to 1976. Under Mao's successor, Mr. Deng, these companies were supposed to be reformed and run along more market-oriented lines, perhaps one day even to be privatized or sold to employees.

Laissez-faire economists argued that China couldn't afford these huge enterprises; instead it was supposed to divert investment to light industrial products, such as toys, clothes and shoes -- the sort of labor-intensive, low-cost products ideal for China's huge, cheap labor forces.

Eventually, China would graduate to heavy industry and high technology, much as Taiwan did over the past 40 years.

Now, however, more impatient economists are gaining influence. They are called the "surpass and overtake" (the West) thinkers, and they advocate pouring money into the huge state industrial giants so they can quickly bring their technology up to international standards and turn China into a world industrial and high-tech powerhouse.

They see South Korea, rather than Taiwan, as a model, with its authoritarian government in the 1950s, '60s and '70s firmly guiding the economy and creating huge industrial conglomerates that are now world-class competitors in automobiles, shipbuilding and consumer electronics.

These economists believe Mao was right to invest China's scarce resources in heavy industry.

In the past, reformers could take solace in the fact that Mr. Deng was -- most of the time -- on their side, ready to overturn a wishy-washy five-year plan and back bold reforms.

The last five-year plan, for example, was a dull affair that hardly anticipated China's new round of reforms and economic boom.

"But now," notes an economist from the Chinese Academy of Social Sciences, "the country is being run by a group of technocrats fascinated by state power. Don't expect breakthroughs from them."

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