Zhu in bid to retain investment

A TEAM under Executive Vice-Premier Zhu Rongji is drafting reform measures in finance and other areas in a bid to convince foreign investors that the on-going austerity programme will not stop economic liberalisation.

Meanwhile, a senior official from the Special Economic Zones Office of the State Council said yesterday Beijing would continue to approve new development zones in spite of the closure of nearly 1,000 of them in recent months.

Chinese sources said yesterday officials and think-tanks close to Mr Zhu were drafting measures for ''the next stage of reform'' in areas including banking and finance, investment, taxes and the management of government assets.

These policies would be presented for endorsement by the Third Plenum of the Central Committee set for October or November.

''The new measures should convince foreign and local investors that market reforms will continue in spite of efforts to boost macro-level adjustments and controls,'' a Chinese source said.

The thrust of the new reforms was to ensure that lending and investment activities be based on market requirements, not orders from government units.

For example, local governments and cadres would be barred from influencing the policies and activities of various branches of the People's Bank of China and the specialised banks.

Mr Zhu has vowed to speed up the drafting of regulations on the management of state assets, the gist of which is that such assets be managed by economic entities and legal persons, and not bureaucracies.

However, Chinese economists warned that some of the new measures would boost the powers of the central Government.

These include new policies to delineate the tax bases for both the central and local authorities.

An underlying principle of the new rules is that the central Government must be assured sufficient tax revenue in order to reverse the alarming decline in income for central coffers since the late 1980s.

Meanwhile, in an interview with Xinhua (the New China News Agency) last night, an official of the Special Economic Zones Office said new zones would still be established ''in a planned and step-by-step manner''.

The official said the number of zones had recently been slashed to 249 from a previous total of 1,006.

The affected zones were those which had never been approved by Beijing and which were set up by local authorities in the provinces of Liaoning, Hebei, Shandong, Jiangsu, Zhejiang, Fujian, Guangdong and Guangxi.

''Since construction of economic development zones is an effective means in the country's open-door policy, the Government will in the future give priority to the approval of new zones in the inland provinces, as well as in provinces along border areas and along rivers,'' the official said.

It is understood that only zones with high economic efficiency and whose products are in line with Beijing's priorities would be approved.