HEAVY losses suffered by state industries have become the most serious obstacle to the Government's anti-inflation campaign, according to a top economist. In a critical paper delivered yesterday, Wu Jinglian gave a blow-by-blow analysis of the Chinese economy - and pointed out some of the reform measures introduced this year have not had the desired effect. Speaking at an international economic conference in Beijing, Mr Wu said although Beijing had scored some success in tax structure reform and unification of the exchange rates, little progress had been made in the reforms of the financial system. Reform of state enterprises and the social insurance systems were also clearly lagging behind, Mr Wu was quoted by the China News Service as saying. Government officials are still drafting proposals in these areas. Consumer price index - a major indicator of inflation - surged to 24.2 per cent last month, defying months of efforts by the Government to keep down prices. Mr Wu's criticisms were similar to remarks made by senior officials recently, including Vice-Premier Zhu Rongji, indicating that Beijing would fine-tune its reform policies by placing more emphasis on its state sector. The policy change is expected to be endorsed by the Communist Party Plenum to be held later this year. In order for reform to succeed, Mr Wu said Beijing would have to put enterprise reform on top on its agenda next year. Moreover, he said no major progress was made in the establishment of a new financial system, although Beijing had taken back the control of money supply and issue of loans. The recentralisation of power, however, was not matched by a real independence of the central bank, the People's Bank of China, which was still unable to regulate the economy through tools like interest rates. The top economist added that since the banks were still operating in negative interest rates, they could only rely on state fiats to control the growth of investment projects - a major factor behind the runaway inflation. Moreover, the inability of the central bank to function as an independent financial institution also helped breed corruption. And according to Mr Wu, Beijing was struggling to put together its programme to build a ''modern enterprise system'' and had difficulties in giving a clear definition of issues such as company shareholders and ownership rights in companies. He admitted that the lack of progress in these areas meant that although more than 10,000 state enterprises have been transformed into shareholding companies, their relationship with the Government remained unchanged. But Mr Wu said the biggest threat remained the lacklustre performance of the state industries. The great resistance faced by the Government has also slowed down reforms in other areas, he said. For example, some industries had lobbied Beijing to delay the introduction of value added tax, claiming they needed more time to adjust their business to the new tax, Mr Wu said.