Edition: U.S. / Global

FOREIGN AFFAIRS; China Reinvents Itself

By Flora Lewis
Published: April 20, 1988

Deputy Mayor Zi Quo Rui put it flatly. ''We can't wait any longer, the gap is widening with the coastal zones.'' Kunming, capital of Yunnan province in the southwest just above the border with Vietnam and Laos, is not part of the special zones favored for rapid economic development, and it minds.

Aggravating regional inequalities, as well as social inequalities, is part of the price China is paying in its headlong drive for economic growth. A veteran European observer summed up the current phase in China's extraordinary about-face to market economics as ''trying to keep the lid on.''

Demands and expectations are exploding all over, along with complaints about the accompanying social ills of inflation, unemployment, corruption -the kind of thing Communism was supposed to have wiped out.

The Deputy Mayor and a half-dozen managers of major municipal enterprises sat around a big table last Sunday morning and contributed their share of complaints about lacking the preferential ''rights'' of some areas. Kunming pays double the tax rate, has nowhere near the say about local projects, development, management, distribution of materials or dealing with foreign concerns, and therefore is falling behind, they said.

But the spur of competition seems to be working here too. They have figured out how to plug into the boom on the other side of the country, even without privileges. The special zones are export-oriented, one manager said, ''so we can take advantage of our concentration on the domestic market. They need our goods now.''

As with much of China, in Yunnan 80 percent of the people still work in agriculture. But there are some traditional industries: chemicals, machine tools, tobacco processing. From a quick look, the plants appear hopelessly dilapidated. And yet, Kunming is actually investing in plants in the coastal zones to take advantage of lower taxes there. A plastic door and window factory in the east cuts transport costs to market and sends home profits.

Despite the central controls, it is the classical economic response to opportunity. Spreading across the country, wriggling through loopholes, the drive to catch up is infectious.

Kunming is an old city, 2,200 years of history, a local journalist said proudly. It's full of new buildings and broad avenues, the remaining lanes squeezed between rickety old houses. In some ways, and for some of its people, China is changing too fast. Yet there is a sense in which nothing could be fast enough. This is an impatient country. That's what ''trying to keep the lid on'' means.

Ironically, the society's handicaps in forging ahead seem to stem as much from the now admittedly misguided attempt to leap into a theoretical future as from the weight of its long past. The official definition of the system now is ''the primary phase of Socialism,'' a way of saying that the Utopian frame of Communism is receding generations and generations into the future. ''First we must have the material base,'' say people who use the approved language.

The distant goal has not been renounced, and it won't be by the new generation of leaders. There is too much emotional commitment - and vested interest - to what young people have been taught to call ''the liberation'' rather than ''the revolution.''

But results have become the test. ''Learn truths from facts,'' said Deng Xiaoping, implying that they won't be found in Mao's ''Little Red Book.''

The move to the market, however, presents the society with the problems of raw capitalism, which Marxism pretended to overcome, without the tenderizing restraints of modern capitalism. Rules were junked, on the thesis that the centralized power of Communism was perfect and required no limits.

Now they are needed, because liberalizing requires a different kind of control. Imagine China, which invented the idea of a professional civil service chosen by merit - the Mandarins - seeking to recreate a non-political corps of public servants based on competence. They are studying Western models.

There is no social security system, unnecessary in the period of the ''iron rice bowl'' when rewards had nothing to do with results, but essential to protect the weak when the strong are set loose. There is not yet a real legal system because the idea of law was demolished by the idea of the omnipotent party. There isn't even a basis for fiscal and monetary control, which has to be remade for economic decentralization to work.

No country demonstrates better than China what is to be lost by ideological pretension, and what needs to be saved or will have to be reinvented at high cost.