Fri, 05 Mar 1999

Zhu's patience tried as reforms held up

By Andrew Browne

BEIJING (Reuters): China's Zhu Rongji is used to snapping his fingers and getting results, so the past year must have tested his notoriously thin patience.

And the next 12 months are likely to be even more frustrating.

This time last year, after being elected premier at the annual meeting of parliament, Zhu pledged to fire four million civil servants -- chopping the bureaucracy in half -- and sell off thousands of smaller loss-making state firms.

"I will have no misgivings," Zhu declared in his usual forthright style as he also promised to privates urban housing.

On all three counts, Zhu has been thwarted.

He has had more success shoring up technically bankrupt state- owned banks and giving greater supervisory powers to the People's Bank of China, the central bank -- two other planks in his ambitious platform.

But the record of Zhu's first year in office is mixed.

"You can't say that Zhu Rongji has delivered on the program as he outlined it a year ago," said Tony Saich, who heads the U.S. Ford Foundation in China.

"But I don't necessarily think that means his reform attempts have been a failure," he said.

Zhu could hardly have picked a worse moment to launch a social revolution intended to roll back state controls over everything from employment to housing and social welfare.

The Asian financial crisis slowed China's economic growth, shrinking the job market and making it politically harder to lay off state workers. The threat of joblessness helped doom efforts to persuade workers to buy their own homes.

Rampant corruption has slowed the factory privatization program: billions of dollars of state property has been lost through asset stripping.

And as corruption and joblessness grows, so does public discontent with Zhu.

"He's becoming increasingly unpopular among ordinary people," said Kjeld Erik Brodsgaard, a visiting scholar at Peking University.

In addition, said Brodsgaard: "Bureaucrats are resisting."

The feeling among gloomier Western analysts in Beijing is that not only are bureaucrats resisting, they have gained the upper hand.

"Central planners are back in control," complained one senior Western bank executive.

Some even argue that Zhu himself is a central planner at heart, that his reform program was designed chiefly to make the old socialist system work better, and that Western hopes in him have been misplaced.

Indeed, in the countryside -- home to most of China's 1.2 billion people -- Zhu's top agenda has been to strengthen the state grain monopoly.

But Ken Lieberthal, senior director for Asia on the U.S. National Security Council, has a more upbeat assessment of Zhu.

"He certainly did not come across as a doomed-to-fail central planner," he said after meeting the premier last month. "He is articulate, confident, direct in his responses, quite forceful on issues he chooses to be forceful on."

While Zhu's reforms have slowed, they are far from dead. Perhaps the biggest casualty of the past year has been Western hopes -- greatly exaggerated -- that Zhu was taking China full- speed towards a private economy.

"Zhu sees a role for the private sector, but he wants to make sure its a controlled role," said Saich.

Control will be the watchword in 1999, a year studded with politically sensitive dates that could provide a spark for simmering social discontent. Chinese leaders are far more anxious to promote stability than change.

Coming up are the 10th anniversary of the June 4 bloodshed around Tiananmen Square and the 50th anniversary of the founding of the People's Republic of China in October.

"The pace of reform will not be accelerated," said Brodsgaard. "We will see a year of caution."