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AT THE beginning of the austerity drive last July, it looked as if the Chinese Government was putting both hands on the steering wheel, taking its foot off the accelerator and applying the brakes to an economy that had run dangerously out of control.

    But since then, the driver's seat at times has appeared to be occupied not by a cautious chauffeur, but by a schizophrenic, revving up and then cutting the petrol as he jerks along the road with both the left-and right-turn indicators flashing.

    Bystanders can be forgiven for wondering where the driver thinks he is going.

  The hype surrounding the recent plenum of the Communist Party Central Committee has in some ways made things even murkier.

  How does one, for example, reconcile a call last week from economists at the State Statistical Bureau for ''further implementation of macro-economic control measures'', with senior leader Deng Xiaoping's latest pearl of wisdom ''leaked'' on the eve of the plenum - ''Slow development is not socialism'' - a remark which appears to give local officials the green light for all-out growth.

  Is an austerity programme still in force, or is the economy to go full speed ahead? The answer seems to be: a bit of both.

  ''At this point, the picture is mixed,'' a Western analyst said. ''But from January to June this year, it wasn't mixed at all. It was: Get in and make some money.''   On the surface at least, the statistics suggest anything but austerity. Government figures released last week forecast 13 per cent gross domestic product (GDP) growth for the whole of 1993, overall industrial growth at 21 per cent, and retail sales up 23per cent for the year.

  Inflation eased a bit over the summer, then climbed last month by 0.4 per cent to 21.1 per cent in the major cities.

  Money supply apparently fell by about two per cent in the third quarter of this year, but that was just before the central bank announced it was making available an extra 100 billion yuan (about HK$134 billion) in credits, a concession to the provinces whose industries were complaining about the austerity programme, which forced many factories to cut production.

  ''The question is, was that just a tactical shift, because money was too tight in the third quarter, and they were trying to avoid a rapid collapse of industrial output?'' a Western diplomat said. ''Or does it mean the leadership isn't worried about inflation, and that inflation at current levels is a manageable cost of reform?''   While the economy is still racing ahead, analysts note the pace has been slowing down a bit. True, inflation did inch up last month, but that compared favourably with the first half of the year when the rate was rising by leaps and bounds.

   Thirteen per cent economic expansion sounds phenomenal, but earlier this year the GDP growth was running even higher.

  The latest plenum reportedly set a target of slowing down economic growth to nine per cent next year. It is hard to find an economist who believes the figure will be so low.

   For that to happen, massive cuts in production would be required, while construction and other projects would have to grind to a halt, creating massive underemployment, if not unemployment.

  Yet there is evidence to show the government has been successful in achieving some of the targets of its austerity programme, such as stemming the wild, unauthorised lending which was causing state-allocated funds to go adrift, and was fuelling speculation in real estate and other sectors.

  Government estimates put unauthorised lending at 200 billion yuan.

   Under the austerity programme, all of that money was to have been brought back into the state banking system.

   The government has still to reveal how much of that money has been recovered.

  The austerity programme was also aimed at channelling money out of the private sector and into infrastructural projects so as to ease transportation and supply bottlenecks contributing to inflation.

  If the government seems to be sending out confusing signals, there is a reason.

   On the one hand, Beijing wants to avoid economic chaos resulting from hyper-inflation. However, there is also a risk that if the economy slows down too much, the movement to restructure the economy may lose momentum.

  Reforms - many of which challenge vested interests - create less controversy during a period of economic expansion, when standards of living are rising, than during a slowdown.



Beijing hedging its bets on whether to cool off or not