NO ruling elite in history has voluntarily given up power. The imperative of privilege is such that its members are deluded into believing there is something divine to their monopoly on authority. Four years after the June 4, 1989, massacre, the Chinese Communist Party (CCP) seems impregnable. The economy is the envy of even the developed world. The party's triumph over the participants in the 1989 pro-democracy crusade seems total. An estimated one-third of the ''black hands'' have fled the country. Many of these reluctant exiles are begging Chinese embassies in the West to let them go home. Having left politics for business, another one-third of the hotheads are striking million-yuan deals with the hated ''princelings'', or offspring of senior cadres. The remainder of the activists are demoralised, nursing their wounds and consumed by self-doubt. It is a tribute to Deng Xiaoping's dialectical materialism that a surprisingly large number of cadres are cool-headed enough to see that, the rosy facade notwithstanding, the CCP is facing its worst crisis since 1989. In a speech published in yesterday's edition of the pro-Chinese Hongkong journal Bauhinia, Jiang Zemin was frank about the nation's ills. The president decried hyperinflation, corruption and income disparities between the rich and poor. Mr Jiang, who is also party chief, admitted that ''small-scale [socio-economic] shocks are inevitable''. However, while he expressed confidence that ''major upheavals'' could be averted, seasoned observers are not so sanguine. Compounding the malaise is the fact that Beijing has been forced to mothball Mr Deng's radical reform programmes, deemed by the patriarch as the only way to save the party. Officially, national inflation is estimated at eight per cent. However, the state-funded Hongkong China News Agency reported late last month that the retail price index in Shenzhen had soared by an astounding 35.8 per cent over the past year, thus givingan indication of the plight in equally expensive cities such as Guangzhou, Shanghai and Beijing. After the recent outbreak of unrest in Lhasa, which was triggered by anti-inflation protests, Beijing has put off or watered down price-reform policies slated for Shanghai and other places. The State Grain Reserve Bureau indicated if prices of staples had risen ''beyond the level that can be accepted by the masses'', they would be frozen. Widening income gaps between the southeast and the west - and between the haves and the have-nots - could force the CCP to moderate its 14-year-old policy of letting the coast and a small sector of the population get rich first. The Guangming Daily recently railed against the nouveau riche: ''With just a little money in their hands, they go to extremes in indulging their appetites. Such people will not have a good ending.'' The conservative paper had vented the anger of the majority who feel left behind - and shortchanged - by the privileged few. The discontent among the peasants, who are reeling under the double whammy of depressed produce prices coupled with rising costs and taxes, is so alarming the Central Committee has, since late last year, issued 13 directives on boosting agriculture and alleviating the hardship of farmers. Referring to the two legendary leaders of peasant rebellions in the Han Dynasty (206BC-220AD), the liberal elder Wan Li said recently: ''If Chen Sheng and Wu Guang were to burst on the scene, the countryside could explode.'' The revolt against the polarisation of incomes is tied to the worsening plague of corruption, what Mr Jiang calls ''the exchange of power for money''. Elders including Chen Yun and Yang Shangkun have warned that if the CCP were to crumble, it would be because of ''internal atrophy through corruption'', not sabotage by ''hostile foreign forces''. OR as Guangdong party chief Xie Fei put it last week: ''The life and death of the ruling party depends on whether it can counter corruption and establish a clean working style.'' While the leadership may have seen the writing on the wall, they have shied away from the real solution: political reform, or at least the setting up of institutions that could effectively supervise the CCP. It is well-known that hyperinflation and the run-away money supply have their origin in Mr Deng's imperial style and the party's obsolete planning system. For example, the patriarch's high-growth policy and his refusal until April to acknowledge the problem of overheating had contributed to Beijing's loss of control over the economy. Entire forests have been laid waste to provide the paper on which is printed the CCP's daily fusillades against graft. Until a ''Western-style'' system of checks and balances is established, however, there is no institution that can either challenge the Deng-style of ''rule of personality'' or punish the worst perpetrators of corruption, who include senior cadres and theprincelings. Soon after the ''counter-revolutionary rebellion'' of 1989, Mr Deng told intimates that the ''troubles'' had started as a protest against the party's special privileges. However, the octogenarian has recently repeated that the CCP would never tolerate ''Western'' institutions such as multi-party politics. Quoting the patriarch, liberal leader Li Ruihuan said last month that ''the construction of Chinese democracy must be based on China's actual conditions''. ''If we become over-hasty and implement democracy that is divorced from Chinese reality, it will impair social stability, spawn national chaos and impede economic growth,'' he added. Last month, Mr Deng reportedly indicated that he would only consider expanding the traditional concept of ''democratic centralism'', a kind of noblesse oblige whereby party members and intellectuals can express views ''under the premise of obedience to the centre''. Yet again, the CCP has chosen the easy - and hitherto effective - way out: reinforcing the police and the army apparatus. Despite the fact that the ''dissident community'' is in disarray, both the numbers and the ideological training of security and military units have been boosted. As Logistics Chief General Fu Quanyou pointed out on Monday: ''We must ensure the high degree of stability and unity of the troops. At any time and under any circumstances, they must remain in absolute unison with the party and army leadership in politics, thoughts and action.''