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China's President Strengthens Position in Advance of Meeting

By Frank Langfitt
The Baltimore Sun

In preparation for a major meeting this fall, leaders of China's Communist Party are signaling that they are prepared to speed up their capitalist-style overhaul of many failing state-owned industries.

While offering few details, President Jiang Zemin has called for "the deepening of reforms," measures that have included selling stock and merging some failing businesses with successful ones.

China's state-owned industries employ 112 million people - about one-sixth of the nation's work force - and are the largest roadblock in China's march toward a competitive, market economy. Turning them into corporate-style, for-profit enterprises could require layoffs and lead to widespread and politically dangerous labor unrest.

Economic reformers launched an unusual public attack last month against party hard-liners, who argue that wholesale changes in the state-owned industries are a betrayal of socialism.

"Since last year and the first half of this year, we can see that leftists have clashed with current policies," said party magazine editor Xing Bensi in an interview with the China Economic Times. "We cannot expect Marx to provide ready answers to questions that arise a hundred years or several hundred years after his death."

The aggressive rhetoric comes in advance of the party congress, which will be the first since the death in February of paramount leader Deng Xiaoping. During the meeting, expected to open in late September or early October, the party will outline policy and choose the men who will lead China into the next century.

Jiang, who is also the party's general secretary, will try to use the occasion to consolidate power in his new role as first among equals in China's leadership. Analysts expect the party to endorse current economic reforms and also to call for more rapid changes in the state-owned enterprises - about half of which lost money last year.

"They feel like they are up against a wall on this, because the state enterprise system continues to hemorrhage funds," said Kenneth G. Lieberthal, a professor of political science at the University of Michigan. "I think they feel that they have to make some very tough decisions."

Although analyses of policy and leadership struggles may seem arcane, the inner workings of the Communist Party are increasingly important to the rest of the world. China sits at the center of the globe's most economically dynamic region, and instability in China could disrupt tens of billions of dollars in U.S. trade and investment throughout Asia.

With 1.2 billion people, nuclear weapons and rapid economic growth, China is also one of the few countries capable of eventually challenging the United States on the world stage. And the character of its leadership matters, as the two nations try to resolve issues as diverse as access to Chinese markets, human rights, peace on the Korean peninsula and the security of Taiwan.

Of the many personnel changes planned for this fall's congress, a replacement for Premier Li Peng is among the most important.

Li, 68, whose credentials include being the adopted son of the late Prime Minister Zhou Enlai, is best known in the West for supporting the violent crackdown on the Tiananmen Square pro-democracy movement in 1989.

Western diplomats predict that the job will go to Vice Premier Zhu Rongji, a brusque, hard-nosed administrator who is credited with having reduced the inflation rate. Zhu, 68, a former mayor of Shanghai, is regarded as the best economic manager in the government. Analysts expect the task of continuing reform of the state-owned industries to fall to him.

"The West would be very happy with Zhu," said a Western diplomat in Beijing. The Communists "are clearly laying their claim to rule on good economic management."

Communist Party history is filled with internal struggles, and party leaders have worked hard to hide signs of factionalism. So it was all the more noticeable last month when reformers took on Marxists in the press.

Some observers saw the attack as a way to rally support for Jiang, 70, who does not have the political power of Deng and remains in the late leader's shadow.

The reformers' criticisms came in response to an anonymous document circulated by party conservatives, which compared foreign investment in China to colonization. The document also suggested that the decline in state ownership was undermining socialism and the party's grip on power.

Those concerns seem far removed from conditions in downtown Beijing, a rapidly modernizing city where young people appear enthralled by the deluge of Western products and the increased purchasing power that have come with economic reforms.

It is unclear who would publicly champion anti-reform views. The leftists have lost much of their political might as their leaders have died, retired or been shunted aside. Analysts say the leading figure on the left is Deng Liqun. Deng served as acting minister of propaganda in the mid-1980s but holds no official position.