Watershed year for Deng's reforms. Deng Xiaoping has set China on a problematic but promising course. The Chinese are watching to see if he can make his reforms stick. In a series, the Monitor looks at this crucial time for China.

In the seven fat years since Deng Xiaoping took control, Chinese society has begun to hum. Incomes are up, people are consuming instead of merely producing, and a modern mass culture is trying to emerge outside the auspices of the Communist Party.

The lists of best-selling consumer items have changed. The old ``four things that go round'' (bicycles, electric fans, wrist watches, and sewing machines) have been replaced by the ``eight new big things'' (color televisions, cameras, cassette tape recorders, motorcycles, air conditioners, washing machines, refrigerators, and video machines).

On the political side, the government is relying less on coercion and indoctrination and more on reason and the self-interest of the Chinese people to implement policy.

Nevertheless, there are anxieties over whether the current state of affairs and the promises for a better life will continue.

In 1986, people are commenting on the gap between the spirit of the government's policies and actual bureaucratic practice. Some people are now openly worried that the party's promises for a better future won't survive without revisions.

Contrary to what they believed was the spirit of Deng's reforms, they observe that the ideologues are tightening their guardianship over arts and culture; the central authorities have actually strengthened -- rather than loosened -- their control over the economy; and China's door to the outside world, propped open since the late 1970s, could close again.

These latest shifts in the political winds follow the wrenching experiences of the past year:

An official inflation rate of 9 percent, where there was virtually no inflation from 1949 until the late 1970s.

The squandering by government agencies and illicit importers of much-needed foreign exchange on consumer goods.

The effects of foreign influences on a once-closed culture.

Dashed expectations about the readiness of the party's lower echelons to take on more responsibility.

The durability of the ``iron rice bowl'' (the employment-welfare system in which everyone is provided for regardless of his productivity).

The disruptive impacts of material inequality.

And the growing problem of corruption, which could prove to be the Achilles' heel of the whole reform program.

After decades of promoting a system of ethics based on the virtues of socialism and shared scarcity, the authorities are now confronted with how to guide Chinese behavior under conditions of capitalist-style prosperity. Mao Tse-tung once worried that a party secretary could be bought for a few packs of cigarettes. That sort of corruption, like so many things, has seen some inflation of late.

``It used to be that a banquet or other simple amenities could close a deal with state officials and enterprise managers, but now the price of catering to Chinese business partners is higher,'' said one business analyst from Hong Kong. ``They suggest expensive benefits, such as cars for their companies or an inspection trip to one of the special economic zones or Hong Kong,'' he said.

The party's recent denunciations of extravagance in business affairs has had some effect, at least in one case: Recently, a manager in Canton refused to go to Hong Kong for a meeting with his joint-venture partner unless his factory's party cadre accompanied him. The party official had nothing to do with the business venture, but he would have been insurance against accusations of wrong-doing. The manager didn't attend the meeting.

There are also basic questions of economic policy.

In 1985, China's economy raced along at almost three times the speed the government had intended. Amidst the usual enthusiasm for exceeding state production targets, Premier Zhao Ziyang has given stern warnings about the dangers ahead if, under the economic plan now being drafted for 1986-1990, economic growth isn't brought under control.

There are few Chinese who would actually come out against Deng's reforms, which have fueled the rapid economic growth, but many sympathize with those members of the leadership who have to confront the problem of implementating the reforms. The means of solving the problem appear to involve more bureaucratic controls on society, not less.

China's traditional ambitions for itself include visions of a moral and social order that have tended to clash with the liberal ideas and institutions of the West. These ambitions also clash with the development of a society free of politicized morality, a goal some say has been encouraged by the pragmatic ``thought'' of China's master strategist, Deng Xiaoping.

``Look toward the future and seek truth from facts,'' reads one slogan at a busy intersection in central Peking. ``Seek truth from facts'' is a saying gleaned from Mao's prolific writings, but it is a slogan used by Deng and his fellow reformers to endorse an economic pragmatism to which Mao never espoused.

Many people enjoy the agreeable play on words: The spoken version of the first part of the slogan also sounds like ``look forward to money.'' It is a sentiment that has swept the country -- even as the party now denounces ``putting money above all else.''

At the other end of the political spectrum are the residues of Maoism. A few people in their 30s and 40s are openly nostalgic about their Maoist past. When they came of political age in the 1960s, the words of Chairman Mao raised their expectations dramatically -- fueling hopes of unprecedented social and professional mobility and illusions of power that still haunt them.

``Who gives my superior the right to boss me around?'' exclaimed a former Red Guard activist and computer scientist still struggling with the anarchistic ideals of the Cultural Revolution (1966-76). After the heady experience of criticizing anyone and everyone in power during his student years, he still resists the notion that others should have authority over him. This sort of Red Guard defiance is a troublesome legacy. It creates conflicts in a society trying to put arbitrary, radical politics behind it.

But regardless of these troublesome undercurrents, enthusiasm for China's recent accomplishments under Deng's leadership is standard fare in the official Chinese press. ``A series of major breakthroughs have dazzled us,'' wrote Yu Quanyu of the official New China News Agency last year. He observed that the Chinese people had doubled their incomes and solved the problem of feeding and clothing themselves, and he asked rhetorically: ``What more great miracles can the Chinese people achieve?''

Deng also gets credit for confronting the nagging question of continuity for his policies. At a national party conference last September, some 64 elderly members of the Communist Party Central Committee, including 10 members of the ruling Politburo, retired in favor of younger people.

At a less exalted level across China's vast bureaucratic landscape, some 2 million people retired last year to make way for younger officials, according to Party General Secretary Hu Yaobang. These shifts have substantially realigned political loyalties and brought fresh commitment to the reform programs, even if they have brought into leading posts people of untried abilities.

One motif of Chinese politics this year will be the political maneuvering behind decisions to be announced at a party congress in 1987 -- decisions on who will finally step into the top positions of party general secretary and premier. The announcements will cap the major personnel changes under Deng which are aimed at stabilizing China's leadership well in the 1990s.

Hu Qili, head of the party Secretariat, and Li Peng, vice-premier, are now the front runners for these posts. Party General Secretary Hu Yaobang (no relation to Hu Qili) is said to be a candidate for Deng's titles: chairman of both the central advisory and the central military affairs commissions. It is less clear if Premier Zhao is favored to succeed President Li Xiannian.

But with Deng's followers already dominating the top of the organization charts, and with their manifesto for economic change and the open-door policy well established, succession politics are subdued. Political maneuvering has shifted into those parts of the bureacracy that control the news media and the arts. There is also an ongoing propaganda effort to mold the values of that half of China's population that is under 25 years old.

If Deng should begin to lose the invisible struggles at party headquarters in the Zhongnanhai compound, the party will be sure to make it appear that unity prevails and that its shift of direction is the ``correct'' one.

The camp of party leaders that holds strong reservations about the reforms, a group led by Politburo members Chen Yun, Hu Qiaomu, and Peng Zhen, are busy trying to shape mass culture along more orthodox communist lines. They are trying to filter out unwanted foreign influences that are pouring in through Deng's open door.

One measure of their influence is how successful they will be in controlling the media and the arts. Their main aim is to prevent Western ideas and culture from spilling out into China even as Deng welcomes Western technology, investment capital, and hundreds of thousands of foreign tourists.

Deng has refused a pedestal in the Chinese political pantheon of Marx, Lenin, Stalin, and Mao. He has said he is not indispensable. Maybe all his policies aren't indispensable either, if they threaten to alter the identity of Chinese culture and to challenge the assumptions of China's ruling elite.