By John Pomfret
Washington Post Foreign Service
Saturday, June 20, 1998; Page A13

CHONGQING, China—The city fathers of this immense metropolis took a page from American politics recently to show how keenly they feel the pain of the city's growing ranks of unemployed workers.

All government officials were ordered to adopt a laid-off worker, in effect, by lending them money and finding them new jobs. The mayor adopted a divorced mother of one. The deputy mayor adopted a family of five. The Communist Party secretary cared for a family of three. Then the efforts of more than 500 government officials were dutifully reported on local state-run media.

It was a strategy Dick Morris would have admired.

The adopt-a-worker program in Chongqing is, admittedly, a modest effort in a city where an army of 400,000 people have been fired recently and are looking for work and thousands more are pouring in from the countryside each day. But as China's most populous city, Chongqing finds itself at the front of China's war against unemployment, a war that will only intensify in the coming months.

Twenty years after it opened to the Western world and reformed its command economy to achieve one of the greatest growth spurts in modern history, China is finally getting serious about modernizing its state-run sector. These firms -- giant iron and steel works, coal mines, rusting shipyards, hulking textile plants -- are now so inefficient and lose so much money every year that they threaten to drag the rest of the Chinese economy down with them. But fixing them involves a painful process that could eventually result in trimming 30 million jobs from a current payroll of 100 million workers.

Already, waves of layoffs have begun all over China, particularly in its industrial cities. An estimated 12 million people lost their jobs last year, with 13 million more layoffs expected this year, according to a senior Western economist in Beijing. Next year, 8 million will get pink slips, she said.

For a government and a party that still wrap themselves in the trappings of the proletarian revolution, this headlong rush to encourage factories and government offices to fire workers is a high-risk political and economic gamble beginning to impinge on China.

In Chongqing, for example, workers and students "organized petitions, blocked traffic, destroyed production, demonstrated, carried out strikes" more than 100 times last year, according to an unusually blunt acknowledgment in a yearbook published recently by the city's Academy of Social Sciences. This year, witnesses say, workers gather once a week in front of city hall when the city government is in session to demand reparations and help.

Solving the unemployment mess "will not only have an impact on whether state enterprises can successfully carry out reform," Politburo member Wei Jianxing intoned in a recent speech, "but also affect social stability and the solidarity of our socialist government."

"It's like a war," echoed Hou Xiaochuan, the chief of Chongqing's reemployment office. "I'm working like a dog, 12 hours a day, thinking up all sorts of ways to get these people to work."

The layoffs in the state-run sector are part of a far-reaching set of changes underway in China's cities that, over the next five years, will transform the way people live here. Housing, health insurance, social security and retail banking systems all are set for major reforms that are closely interrelated. A setback or crisis in one area is almost sure to ripple through the others.

The life of 39-year-old Zhao Zhihong illustrates how profound the impact can be, with virtually every aspect of reform making another dent in her family's economic well-being.

Laid off in 1993 from one of the state's money-losing textile mills, she was supposed to be paid $21.95 a month in benefits, according to a nationwide regulation. So far, however, she hasn't gotten a penny because her factory is broke. And because her husband also lost his job, the family now lives on his monthly stipend of $12.59, half of what he is supposed to receive.

Meanwhile, expenses are rising. Last year, Zhao's 13-year-old daughter lost a tooth and eventually developed an infection. Previously, her factory would have footed the medical costs, but because of health care reforms, an insurance company paid only $1,200 of a $3,600 bill. Her daughter has good marks at school but the tuition, which used to be free, is increasing each year. Rent on their 300-square-foot apartment, which used to be $12 a month, is now set to jump 10 times, thanks to housing reforms.

"My girl wants these clothes, she wants those clothes, but I don't have the means to buy them. My heart aches," said Zhao as her eyes filled with tears. "This is putting enormous pressure on my relationship with my husband."

To cushion these blows, the government is trying to fashion a social safety net, but that will take time and money to complete. In the meantime, many like Zhao and her family are falling through. It is a painful reminder of how economic necessity has finally forced the Communist Party to toss aside the last vestiges of its socialist ideology.

During the first 20 years of economic reform, party officials adamantly opposed the idea of large-scale privatization of China's industries. But last year the government finally announced that a factory sell-off would be necessary if the economy was to be revived and sufficient revenues were to be raised to pay for a social safety net.

At the same time, Chinese banks -- after years of lending only to the state-run firms -- are being encouraged to lend to private citizens and businesses instead, in the hope that these new enterprises will absorb the unemployed.

Chongqing reflects the strains being felt by China's economy as it embarks on this potholed road toward reform. Known by past generations of Westerners as Chungking, the city was the capital of China during World War II, and was given the status of a province last year as its population swelled from 13 million to 30 million people.

Chen Hong, 43, is one of the model workers of this new, not-so-socialist city. Once the foreman at a textile mill in Chongqing, she quit in 1997 and, with an interest-free loan of $6,000, started a chicken, pig and fish farm on the outskirts of the city. Now she has amassed total capital of almost $25,000 and employs six people.

"Before, I had an easy life," said Chen, the mother of a teenage daughter. "I used to work eight hours a day and watch time go by," she said, recalling her days in the factory. "Now it's 12 hours a day. . . . You've got to get used to it. You have to be willing to work very, very hard."

Indeed, one major hurdle that China faces is how to retrain its workers.

Take Li Mingqiang. In 1996, the 38-year-old iron worker was voted a "model worker" at Chongqing Iron and Steel Works, a sprawling, rusting monstrosity employing 10,000 workers on the outskirts of this city. But a year later, Li was out of a job. His wife, who worked in a textile mill, also "got her squid fried," Chinese slang for the pink slip.

In February, Zhang Delin, Chongqing's Communist Party secretary and one of the most powerful men in town, "adopted" the couple and their 12-year-old daughter. Zhang got him offers galore, many better-paying than his old job. But Li wasn't interested.

Li appealed to the party secretary to pull strings to get him his old job back at the financially ailing textile mill -- his "state-run home," as he put it.

"I'm not used to this new world, I don't trust it," Li said as he stood next to an idle workshop littered with scrap metal and swirling with coal dust. "This factory has more than 60 years of history. My parents and other relatives all worked here. I've got feelings for this place."