Where politics and business mixes easily

QUESTION: when is a soldier not a soldier? Answer: when he is a hotelier. When is a government official not a government official? When he is a businessman.

In the Alice in Wonderland world of China today nothing and nobody are quite what they seem, as institutions diversify into business and cadres become entrepreneurs.

In the past five years, but particularly since last autumn - when the Communist Party gave the green light for just about everyone to set about making money any way they could - it has been difficult to tell exactly whose fingers are in which pies.

The phenomenon, and its attendant problems, were highlighted last week when it was reported that the Hongkong and Macau Affairs Office is to set up an investment company. Policy statements from the Hongkong and Macau Affairs Office directly affect Hongkong's stock market these days. In the future, its investment arm may be dabbling in that same stock market even as stocks plunge or rise on its own word.

The idea that insider-trading might be a bad thing is not yet fully embedded in the consciousness of Chinese officials here. After all, Chinese society turns on the basis of insider trading of one sort or another. In a one-party system, with a party-dominated legal system, there are no real checks and balances. Everything is a matter of who you know.

According to government directives passed last year, government departments were encouraged to go into business to make money. In theory, the business is then supposed to cut its links with the government. Furthermore, the officials who have moved acrossfrom the government department to the enterprise are required to leave their government posts.

In practice, the lines are blurred, and the system invites abuse in two very obvious ways. First, any official who goes into business is likely to be able to pull strings with his old government cronies. Second, any government department is likely to extend preferential treatment to any business which is making money for that same government department.

An official at the Beijing Municipal Government's legal department, asked how corruption could be avoided in this situation, could only comment, ''It's hard to say.'' In 1991, there were 34 million people working as government cadres, and government offices are estimated to be roughly 15 per cent over-staffed. The bureaucracy is gradually moving into enterprises.

If a superfluous cadre can move into an enterprise run by his department, so much the better for everyone concerned. Many cadres want to make the change, believing that commerce rather than administration is the way to riches.

Last week, Mr Xiao Yang, the newly-elected governor of Sichuan Province said that provincial officials were forbidden to engage in any economic activities, or to get involved in the stock market. That he felt constrained to make this statement points clearly to the fact that such abuses are occurring.

Last year, Mr Bo Xicheng, the son of veteran revolutionary Mr Bo Yibo and head of Beijing's tourism department left government service to go into business.

Long before last year, the most powerful institution in China had already gone into business. The army rents out its trucks and drivers like a private haulage company. In Beijing's parks, armed police have been sub-contracted to sweep the paths.

When business travellers and tourists settle their hefty bills in the marbled elegance of the lobby of Beijing's Palace Hotel, they might be surprised to know that they are paying into the coffers of the People's Liberation Army.

The five-star luxury hotel is just one of the capital's many hotels part-owned by the army and other branches of the security forces. In many such hotels, the spoilt children of army officers are guaranteed well-paying jobs in comfortable surroundings.

The army's foray into the hotel trade might be taking the slogan ''Serve the People'' to extremes.

But it is the service industries which have attracted the greatest investment from government departments. In an increasingly consumer-oriented society, there is money in restaurants, karaoke bars, and nightclubs.

Even better, in the eyes of China's military managers, in the hotel business there is plenty of foreign exchange.