Reforms to gather pace as new leadership takes over

John Kohut

FOR many foreign investors, Beijing has been a place to avoid - a big city where the bureaucracy weighs heavily on the pace of business, offering few of the tax advantages and other benefits of the more free-wheeling coastal areas.

But the momentum of economic reforms sweeping China is stirring the capital.

''Dynamic'' is probably not a word to describe this city. But the physical changes in Beijing over the past few months, from the scores of new shops and office buildings to the increasing numbers of mobile telephones, are evidence of growing entrepreneurial vigour.

Expectations are that the city's newly appointed leadership will move more boldly than the previous administration, even if it does not race ahead at the speed of the south.

Hardliner Mr Li Ximing - a man with neo-Maoist tendencies and a deep suspicion of foreigners, including businessmen - was ousted from the position of municipal party secretary last December in favour of Mr Chen Xitong, the former mayor.

Although little is known about the new guard, it is younger than the municipal leadership it replaced. Two of the new vice-mayors are in their 30s.

''At last we have some young people with young blood,'' said an analyst.

Mr Chen, delivering his work report to the recent annual session of the Beijing People's Congress, revised upward the economic growth target in the current five-year plan to nine per cent from 5.5 per cent annually.

This compares with an actual growth average of 8.8 per cent a year throughout the 1980s.

''We will try to finish the task set in the 10-year programme (covering 1991 to 2000) three years ahead of time,'' Mr Chen said.

But bureaucracy remains a problem.

''If they aren't clear about a legal point, the bureaucrats will say that if the rules don't specify that you can do it, then you can't,'' said a Western analyst with business dealings in China.

In Beijing, you encounter ''conservative attitudes if you are running some new sort of business'', said Mr Peter Yan, China co-ordinator for Electrolux (Far East) Limited.

''In other cities, the government tries to help and change it [a rule or situation which acts as an impediment] . . . not only the government but the local business community is relatively conservative.'' But Beijing officials seem to have woken up to the fact they themselves have been one of the biggest hindrances to the city's economic development.

At the National People's Congress last March, for example, one Beijing deputy chided officials of his city: ''We are . . . conservative. Things which can be done in other cities are questioned here. Things which are questionable in other cities are banned here.'' Slowly but surely, attitudes among officials are starting to change.

''People at the central level have indicated that flexibility is the key word,'' a foreign lawyer said.

Information is easier to obtain, even over the telephone. In the past, many departments have refused to give public data over the telephone, insisting that questions be posed in person.

As a result, having the central government bureaucracy at your doorstep is no longer necessarily a disadvantage. ''You have more direct access for approval or problem solving,'' the lawyer said.

The process of opening a business in Beijing is getting easier.

Beijing municipality approved an average of six joint ventures per day in 1992, according to Mr Chen's work report.

Total joint ventures approved last year was more than the number approved during the previous 13 years.

One consequence is the glut of office space that faced Beijing a year ago has now turned into a shortage as new companies come in.

Among the advantages of investing in Beijing, said Mr Yan, is the city - with a population of 10 million relatively well-off residents - is a substantial market. It also has a fairly efficient distribution network.

And being the capital of China carries some weight.

''Certain goods will sell well in rural areas just because they carry the name of Beijing,'' Mr Yan said.

Infrastructure, housing and schools are among the best in China.

A new road has been built to the port city of Tianjin, giving Beijing access to a good harbour.

The city's infrastructure is also improving, thanks to Beijing's attempts to spruce itself up in the hope of hosting the 2000 Olympics. For example, a new expressway under construction will make it possible to drive from the airport to downtown Beijing in less than 15 minutes, cutting the time in half.

Another advantage is that many major Chinese companies are located in Beijing, offering attractive partnerships for multinationals.

Among the disadvantages is that Beijing has never tried to attract foreign investment.

As a result, there are no special tax incentives: corporate tax is 33 per cent in Beijing, compared with 15 per cent in the special economic zones.

When he went to the Beijing investment service centre last year, Mr Yan was shocked to discover that the office did not even has a brochure with basic information about the city.