CHINESE Premier Mr Li Peng may still be an arch-conservative at heart, but he has grown into a wily one. Faced with economic growth spiralling above official forecasts, his Annual Work Report was like doing the political splits. His report readjusted growth forecasts from six per cent to eight per cent and reaffirmed paramount leader Mr Deng Xiaoping's speedier economic reforms as he also stressed that the government should take a watchful step and strengthen the central controls over the economy. Everyone knows that even the new forecast will be exceeded, but Mr Li's revised figures were just enough to put one of his feet in the liberal camp without moving the other from his conservative power-base. This year's pragmatic approach is a contrast to 1992, when he burned his fingers by underestimating the country's Gross National Product target, earning scorn from Mr Deng's supporters wanting to develop a market economy at full speed. ''People know who is in control. If Li Peng doesn't speak in line with Mr Deng Xiaoping, people will just ignore him because we know who has the final say,'' a Chinese official in Hongkong said. In his speech, Mr Li projected that this year's Gross Domestic Product (GDP) would reach eight per cent with an inflation rate at six per cent. The Budget deficit would decline to 20.5 billion yuan from last year's 23.7 billion yuan. Hongkong researchers are treating these planned figures lightly. ''The renewed figures are more realistic, but still underestimated. That's their practice, never reveal the true picture. So nobody really trusts their projection,'' said a researcher. According to a survey on China's economic outlook carried out by G. K. Goh Securities, GNP will rise by 11.5 per cent in 1993, slightly down from last year's 12.8 per cent. Of that, the service industry will have a nine per cent growth, while industrial and agricultural growth will increase 14 per cent and four per cent, respectively. However, Mr Li leaves a leeway for himself by saying that the growth rates might be exceeded both in the national aggregate and in the performance of high-growth enclaves. G. K. Goh estimates that the inflation rate will rise to nine per cent from last year's 5.4 per cent, but will remain within a tolerable level. It tips the Budget deficit to increase to 24 billion yuan. The Central Government has long realised the impact of inflationary pressure and has planned to tighten the money supply to cool down the overheating economy. Mr Li said in his speech that the money supply would increase by four per cent to 380 billion yuan this year. However, the question is: Can the Central Government keep control of such a sprawling economy? The economic expansion plans of far-flung local authorities appear to be the biggest hurdle to attempts to retain tight reins on growth and inflation. In the past, Beijing could oversee the economic growth simply through its administrative decree. But now, as the market economy catches hold, in addition to a half decentralised government, Beijing has lost some of its control. The country now plans to regulate the economy through a macro-economic control mechanism, similar to a Western country, but, during the transition stage, cannot effectively regulate by either system. ''China is in a transitional period,'' said Mr Benjamin Chan Sau-san, head of economic research department, Bank of East Asia. In fact, the local authorities do not always follow Beijing's guidelines. ''Beijing likes to cool down the overheating economy. But the local government may not co-operate,'' Mr Chan said. Ms Lau Pui-king, associate head of Business Studies, Hongkong Polytechnic, pointed out that lack of information flow, rather than a rapid expansion, was the reason for the runaway inflation. ''We shouldn't always talk about the overheating. The real problem is the shortage of telecommunication and transportation infrastructure, which has led to an imperfect market. The supply of resources cannot meet the demand through the market system,'' she said. An example of local policies running counter to national guidelines can be seen in the property market. Despite Central Government announcements to restrict the amount of land granted for property projects, a huge amount of farm lands has turned over to the developers. This has resulted in a shortage of farm products and an impending property glut. The land-use rights for 435 billion square feet of plots were granted to the private sector for property development last year, equivalent to nearly 400 sq ft for every man, woman and child on the mainland. The Central Government or even the provincial government would like to suppress the property expansion. But little can be done. Last year, the Guangdong authorities initiated a series of policies to control the property development. When asked if the city and the county government would follow the guideline, Mr Yuan Zheng, director-general of the Lands Department of Guangdong Province paused and said: ''We're not sure, we'll try our best.'' Beijing seems to have recognised the problem. Mr Guo Shuyan, a newly appointed vice-chairman of the State Planning Commission said in last week's National People's Congress: ''Even in countries such as the United States where the commodity grew rapidly, planning still plays a part. The important thing is that we can't have too much planning. Too much planning doesn't work.'' As a socialist country, China insists on taking the view that the Central Government should hold a major stake of the country's property. At the moment, property rights are still controlled by the administrative power. ''Beijing has yet to accept the concept of distributing the social wealth under the market economy. For example, when a plot of land has been privatised, who should have the money? The farmers, the local government or the central government? Only little has been developed,'' said Ms Lau of Hongkong Polytechnic. Establishing a system of shareholding companies is a start to regulating property rights under a market economy. ''But it's only a very small step,'' said Ms Lau. There is no doubt that this year will be a crucial and ominous one to master plan China's unprecedented socialism with the Chinese character. Many major reforms will get under way. The government will call for decontrol of grain prices and conversion of state agricultural subsidies into a ''relief fund for natural disasters''. Prices for products will be further subject to supply and demand pressures. The government will reduce the subsidies to the enterprises and a high number of state-owned business will be closed down. That will cause substantial layoffs and, to add fuel to the fire, Beijing has pledged to reduce the size of the civil service by 20per cent. Against this background, there are indications that the Central Government is running out of money, prompting Mr Li last week to call for a crackdown on tax evaders. All this makes for a volatile year ahead, something that is likely to increase the rift between liberals and conservatives. That will make the splits an even more difficult task for Mr Li, 12 months from now.