Chinese Leaders Scramble to Slow Racing Economy

SURGING economic growth. Real estate and construction booms. A flood of foreign investment. Music to the ears of economists and policymakers around the world? Not in China.

As capitalist governments from Washington to Tokyo try to jump-start solid recoveries, Beijing's communists wrestle with too much growth, too fast.

Recently, the government announced plans to rein in the booming economy and lower China's 12 percent growth in national output in 1992 to single-digits this year.

Last year's growth, double the original official target of 6 percent, has stirred fears of revived inflation and comparisons to 1988 when high prices fed political discontent. That unrest culminated in the bloody Army crackdown in Beijing.

"The measures taken will be different than 1988," says Ji Chongwei, senior researcher at the government-run Development Research Council. "This year the focus will be on a soft landing."

However, amid political infighting, Chinese leaders still squabble over what that means and how to do it. Senior leader Deng Xiaoping kicked off the latest boom when he toured southern China almost a year ago and called for more prosperity to cement Communist Party control.

Prime Minister Li Peng and other conservatives have grudgingly played along. Of late, though, Mr. Li, Party Secretary Jiang Zemin, and other senior conservatives warned that the economic pace is too torrid. In describing China's economy, officials now speak about dangerous "crazes" for capital construction by local governments, establishment of special development and real estate zones, and bank lending.

Last year, the money supply grew 30 percent and bank loans rose 20 percent. Inflation almost doubled to more than 6 percent nationally and averaged 11 percent in the cities.

With economists of all political stripes warning of overheating, Chinese leaders say they will temper exhortations for market reform with controls on credit, construction, land development, and expansion of fledgling stock markets.

However, controlling China's boom-oriented climate will not be easy. In the wake of economic reform, provincial and local governments have loosened Beijing's fiscal control by charging ahead with investment without central approval.

The central bank has few monetary tools to control credit, although legislation has been promised to establish discount rates, reserve requirements, and other controls.

Government economists admit that reining in the free-wheeling economic pace of the provinces will be complicated. That will make lowering growth significantly from 12 percent difficult.

"This is a problem. There is competition among the provinces and the cities to catch up with their neighbors. They have tasted autonomy," Mr. Ji says. "The government will have to take tougher measures instead of empty talk."

But many economists question whether the government can back up its promise for action. Leaders are in a quandary over plans to streamline the ponderous bureaucracy of central planning and overhaul its loss- and debt-ridden state enterprises, both key steps in market reform, observers say.

"There are so many plans for economic reform, people are bewildered," says an economic analyst who asked to remain anonymous. "It's like the old Chinese story of the eight gods and goddesses who, when sailing across the sea, each had his own way of getting across."

Western and Chinese observers worry that the debate over economic growth could be used to short-circuit reform. Although some bureaucrats are jumping on the market bandwagon and opening up private companies, many are Soviet-style technocrats with powerful vested interests to protect.

"Though the economy is not yet overheated and inflation is not yet that high, conservatives see this as an opportunity to place blame," says an economist in a government-run think tank.

"The conservatives and bureaucrats want to control this overheating by administrative edicts, and they will say the ministries are needed to do this," the analyst says predicting attempts to block government streamlining.