FOCUS : CIA Report Says China on the Mend : Economics: Two years after Tian An Men Square, the nation’s growth rate has soared to 14.2%.

China’s economy is recovering strongly from the decline that followed the crackdown on the movement for democracy, the Central Intelligence Agency says.

The world’s most populous country “is emerging from its austerity-induced economic slump with strong, if uneven, industrial growth,” the CIA told Congress in a report dated July, 1991, and released to the public last week by the agency.

After the Tian An Men Square massacre in June of 1989, China’s industrial growth plummeted to zero at the start of 1990, but soared to an annual rate of 14.2% by the end of last year, said the CIA.

In other countries, 4% or 5% a year is considered strong growth.

Unlike neighbors Japan, South Korea and Taiwan, which are cutting their trade surpluses, China has “turned its economy outward,” combining a tight lid on imports with an 18% increase in exports, the agency said.

The shift reversed a 1989 trade deficit. In 1990, China sold a record $8.7 billion worth of goods more than it bought, the report noted.

The CIA said China could achieve at least 10% export growth a year over the next decade--though at a cost of rising inflation and increasing resentment from the United States and other countries facing growing trade deficits with China.

The United States is China’s biggest market. The burgeoning U.S. trade deficit with China has figured in the debate over President Bush’s decision to continue the lowest available tariffs, known as most-favored-nation, or MFN, status for Chinese imports.

The U.S. trade deficit with China hit $10.4 billion last year, a 67% increase over the previous year, according to the Commerce Department.

Both houses of Congress voted to impose strict conditions on MFN renewal, but the Senate’s July 23 vote fell short of the two-thirds margin needed to override a veto threatened by Bush. The President argues that cutting trade would hurt U.S. business and consumers while isolating China and making it more difficult to encourage human rights and movement toward a market economy.

While East European countries were abandoning Communist economies, Chinese leaders showed “little appetite for reform in the style of the early 1980s when communes were abolished and agricultural production liberalized,” the CIA said.

“Since gaining control of the economic agenda in late 1988, orthodox leaders in Beijing have tilted economic policies in favor of large state-owned enterprises,” with growth considerably below the rates for collective and rural enterprises, it added.

“Beijing’s reluctance to proceed with comprehensive productivity-enhancing reforms reduces the likelihood China can sustain inflation-free growth,” said the CIA report.

“Continued emphasis on export growth without trade liberalization also risks foreign protectionism,” the report said.