CHINA REFORMS TO TAKE DECADES, NO ALTERNATIVE
China's economic reforms will take
decades to fulfill and will outlast the life of any leader
because they are the only way to save the country from poverty,
an economist in one of the country's top think tanks told
Reuters.
    But He Weiling, Washington representative of the China
Economic System Reform Institute, said China's economic reforms
definitely are not at risk from the nationwide drive since
January against "bourgeois liberalism," a phrase meaning Western
political ideas.
    He said "bourgeois liberalism" is not affecting departments
dealing with economics.
    His is one of a small number of key institutes, set up in
the early 1980s, which formulate economic reform policies and
advise the top leadership on them.
    Discussing subjects raised in the budget speech last week,
which put the 1986 and 1987 deficits at more than 15 billion
yuan because of excessive consumer demand and capital
construction plus falling efficiency in state firms, He said
reform of state firms and the financial system is the key goal
for 1987.
    "The most difficult thing is to strike the balance between
making them independent units and the need for central control,"
He said.
    "We are exploring ways of doing this, through joint stock
ownership, leasing, factory management responsibility systems
or in other ways," he added.
    One of the most serious problems facing China's leaders is
how to curb excess investment in capital construction,
especially in projects outside the state plan.
    He said this problem is chronic in all socialist economies.
    This is because firms are judged on output, not
profitability or efficiency.
    "Firms use every excuse to get money and materials. They say
they want money to build offices but in fact use it to build
apartments, which is unauthorised," He said.
    "Also, it is not good to report profits, which would mean
higher tax payments. It is better to report a loss," he added.
    He said China's state firms are continuing a 5,000-year-old
tradition when they under-report their assets in order to
reduce claims on them by higher authority.
    He said China will have to improve auditing, economic
regulations and the tax system, which he described as "chaotic,"
especially at the lower levels, in order to deal with
under-reporting.
    "Another important step is to further develop the money
markets to give firms an opportunity to invest. They need
channels for this which they do not have now. Without this,
there will be no genuine supply and demand for money," he said.
    As a reform to encourage efficiency, China now supplies
state firms with loans instead of grants as in the past.
    But He said the reforms have not resulted in much real
change because the loans carry low-interest. "So some efficient
firms have not been able to get money from banks."
    Price reform has been one of the most sensitive aspects of
the reform programme. Widespread discontent over price rises
forced the government to promise in January that there will be
no major increases in 1987.
    He said the price of steel, timber and cement and other
industrial raw materials only will "rise gradually" this year.
    Large-scale price adjustments would have an adverse
psychological impact and create social discontent.
    "We must preserve unity and popular support," he said, but
"sometimes, the common people must make a sacrifice, like those
of Germany and Japan after 1945."
    He said restrictions on a wide range of prices, including
most farm and light industrial products, have been lifted and
many intermediate pricing schemes scrapped over the last eight
years.
    "It will take at least 15 to 20 years to complete an
overhaul of the price system. We must move carefully. We have
no model to work from and have only ourselves to rely on," He
said.
    He said the greatest fear expressed by foreigners is that
reform and open-door policies will not survive the death of
certain elderly leaders.
    He did not name top leader Deng Xiaoping, 82, the chief
architect of both policies since 1979.
    "These fears are unfounded. The two policies have already
become the basic national policy of China. The reforms are
irreversible. China is one of the poorest 25 countries in the
world. Without the reforms, how are we to escape from this
poverty?"
 REUTER
