China Reports Healthy 7% Economic Expansion in ’91 : Asia: Beijing official hails explosive growth in foreign investments. Political stability is cited as a key factor.

China’s economy expanded by about 7% in 1991, creating improved conditions for political stability and economic reform, a top government spokesman said Monday.

Yuan Mu, a prominent hard-liner who is spokesman for the State Council, China’s Cabinet, conveyed a sense of triumph in releasing the figures at a press conference. China’s resurgent economic expansion, which ends a period of government-enforced retrenchment begun in late 1988, “contrasts sharply with the slow growth of the world economy and also the instability and turbulence in some other countries,” Yuan declared.

He clearly meant to contrast China’s success with the difficulties faced by Eastern Europe and the former Soviet Union in their transition away from communism. But he did not specify those regions by name.

Foreign investment in China showed explosive growth in the last year, Yuan said. Contracts signed between January and November call for $9.56 billion of foreign investment, a 71% jump over the same period last year, he said. This sets a new record for contracted foreign investment in a single year, easily exceeding the previous, 1985 high of $5.9 billion.

China’s foreign exchange holdings doubled during 1991, to more than $40 billion, he added.

“We enjoy political stability, and this provides a very important precondition and guarantee for the stable development of our economy,” Yuan asserted. “The stable economic development has, in its turn, provided a sound basis for consolidating our political stability and unity. . . . Our diplomatic achievements have on their part created a better international environment for China’s development.”

With ultimate power still held by senior leader Deng Xiaoping, 87, and other octogenarian revolutionaries, China awaits an uncertain succession that could bring a severe crisis. But for the last two years, partly through strict ideological controls and severe repression, China has avoided political upheavals.

Relations with the United States have remained tense ever since the bloody 1989 army crackdown on pro-democracy protests in Beijing. But China has managed to restore or improve its ties with most other countries in the world.

Chinese statistics often lack precision and are not entirely reliable. Growing prosperity is spread unevenly, with some families benefiting much more than others; the southern coastal regions, plus major urban centers such as Beijing, enjoyed more rapid growth than the interior provinces.

Still, the figures released Monday reflect a widespread and obvious improvement in living standards for the 1.2 billion people of China. Most Chinese, urban and rural, clearly have access to more and better clothing, food, housing and consumer products than they did a few years ago. Rising living standards appear to be easing some of the political pressure felt by the Chinese government since the 1989 crackdown.

The 7% growth in the 1991 gross national product follows a 5% expansion last year, 3.6% in ‘89, 10.8% in ’88 and 11% in ’87.

Yuan said agricultural output rose 3% in 1991, while industrial production jumped 13.2%. Retail prices in 1991 ran about 4% above the 1990 average, and inflation-adjusted disposable income for urban residents rose 8%.

“Through the efforts of the past three years, from 1988 to 1991, we have basically achieved our target for economic retrenchment,” Yuan said. “In this process . . . our policy of reform and opening up has further deepened and been further expanded, rather than running into any stalemate or just marking time.”

Yuan said his country next year “will appropriately accelerate its pace of carrying out reform and further opening China to the outside world.” China will concentrate on agricultural development, promoting greater efficiency at state-run enterprises and developing an externally oriented economic zone in the Pudong district of Shanghai. He stressed that China’s leaders believe the nation can boost industrial productivity without massive privatization.

“I’m confident that next year, China’s economy will continue to grow steadily, and things will be better than this year,” Yuan said. “I’m quite optimistic about this.”

He touched briefly on chronic difficulties faced by the Chinese economy. Besides acknowledging low productivity in the state-run sector, he announced that the government will exceed its planned 12.3 billion yuan ($2.3 billion) 1991 deficit by several billion yuan. Some Chinese and foreign analysts say China’s economy faces a danger of overheating and resumed high inflation. But Yuan said the government aims to keep inflation under control and to limit growth to 6% in 1992.