Crisis looms on economy, say officials

PUBLISHED : Saturday, 15 May, 1993, 12:00am
UPDATED : Saturday, 15 May, 1993, 12:00am

RUNAWAY inflation, official corruption and contradictions between the old Stalinist system and China's new market economy have pushed the country's economy to crisis point, senior Chinese officials admitted.

The warning of ''economic dislocation'' was fired by Communist Party General Secretary Mr Jiang Zemin in a meeting reported by the New China News Agency yesterday.

''To solve these problems we can no longer rely on our old ways,'' he said.

''By reform, we can find our way through with our economic and legal systems as well as some administrative manoeuvring.'' Meanwhile, Mr Wu Jinglian, a veteran adviser to the State Council, said that China's economy was on the brink of hyperinflation.

Mr Wu, a leading economist, said China's economy had reached crisis point and urged the authorities to speed up reform in the areas of taxation, finance and enterprises to prevent the reform programme from collapse.

According to a report by the semi-official Hongkong China News Agency yesterday, Mr Wu, who works under the State Council's Development Research Centre, openly admitted that because of the ''wrong'' policies practised by the Government, inflation had soared to 36 per cent last year.

Mr Wu said the Government had knowingly fuelled inflation when it relaxed bank credits last year.

The rapid depreciation of the yuan against the Hongkong dollar early this year was another sign of the Government losing control on inflation, Mr Wu said.

He said inflation in 35 major Chinese cities jumped to 15 per cent in the first quarter this year, according to a survey commissioned by the Government.

And he lambasted officials for ''breeding'' corruption. If the situation remained unchecked, it would lead to ''economic chaos'', he said.

He blamed the problem on China's transition from the old Stalinist system to a market economy. While reform had taken place at the grass-roots, the ''hierarchy'' had remained untouched.

The taxation department of central government was still operating under the old methods and had little idea of how to finance growing expenditure.

''They are still following the old traits. When they face a [financial] problem, they either throw away their responsibility by asking the armies, schools or hospitals to raise their own money or they just increase tax or let inflation run wild,'' Mr Wu said.