Limits put on factory output

BEIJING has reimposed some form of centralised control over production to fight the worsening problem of stagflation.

And Vice-Premier Zhu Rongji has been forced to make further relaxations in the money supply in spite of his commitment to tighten policy in that area.

A special State Council conference on sluggish sales has recommended that factories whose products end up in warehouses should stop operation.

''All industrial departments should grasp well the task of limiting the amount of goods in storage and promoting sales,'' the Economic Daily yesterday quoted participants as saying.

''Products that cannot be sold should no longer be manufactured.'' Commodities that are piling up in storages include steel and iron products, automobiles, videos, petrol, timber and cement.

Funds tied down by products manufactured by factories operating within the state budget reached 169.47 billion yuan (about HK$152.86 billion) by the end of July, up 11.72 per cent from the same period last year.

The Economic Daily quoted ''leading cadres'' from the State Economic and Trade Commission as calling upon officials to cut down on the production of unwanted products.

Factories nationwide are asked to raise the ''sales percentage'' of their products to 95 per cent and to cut the average period of storage by three days.

The Economic Daily reported that the ''accumulative percentage of sales'' of products manufactured in factories in cities and villages was 92.99 per cent by the end of July, or 1.47 per cent lower than the 1993 figure.

Meanwhile, the central banking system has released more funds to bail out loss-making state enterprises and to solve the problem of ''triangular debts'', or money that enterprises owe each other or the banks.

The semi-official Hong Kong China News Agency reported last night that the People's Bank of China would ''in the near future adequately release a considerable amount of funds to society''.

The money will be used only for short-term working capital of enterprises.

For the first time, the injection of such funds will take the form of the People's Bank buying short-term bonds from the specialised banks.

News about the further relaxation of the tight-money policy came a day after a tough-worded commentary in the Economic Daily, which warned against the futility of propping up state enterprises.

The commentary said that in view of sluggish sales, more funds being channelled to factories would only worsen inflation as well as the problem of more products ending up in storage.

Economic analysts said the news was an indication that Mr Zhu's campaign to ''boost macro-level adjustments and controls'' might not be as successful as the authorities had earlier made it out to be.