Peking shelves grandiose plans; Japan shaken by China cutbacks

"Are you disappointed in the Chinese economy?" China's senior leader, Vice-Chairman deng Xiaoping, asked Japan's minister of trade and industry. "No, I am not disappointed," the minister replied. "But I am worried."

The exchange took place during a recent meeting between Mr. Deng and six Japanese Cabinet ministers, visiting Peking for their first group ministerial meeting with their Chinese counterparts.

To the people of Peking, the spotlight during the past week continued to be on the trial of the "gang of four," with Jiang Qing, widow of Mao Tse-tung, as the star.

To China's leaders, Mr. Deng and Prime Minister Zhao Ziyang, the most urgent problem is how to scale down overambitious economic development plans, includin Japan-related projects, while pumping out enough consumer goods to meet China's version of the revolution of rising expectations.

The trial of the gang of four is meant to demonstrate to China's 1 billion citizens that the disorder and arbitrary rule of the 10 years during which the gang held sway (1966-76) can never be repeated again, and that the program of economic modernization featuring more incentives and less centralized decionmaking is here to stay.

But as Mr. Deng's comment illustrates, the Chinese economy is going through a difficult and painful process of readjustment.

Heavy industry has to be cut back, to keep from gobbling up funds needed to improve agriculture and light industry. Production of oil, China's principal foreign exchange-earner, has reached a plateau and will decline until the late 1980s when offshore oil, still in the early stages of exploitation, is expected to come on stream.

China's original development plans were too grandiose, Mr. Deng has admitted. They must be retailored to suit the circumstances of a country that has atom bombs and rockets but is otherwise still poor and relatively backward.

Foreign businessmen are affected because much of the restructuring and retailoring concerns projects in which they had won contracts were hopring to do so. Among them, the most heavily affected are the Japanese. They have been the major foreign partner in many industrial projects and the major customer for China's oil.

The most shocking blow to the Japanese so far has been the news that China will postpone construction of the second stage of the huge Baoshan integrated steel mill complex. Some $1.3 billion of contracts that the Japanese had assumed to be in the bag will be affected. Contracts worht $900 million, already signed, may be scrapped.

Vice-Premier Gu Mu has said plans will be restructured in such a way as to cause no losses to foreign contractors. But the details remain to be worked out , and the Japanese are worried because compensation clauses in most of the contracts they have signed are said to be inadequate or vague.

It was under these unpropitious circumstances that six Japanese Cabinet ministers flew to Peking Dec. 3 for their first group ministerial meeting with their Chinese colleagues. These meetings, which Japan also used to have with the United States, were agreed upon during Chairman (then premier) Hua Guofeng's visit to Tokyo in May. They are to be held once a year, alternately in Tokyo and Peking.

Besides Foreign Minister Masayoshi Ito, ministers involved on the Japanese side were Michio Watanabe (finance), Toshio Komote (economic planning), Takao trade and industry) and Masajuro Shiokawa (transportation). The Chinese delegation, headed by Gu Mu (vice-premier and chairman of the State Capital Construction Committee) and chairman of the State Capital Construction Committee) included four vice-premiers and several ministers.

Exchanges were described as "frank," particularly those involving the two most outspoken member of the Suzuki Cabinet, Messrs. Watanabe and Tanaka. Both reportedely complained strongly that China should not unilaterally cancel or change large-scale projects involving foreign participants without advance notice.

China, however, remains an important trading partner for Japan, and Japan continues to have to stake in the successful achievement of its giant neighbor's economic modernization program. Sino-Japanese trade is expected to reach $8.7 billion in 1980 -- $4.5 billion in Japan's exports and $4.1 billion in imports. Crude oil, the largest item on the import side, will account for $1.9 billion.

On the export side, the priority China gives to satisfying consumer needs is clearly seen in the following: In the first half of this year, Japan will have exported 300,000 black and white television sets, 130,000 radio-cassette tape recorders and more than 400,000 wristwatches to China.

Japanese ministers are reported to have returned to Tokyo pleased on the whole at the realism and frankness of their exchanges with the Chinese. No spectacular new agreements were signed -- only a continuation of Japan's commitment to aid six development projects.

Euphoria faded from Sino-Japanese relations quite some time ago. What remains is a sober but not unsympathetic appreciation of China's economic problems and of Japan's continuing stake in an orderly, stable, prosperous China.