Despite ‘Problems,’ China Presses Economic Reforms

Even though 1985 has not been the best of years for Chinese leader Deng Xiaoping and his aides in their effort to reform China’s economy, they seem to have weathered the immediate threat of embarrassment from student demonstrations against the reforms.

A series of protests and wall posters this past fall, here and in other cities, dramatized complaints about inflation, corruption, exploitation by Japan and other phenomena perceived to be results of the regime’s policies. Appeals by authorities for “stability and unity”--as well as the implied threat of tougher action if the protests continued--appear to have persuaded the students to back off.

The student protests were not an isolated phenomenon but a symbol of the change in the political mood since this time a year ago. At the end of 1984, the climate was remarkably optimistic.

“We say that the current policies are effective, because our country has become prosperous,” Deng said in a speech at the end of last year. “The overall situation is fine.” The leader said that on a trip to the city of Suzhou he had found that “people had not only solved their food and clothing problems but had also solved most of the problems related to . . . television sets and other major household appliances.”

As for his policy of opening China to the outside world, Deng was similarly sanguine. “We must open to the outside world, and the open policy will not hurt us,” he said.

Compare those words with the address given by Vice Premier Li Peng to a convocation of students early this month. His speech was, in effect, the authorities’ official response to the student protests and he was forced to acknowledge (as newspapers here had earlier) that there had been “some problems and even errors” in the regime’s reform program.

“With such a profound reform in the country, there will inevitably be bright sides and dark sides,” Li said. He found himself grappling once again with the century-old dilemma of how to bring science and technology from the rest of the world into China without being influenced by foreign ideas: “While we are introducing some advanced things into the country,” Li told the students, “We should not allow in the capitalist concept of value and a decadent way of life.”

Early this month, the official newspaper Workers Daily published a list of commonly asked questions about the economic reforms that it hopes to answer soon. The questions provide an indication of the sorts of political concerns raised by Chinese workers these days.

Among the questions on the list:

--What is the difference between the open-door policy in China today and the old open-door policy that was forced on China by the United States to get the privileges obtained by the other Western powers?

--Is the goal of price reform to raise prices?

--Why shouldn’t we say that the Communist Party’s policies make the peasants rich and make the workers poor?

--Won’t carrying out management reforms influence (weaken) the position of workers as their own masters?

In practical terms, there were three separate developments during the past year that served to erode support for reform and change.

First, and most important, last spring China lifted price controls on non-staple food items in a way that produced the most serious and sudden surge of inflation since the communist takeover of 1949. By Sept. 30, the general price level in the cities was up by 11% over a year before, and the authorities admit that the increase in food prices was considerably higher than that.

Consumers by the millions stopped buying meat and began eating eggs instead. Because of market dislocations, vegetables became both expensive and hard to find. “Ten years ago, China was in chaos, but Mao (Tse-tung) kept the prices stable,” one elderly woman in Shanghai observed. “Now, China is stable but the prices are in chaos.”

Second, the authorities switched in 1985 from a policy of encouraging consumer spending to one of discouraging it. A year ago, perhaps as a deliberate bid for support of the new economic reforms, the regime told the people that they should stop being so thrifty and should indulge their desire for more material goods.

“How are we going to develop our textile industry if everyone keeps wearing the same garment for nine years?” Vice Premier Tian Jiyun asked. “We should liberalize our minds a bit, make life more beautiful and stop viewing fancy clothes as exotic.” The magazine Peking Review said flatly that “China’s leaders are advocating more spending now because the conditions are ripe.”

The campaign turned out to be a serious miscalculation; the regime apparently underestimated just how many consumer products, particularly imported ones, the public would buy so quickly. Currency reserves dropped sharply, China built up a large trade imbalance with Japan and by midyear the “spend-money” program was quietly interred. By December, Peking Review was listing “premature consumerism” as one of the problems facing China’s economy.

Third, as China’s economy has opened up a bit, disputes over the fairness of the reforms--that is, over exactly who is profiting from the changes and how income is distributed--have become increasingly acrimonious.

For several years, city-dwellers have been grumbling about the increasing wealth of the peasants. This year, as the reforms have reached the cities, competition among different social and occupational groups has intensified. Government workers and intellectuals complain that they are not getting as much money as factory workers. At the same time, factory workers believe they are not getting as much as small-time entrepreneurs.

Most of all, there are widespread complaints that the benefits of Deng’s reforms--money, luxuries and trips overseas--are going disproportionately to the families and friends of Communist Party officials. Official privilege and corruption are old and thorny issues in Chinese society and they have returned this year with considerable force.

Beyond these immediate problems, Deng’s reforms are running up against a number of more fundamental problems, dilemmas and contradictions.

For instance, China lacks any strong or independent class of merchants or entrepreneurs, and the historic mistrust of businessmen remains strong. If Deng and his supporters allow a commercial class to develop outside the structure of the Chinese Communist Party, then the 40-million-member party is not likely to be happy with the new and independent power group. But if the regime keeps the development of commercial interests within the party or under its control, then the party is open to charges of corruption and privilege.

For the regime to advance China’s science and technology, it needs to foster a greater spirit of free inquiry and creativity in its universities--but if the regime gives too much freedom and too many privileges to academics, it risks arousing once again the old resentment of intellectuals within the Communist Party.

And if the authorities lift price controls entirely, there is a danger of more serious and even more politically unpopular inflation; if they don’t, and instead simply raise prices selectively on certain items, the reform program may flounder because it does not go far enough.

Although the leadership was forced to admit errors and give way considerably on ideological matters this year, it did score some noteworthy successes. Deng continues to have his way on personnel within the Communist Party and increased his support on the Politburo during a party conference in September. And he has succeeded in greatly reducing the political power of the army. Remarkably, even though China launched a broad demobilization program and a reorganization of the military leadership this year, there were apparently no serious political repercussions.

Finally, Deng and his aides have continued to carry out an extremely artful foreign policy, carefully balancing relations with the United States and the Soviet Union, courting both Western and Eastern Europe, winning the confidence of Southeast and Southern Asia and avoiding costly adventures such as a new war with Vietnam.

In the end, Deng will not be judged on foreign-policy skills but on the success of his economic reforms and his ability to make them politically palatable enough to stick. The next 12 months will determine whether the reformers can regain the momentum they need.

Next year will be a year of anniversaries in China: the 20th anniversary of the outbreak of the Cultural Revolution; the 10th anniversary of the deaths of Mao and Chou En-lai; the 10th anniversary of of a mass outpouring of protest at Peking’s Tiananmen Square, and the 10th anniversary of the arrest of the Gang of Four, including Mao’s wife. All these anniversaries serve as reminders of how unsettled Chinese politics can be. Deng’s task is to convince China that its political direction is now firmly settled.