China is arguably the most rigid dictatorship in the world, yet has a central government powerless to enforce its will. During the National People's Congress, top leaders have been coaxing support from provincial delegates for the latest scheme cooked up by planners in the capital - to solve the problems at state-owned enterprises within a thousand days. No one knows why three years is the deadline but the response, at least by the recession-mired northern and western provinces, verges from the polite to the contemptuous. The reasons are plain: the central government no longer controls the purse strings so why should it call the tune? In a decade, the central government's share of budget spending has shrunk from 20 per cent to 5 per cent in last year. Most spending is controlled either by the provinces or enterprises themselves. The central government commands such a tiny budget, about US$5 billion, that it cannot even pay its own staff and has had to sack half of them. They are not needed either since the operation of the central planning mechanism has effectively ceased. Beijing no longer tells the state factories what to do or when and has lifted price controls on about 90 per cent of products. It is every man for himself as the traditional ties between suppliers and manufacturers have gone. This is why Zhu Rongji has had to spend so much of his time going around the provinces banging heads together to enforce some kind of vague obedience. Governments in some parts are themselves short of money, their state factories mired in debt and many cadres resorting to levying their own special taxes. If the central government cannot help them why should they have to listen to its emissaries? Beijing's lack of authority is preventing a solution to the state sector's problems despite claims to the contrary. Industries such as coal and textiles remain as broke as they were seven years ago. Part of the problem is that the central government cannot force the provincial governments to shut the mines or mills. It might be better if Beijing could enforce mergers, closures and acquisitions to consolidate the many fragmented and old industrial sectors. Yet when times are so hard, provincial authorities, especially in the poorer areas, do not want to close their factories or merge their provincial champions with those next door. But the central government still controls monetary policy. Since 1996, Beijing has cut rates three times without much effect and it now wants to boost infrastructure spending. A spending plan probably will be unveiled in the middle of the year when Mr Zhu begins to put his stamp on the economy but decisions taken then will take a while to stimulate demand. There is scant room for more infrastructure spending in areas such as the northeast. Other proposals being touted in the press include repairing old and dangerous dams, or building new railways. But the returns are poor on all of these options, the lead times long and the availability of foreign soft loans scarce. And where will the central government get fresh capital for its share of the costs without printing money? It could set the presses rolling without triggering inflation but to solve the triangular debts mess - the over capacity in most sectors - Beijing must take bold steps. It must release its grip over prices of key commodities - coal, cotton, grain electricity and water. Efforts to create nationwide markets in cotton, grain and electricity are lagging far behind schedule and one wonders why. Perhaps too many provincial governments are in no hurry to develop these markets for fear their producers will be buried by cheaper imports from rival economies. Protectionism is one motive but fear is another. They too might end up as emasculated as the central government.