Economic controls fail

THE year-long programme of economic rectification has failed to promote any fundamental changes in state enterprises and the investment system, two bottlenecks of the economy.

In a an unusually frank report run in the People's Daily yesterday, the State Statistical Bureau (SSB) admitted the ''campaign to boost macro-level adjustments and controls'' had cured only superficial problems, not basic ones.

But in an apparent bid to unify the thinking of party cadres before the Fourth Plenum of the Central Committee, the bureau claimed the campaign had also achieved sizeable results.

The article said that in spite of government efforts, state enterprises remained ''without energy and devoid of an effective risk mechanism''.

Beijing had particularly failed to bring about ''adjustments in the fundamental economic structure'' of government-owned units.

Referring to the fact that investments in state enterprises still depended on bureaucratic decisions and political favours, the SSB pointed out that ''very little changes have been made to the investment system''.

Because investment decisions were divorced from scientific calculations of economic risks, the bureau warned that the ''investment hunger syndrome'' could be reactivated again.

The SSB claimed the trend of ballooning fixed-asset investments had been checked.

For example, there were 18,071 new infrastructure and capital construction projects in the first six months of this year, 4,090 less than the same period last year. The bureau did not mention, however, that fixed-asset investments in July were 72.9 per cent more than that of last year.

The SSB also warned that in a number of areas the authorities had been obliged to use ''executive means and organisational discipline'' to straighten out economic problems.

The major thrust of the article, however, was on the positive results of the austerity programme.

It pointed to the success in cooling the ''speculation fever'' in the stocks and real estate markets; the balanced foreign-exchange accounts; and growing foreign reserves.

Analysts said the pieces of upbeat news being circulated in the media would set the stage for the Fourth Plenum, whose theme would be the ''perfection'' of macro-level adjustment measures.

The Guangdong economy has been hit by a credit crunch and decreasing consumer demand, Vice-Governor Lu Ruihua said. ''The problem of enterprises owing each other funds is serious, and normal production has been affected,'' he said.

This is despite provincial revenue for the first seven months of the year being 15.55 billion yuan (HK$14 billion), 46.68 per cent more than the same period last year.

Mr Lu warned, however, that many departments had illegally remitted taxes to attract investments.