No US-China Trade War

AS the United States Trade Representative prepares to recommend a series of punitive sanctions against China, thereby setting in motion a potentially bitter trade war between the US and China, a less newsworthy but far more profound drama has been quietly unfolding in the Chinese seaside resort of Beidaihe, near Beijing.

Each August, China's ambulatory Communist Party elites - those senior leaders not currently confined to the hospital - meet informally at Beidaihe to iron out their differences and set national priorities for the coming year.

This year's meeting is especially important, as party elders are making final arrangements for a series of top-level personnel and policy changes to be implemented at November's 14th National Party Congress - the first such Congress to be held since the Beijing massacre of June 4, 1988, and probably the last for many of China's fading oligarchs. At stake is the future of economic and political reform in China.

For the three years since the Tiananmen debacle, China has drifted erratically between the two poles of hard-line ideological conservatism and pragmatic economic "openness." Since last January, however, China's reformers, emboldened by the death or disability of several elderly conservatives, have gained the upper hand; at Beidaihe they are pressing their advantage.

In the past few months hard-line Marxists have been quietly eased out of positions of leadership in the fields of propaganda, organization, culture, and education.

Their places have been taken by allies of China's erstwhile pro-reform party chief, Zhao Ziyang, who was ousted at the height of the student demonstrations in May 1988. Although Mr. Zhao's personal status remains clouded by conservative charges that he aided and abetted "counterrevolutionary turmoil" at Tiananmen, his associates are rapidly regaining lost power and influence in Beijing.

Reports strategically leaked by Party sources in Beijing on the eve of the Beidaihe meeting suggest that at least three key conservatives - Premier Li Peng and fellow Politburo Standing Committee members Song Ping and Yao Yilin - will be forced to step down or accept face-saving job transfers between now and next spring, thus clearing the way for reformers to dominate the upper levels of policymaking.

Among the progressive leaders expected to benefit directly from the conservatives' loss of political clout are Standing Committee member Li Ruihuan, Vice Premiers Zhu Rongji and Tian Jiyun, and former Central Secretariat member Hu Qili, all of whom have enjoyed sharply increased public visibility in recent months. (Hu Qili was a prot of the late reform leader Hu Yaobang, whose April 1988 death triggered the Tiananmen demonstrations.)

Orchestrating these various moves has been China's 87-year-old patriarch, Deng Xiaoping. Although Mr. Deng was personally responsible for the brutal military crackdown at Tiananmen, he remains deeply committed to fundamental structural reform and to China's "opening" to the outside world.

In the past six months he has taken a series of initiatives to wrest power from aging hard-liners and their younger clients, and he has explicitly warned all officeholders that they must either climb aboard the reform bandwagon or get out of the way.

In policy terms, evidence of Deng's breakthrough is abundant. Long-stalled reforms designed to break the Chinese worker's "iron rice bowl" (a lifetime job at a guaranteed wage) and to force inefficient state-owned factories to go into bankruptcy have been boldly implemented - despite strong objections from party traditionalists. Limited experiments with urban stock markets, privatized housing, and other market-oriented innovations have also been greatly expanded since last winter. Piecemeal price reforms

- frozen since 1988 - have not been resumed in an effort to allow market forces greater play in the economy.

Bowing to persistent pressures from the international community, the US in particular, China has agreed to join the 1987 Missile Technology Control Regime and the Universal Copyright Convention, while also pledging to bar future exports of prison-made goods to the American market.

On the political front, a number of leading Chinese dissidents, including outspoken pro-democracy critics Dai Qing and Wang Ruowang, have recently been permitted to leave the country to take up honorary posts abroad. At the same time, the cultural atmosphere within the country has visibly improved with the sacking of China's hard-line acting minister of culture and the lifting of an internal order banning the films of China's two-time Academy Award nominee, director Zhang Yimou.

Many of these positive signs of change have received only passing notice abroad. Far greater prominence has generally been accorded the recent trial of Bao Tong, former top aide to Zhao, who was sentenced in July to seven years in prison (less three years' credit for time already served) for having leaked state secrets to student demonstrators during the Tiananmen protests.

While the sentence was undoubtedly harsh, this episode must be viewed as part of a complex political bargain in which Mr. Bao played the role of designated scapegoat, clearing the way for Zhao's eventual rehabilitation.

A breakthrough for China's reformers does not mean the imminent triumph of liberal democracy. The pragmatists who are currently poised to take power in Beijing are not democrats but technocrats. As such, they are more concerned with generating rapid economic growth than with protecting political liberties.

It will take years - perhaps decades - of sustained economic growth and related social changes before genuine democracy can be engendered in China. In the meantime, the accelerated marketization of the Chinese economy, together with China's increasing "openness" to the outside world, will hasten the emergence of a more dynamic and diverse Chinese society, one in which the values of democratic pluralism may eventually be able to take root and grow. Such is the ultimate import of the meeting at Beidaihe.

With so much hanging in the balance, the imminent launching of an American trade war against China seems ill-timed at best, and pernicious at worst. The reformers are winning in China; the old order is rapidly changing. At such a critical juncture, it is not in our national interest to indulge in a self-righteous orgy of punitive China-bashing. The stakes at Beidaihe are simply too high.