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ECONOMICS : China Charting Its Direction in New 5-Year Plan : The debate reflects divisions over market-oriented reforms, and differences between Beijing and the provinces.

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TIMES STAFF WRITER

China’s leaders have in recent months been going through one of the great cyclical rituals of Communist systems: the drawing up of the next five-year plan.

By most accounts, it has not been a smooth process. Many weeks of private debate and political bargaining have reflected longstanding divisions within the Communist Party.

Now, however, it seems that agreement has been reached on the main features of the plan, which is supposed to provide a framework for Chinese economic policy from 1991 through 1995. The government has announced that the document will be ratified at a Communist Party Central Committee meeting scheduled for next week.

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BACKGROUND: Debate centers on how rapidly China should move to introduce additional market forces into its socialist system. Some Chinese politicians and economists favor measures such as the freeing of prices and widespread sale of stock in state-owned industries. Others support a more orthodox approach, with stronger central controls.

Debate is complicated by conflicting interests between Beijing officials who want more revenues for the national government, and provincial leaders seeking to keep control of local earnings.

Local leaders, especially those in the southern coastal provinces, are generally viewed as more sympathetic to market-oriented policies than the top leaders in Beijing. How revenues and power are divided between central and provincial authorities thus can influence the pace of reform.

PLAN: Premier Li Peng summarized current government thinking in a speech delivered early this month at a conference held to prepare for next week’s Central Committee meeting. Li’s speech gives insight into the outlines of the new plan. But it also is evidence that some key differences have merely been papered over.

On the related issues of price reform and inflation, for example, Li pledged that the government will “strictly control” price rises next year. He also indicated, however, that price reforms are “an important part of economic reform as a whole” and will be carried out based on “the capability of the state, enterprises and people to withstand the strains.”

Li said the five-year plan will feature three key points:

* The target for average annual economic growth will be 6%. This is less than the average growth rate in the 1980s, but enough for China to meet its goal of achieving output in the year 2000 equal to four times the gross national product of 1980.

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* China will continue its decade-old attempt to integrate market-oriented practices borrowed from capitalist systems into its socialist economic structure. The nation’s “opening to the outside world” will continue.

* The government will provide strong support to scientific and technological development, education, agriculture, energy, transportation, telecommunications, raw material production and other basic industries. This is intended to lay a basis “for further economic development in the next 10 or even 20 years.”

OUTLOOK: Five-year plans had direct impact during the early years of Communist rule. But central controls now have been weakened to the point that no plan can be enforced in detail throughout the country. The significance of the plan thus will lie partly in the tone it sets for economic policy.

Debate on the document is also important as part of maneuvering over succession to senior leader Deng Xiaoping, 86, who has formally retired but retains great influence. Deng has not made a public appearance since July. Chinese government spokesmen insist that he is in good health.

As long as Deng holds power, the five-year plan will serve as the official consensus of China’s leaders. But after he leaves the stage, the winners of the succession battle will determine what the document really means.

CHINA’S GROWING ECONOMY

Prime Minister Li Peng and Chinese leaders have been deeply split as they draw up five-year plan to guide their nation’s economy until 1995. China’s economy, state figures show, has grown. But so, too, have concerns, as rumors fly that Deng Xiaoping, 86, China’s influential but retired senior leader, is ailing. 1989: 1,590.7 (GNP in billions of yuan) Source: Statistical Yearbook of China

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