Outdated state sector labours on

If there is one man standing between mainland reformers and a market economy, it is Wu Yonggao - the jolly manager of Lanzhou's tractor works.

Clad in a tidy Mao suit, Mr Wu cheerfully explained the wonder of state-sector economics.

'No one ever loses their job,' he said. 'It is our tradition.' The Lanzhou Tractor Factory, operating as a full-employment scheme since 1952, has weathered Deng Xiaoping's economic reforms and appears prepared to outlive the 15th National Communist Party Congress, too.

The factory claims record-high output and fantastic profits for the party, though its antique machine shop and stockpiles of unsold tractors speak for themselves.

'We have a long way to go,' Mr Wu said.

'We have the ability to provide work for everybody. If there are layoffs, there will be trouble. In a country with such a large population, this is fundamental,' he said.

Thousands of state factory managers would agree with the world according to Mr Wu.

In Lanzhou city, capital of impoverished Gansu province, by official estimate two-thirds of workers are state employees.

Gansu represents one of the mainland's most hopeless cases of state-sector dependency. In a dust-blown region bordering Mongolia, the alternative to steady work in a state factory is back-breaking labour on local dry-land farms.

State-owned enterprises account for 80 per cent of local revenue. Most factories are chronic money losers that, nationwide, have bled more than US$620 billion from the country's treasury.

Gansu governor Sun Ying said: 'In Gansu, the situation cannot get any worse.

'The pride of Lanzhou's local economy, a 1958-vintage state oil refinery, reported a 1.5 per cent pre-tax profit on sales of $850 million last year - a feeble performance for a tariff-protected monopoly,' he said.

The refinery's boss, Chen Shujie , said he had a 'greater responsibility than just selling products'. The main problem is providing full-time pay for 16,000 labourers, managers and technicians.

About 20 years after the introduction of reforms, state planners acknowledge 1990s-style economics have scarcely dented Gansu's Mao-era industries.

'For decades we have built identical factories producing identical goods,' Mr Sun said.

'Nowadays, reform of state-owned enterprises is a key problem.' Mild attempts to ease employees off the payroll at make-work job sites had resulted in 'dozens' of protests involving 'thousands' of Gansu labourers this year, the governor said.

'We do not consider these incidents to be actual protests,' Mr Sun said.

'We think of it as a way for workers in difficulty to appeal for the government's help.' Bloody clashes in the state sector forced the resignation of Gansu's last governor in 1993.

Authorities propose bleak contingency plans in the event central planners in Beijing push for all-or-nothing reforms in the state sector.

The unemployed can always peddle onions and cabbage in town for $1.50 a day, according to a city spokesman.

'They can join the 'service trade' and sell things in the street,' Lanzhou vice-mayor Song Naixian said.

'Too many people in this part of the country have the old idea that if you don't have a job in a state-owned enterprise, you do not have a job,' she said.

Still, the vice-mayor is confident the 15th Congress will leave no radical reforms in its wake.

'The government will go all out to guarantee workers' standard of living,' Ms Song said. 'We don't see a sad future.'