China today made public a national economic policy using Western-style deficit financing and limited free enterprise and moved toward naming a new government leadership full of economic technocrats.
The revelations at the opening of the National People's Congress, China's parliament, underlined the post-Mao leadership's obsession with raising the living standards of millions of sometimes disgruntled peasants and workers.
Congress leaders disclosed a 1979 government deficit of $11.8 billion, with smaller deficits to follow this year and next to finance wage increases for city workers and higher farm crop prices to peasants.
The opening reports at the congress largely followed the policies of Communist Party Vice Chairman Deng Xiaoping, who is scheduled to install a close associate, Vice Premier Zhao Ziyang, as premier at this session and move several other colleagues to higher government posts. Zhao made a reputation as provincial leader of Sichuan for raising living standards and production by loosening government controls on factory and farm management.
In his report today on government budgets past and future, newly installed Finance Minister Wang Bingqian expressed discomfort at joining the legions of modern nations that live with deficits and heavy borrowing.
He listed a number of unexpected costs -- including $690 million paid to victims of political purges in the Mao era -- and said, "We should work to reduce the deficit and do away with it at last." The remark was greeted with applause, one of very few interruptions of the statistics-laden speech to the 3,255 delegates of the congress.
In an opening report on the national economic plan, new State Planning Minister Yao Yilin endorsed a series of experiments letting factory managers make their own decisions about production and keep some of the profits for new investment, which have been tried in Sichuan and elsewhere.
He indicated a desire to shift from products dictated in the state plan to products customers are actually buying and to develop local markets rather than selling everything to the state. His endorsement mentioned the need to remain under the state plan, however, reflecting the distrust many old-line planners in Peking still have for such methods.
The struggle between conventional planners favoring strong central control in Peking and revisionists like Zhao favoring more local decision-making may hamper severely the smooth transition envisioned by Deng, to a new generation of Chinese leaders.
Although Deng and several other veteran colleagues will retire as vice premiers during this session, they will retain their posts in the Communist Party Politburo, where important policy decisions are actually made in China. Hua Guofeng, not considered a member of Deng's group, is scheduled to hand his premier's post to Zhao, but will retain his party chairmanship as a potential rallying point for future opposition to Deng's preference for practical results over Marxist orthodoxy.
One sign of the struggle that has brought intense reaction from Chinese is the recent firing of the petroleum minister and the disciplining of a leading vice premier involved in the cover up of an offshore oil rig disaster last year. The decision to publicly fire the minister and award Vice Premier Kang Shi'en a first-class demerit "makes a lot of us feel there might be some hope" for breaking bureaucratic restraints on initiative and justice, one college professor said here.
Wang's budget report left in doubt the fate of recently suspended American-supported construction projects, including some involving Bethlehem Steel, the Fluor Corp. and the Bechtel Corp. Without mentioning any specific contracts, Wang said the government had to improve controls over rapidly growing imports of foreign equipment. Total imports and exports rose 28 percent in 1979, and 20.2 percent in the first half of 1980, compared to the same period in 1979, he said.
Wang gave a lengthy explanation for the sizable deficit in the 1979 budget. At last year's congress it had been predicted the budget would be balanced. Final 1979 expenditures were $87.8 billion and revenues $76.1 billion. He predicted a $5.5 billion deficit in this year and a $3.4 billion deficit in 1981.
His report revealed a government straining to bring living standards up after the political turmoil and resulting drop in support for the Communist Party during the Mao years. Peking went $1.4 billion over budget to raise farm prices and reduce taxes for peasants, $1.7 billion over budget to raise workers salaries and create new jobs for millions of unemployed youth and $1.4 billion over budget to support new projects in the countryside, many of them designed to raise peasant family income.
As a result, Wang said, peasant income rose 12.7 percent and worker income 9 percent in 1979.
Wang said spending on national defense went about 10 percent over the budgeted amount to a total of $15.4 billion. Foreign experts say this figure only reflects a portion of Chinese military spending, but acknowledge that spending on arms does lag while Peking concentrates on raising living standards and reviving the civilian economy.
Despite its size, the deficit did not cause serious inflation because of a correspondingly sharp rise in savings by Chinese. Wang said savings rose by $6.7 billion in 1979. The government borrowed about that amount from the Bank of China to pay part of the deficit and drew the rest from a surplus fund.
Last year's congress was the first time in two decades that the Chinese revealed details of their budget, so it is difficult to tell how large the surplus in past years has been.
Yao's report on the economic plan revealed relatively modest goals compared to the overblown estimates of the Mao years. Agricultural production in 1980 has been affected by severe droughts, which have cut the summer crop 10 percent. Agricultural growth in 1981 is estimated at only 4 percent, keeping slightly ahead of China's population growth, now listed at about 1 percent per year. Industry is expected to increase 6 percent in 1981.
The report showed that energy production would be low, with no increase in the 106 million-ton annual petroleum production figure. The Chinese are rushing to find new offshore and onshore wells to make up for declining production in some big oil fields.
They also do not anticipate any increase in the enrollment of new college students, now a tiny 270,000 a year.