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SCMP Reporter

VICE-PREMIER Zhu Rongji has tried to consolidate his position by asserting the socialist market economy is running ''normally''.

  China analysts said that by giving the economy a bill of health, the economic tsar could in the second half of the year adopt a more aggressive policy on issues such as growth and the restructuring of enterprises.

  Mr Zhu is also expected to dominate the drafting of a document on macro-level adjustments and controls to be presented to the Fourth Plenum of the Central Committee.

  Quoted in the national press yesterday, Mr Zhu told a specially convened meeting of senior cadres that ''the basic framework of China's socialist market economy has all been accomplished according to plan''.

  ''The framework is operating normally and marked successes have been scored in reforms,'' Mr Zhu told 1,200 leading cadres from the party, Government, the army and the media.

  He spoke also of growth trends and measures to be taken this year and next.

   No details of the speech were released.

  Economic researchers in Beijing said Mr Zhu was trying to convince senior officials that with order restored to the economy, China could take more far-reaching steps in reform and development.

  According to official statistics, inflation is coming down gradually, meaning Mr Zhu could afford to selectively relax the tight-money policy to restructure state enterprises.

  The Chinese-run Hong Kong daily, Wen Wei Po, reported yesterday that the central Government had decided to set aside seven billion yuan (HK$2.67 billion) to help the banking system write off bad debts of bankrupt enterprises.

  Eighteen cities have been designated as pioneering areas for declaring money-losing enterprises bankrupt, a move seen as an effective means to reform the state sector.

  On a selective basis, more credit and loans would be made available to such favoured sectors as agriculture, communications and energy.

  With inflation likely to be at least 16 per cent for the second half of the year, Mr Zhu is not expected to relax the tight-money policy across the board.

  Deng Xiaoping has urged the State Council to speed up the pace of growth and reform, pro-Beijing publications in Hong Kong have reported.

  However, it is understood Mr Zhu would continue to rein in fixed-assets investments by localities and enterprises.

  But independent economists in Beijing have cast doubt on the rosy picture that the Vice-Premier presented to the special meeting.

  Official media, including the China News Service, have reiterated that the economy is still operating within an ''amber-light zone'', meaning that inflationary pressure could rise at any time.

  The economists said that given the huge budget deficits and the continuing need to fight inflation, Mr Zhu probably could not mobilise enough funds to restructure state enterprises, 47 per cent of which were in the red.



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