Working on the edge. China's 4.5 million self-employed live - and often prosper - outside the socialist system

Eight years after senior leader Deng Xiaoping began China's ``second revolution,'' entrepreneurs of many descriptions populate the urban and rural landscape. A few are privately employed, which means they work neither for state-run enterprises nor for enterprises owned collectively by a village or township (formerly a commune).

Living on the edges of society, without the guaranteed benefits of housing, pensions, and the job security offered by established work units, some 4.5 million Chinese are self-employed. These people are highly visible, though they are a small number compared with China's total work force of more than 125 million. They have helped improve the quality of daily life in ways prohibited a decade ago.

Handicrafts and simple manufactures made in family workshops, restaurants, and food stalls; transportation services; tailoring; raising chickens, pigs, ducks, and fish - these are some of the often lucrative businesses favored by private entrepreneurs.

There are also some 65,000 registered ``free,'' or non-state-run, markets in China's cities which sell fresh meat, fish, and vegetables, as well as clothing and household items. The sales volume of these markets in 1986 was an estimated $19 billion, according to the State Administration for Industry and Commerce.

Self-employed workers can lead a difficult life, even if their business is successful. They must endure the scrutiny of others who may work just as hard but earn much less in state or collectively owned enterprises. They must also keep an eye on an envious government.

``If a private enterprise is too prosperous, the state will eat you up,'' said the owner and manager of a small factory near Peking.

The young entrepreneur was referring not only to state taxes, which can ``eat'' between one-third and one-half of profits, but also to the tendency of the state to absorb the most successful enterprises into state-run industries, thereby expanding assets and controlling the competition.

The output of private manufacturing enterprises grew by a staggering 60 percent in 1986, though it accounted for less than 1 percent of China's total industrial output. These figures do not include the output of private agriculture, which is more difficult to measure and accounts for a significant portion of rural income.

Private entrepreneurs, whether in industry or agriculture, prosper only when China's economic planners offer some scope for market forces in a socialist economy managed by the central government.

A decision by the Chinese Communist Party's Central Committee in October 1984 affirmed that it was the ``essential task of socialism to develop the forces of production, create ever more social wealth, and meet the people's growing material and cultural needs.''

Private enterprise has made a small but widely appreciated contribution to this task. Several million entrepreneurs hope the party will keep allowing them to grow and prosper.