Some of China's economic problems have become so severe that the government recently announced plans to step back from its experiment and reassert a large measure of central planning.
Instead of giving greater play to market forces in the hope of increasing industrial output, officials have decided to tighten control on spending and reestablish limits on industrial managers. Although the free-market spirit continues to flourish at the consumer level, the Communist press now talks about "necessary administrative interference" in the major industrial areas.
Since embarking on an economic readjustment program two years ago, China has put much of the responsibility for economic planning in the hands of individual enterprises as an incentive to increase productivity.
But the early phases of readjustment uncovered more serious difficulties than anticipated, including a $30 billion budgetary deficit that is expected to run over the next three years.
Slowly recovering from the ravages of the decade-long Cultural Revolution, China's economy also was found to be suffering from a shortage of coal and oil and what the press calls a "disastrous" harvest this year. In addition, some factories had misused their new independence by increasing prices too much or by shifting their production to goods that already were being manufactured by competing plants.
One effect of the factory price increases, along with those allowed farmers last year, has been that China's already high inflation rate has been exacerbated. This is a problem that officials at first refused to acknowledge.
Faced with public and press criticism that inflation was wiping out the benefit of recent wage increases, the government recently decreed fines or cancellation of bonuses for factories, farms or stores that raise prices.
In a sober reappraisal of the economy, the Communist Party newspaper, People's Daily, this month urged planners to overcome "the wrong practice of setting high targets without taking our actual capability into account." Acknowledging that readjustment would take longer than the three years originally planned, the front-page editorial signaled a retreat from the bold ambitions of thoroughly resructuring the Chinese economy. Instead, the newspaper called for only modest reforms and a reassertion of central planning that, while admittedly outdated, is familiar to the top leadership and bureaucrats who are trying to put the economy back on its feet.
This latest policy shift means further cutbacks in the huge capital construction projects China had planned to import from abroad. Criticized as overly ambitious, ill-conceived and poorly coordinated, the costly program has been sharply cut back in favor of smaller light-industry projects.
Joint ventures with American, Japanese and Western European companies that once promised to bring advanced technology to China also are falling quickly by the wayside. Many projects that seemed profitable when the Chinese opened their doors for trade and investment a couple years ago have been forgotten as Chinese bureaucrats hassle over taxes, management rights and wage rates.