Market reforms to be scaled down

Chris Yeung

CHINA will hold back or scale down some radical market reforms to minimise social and political instability.

And provincial leaders among members of the National People's Congress (NPC) will discuss with the central leadership this week new ways to promote reform while keeping hyperinflation and other negative effects in check.

Informed sources said the leadership had decided to suspend a number of economic liberalisation measures, including transforming state enterprises into shareholding companies and laying off redundant workers to promote productivity.

The sources said China's new priority was to temporarily shore up government-run business units and to cut unemployment.

The Beijing-run Hong Kong daily, Wen Wei Po, confirmed yesterday that ''in the interest of maintaining stability, the party centre had decided to temporarily slow down the introduction of some reforms''.

The newspaper quoted an ''authoritative figure'' as saying that only reforms in finance, banking, prices, foreign trade and investment would be executed as planned.

Wen Wei Po said the leadership had set two criteria for determining which reform measures should be introduced.

Even if correct, policies would be delayed if they would lead to ''a drop in economic benefits for the majority of people'' or if society could not cushion the shock.

Political sources said the new concern for stability was reflected in amendments premier Li Peng made yesterday to his Government Work Report to the NPC.

On the restructuring of state enterprises, Mr Li said China would ''actively sum up experience and gradually put together standardised measures for implementation in order to facilitate the expansion [of the reform]''.

This was a roundabout way of saying the Government would be cautious in overhauling state firms, the sources said.

Speaking to reporters yesterday, Mr Li renewed pledges to fight inflation.

''The national goal of keeping inflation below 10 per cent has already been adopted,'' he said.

''It's not just a task for the Government, but enterprises and people from all walks of life.'' Despite the gradual lifting of price controls, Mr Li said macro-level control and adjustment by the Government over prices was indispensable in the market economy.

''We did not have a total agreement [on the need of macro control] in the past. But we have reached a consensus on this at this [NPC] session,'' he said. The Government had decided to exercise ''macro-level monitoring and supervision'' over 20 basic necessities and services.

Mr Li insisted the goal of the ''correct handling of the relationship between growth, reform and stability'' was to ensure ''sustained, fast and healthy'' development.

''Our goal is, of course, not just stability, but growth . . . The series of measures being adopted to promote stability will contribute to growth,'' he said.

Admitting that the issue of a balance between growth, reform and stability had been discussed before, Mr Li said an ''unprecedented consensus'' had been reached at this NPC.

Chinese sources said State Council leaders and provincial cadres would later this week try to settle differences over the extent to which reforms should be toned down.