Chen Guigen, an unemployed high school graduate in Shanghai, took China's new economic managers at their word recently by opening up a little restaurant in his home. With the help of his family, he offered hospitality and slightly lower prices and soon had big profits.
To the several Peking economists and practical politicians hoping to free China's economy from a Stalinist straitjacket, this exercise in free enterprise with a sign of hope. Chen's little restaurant seemed to exemplify the policies announced at the latest National People's Congress -- that businesses henceforth would have to live or die by their own profits, for Government subsidies would tail off and local initiative would increase.
But plucky young Chen, as the People's daily has revealed, began to have problems in his Shanghai venture, a sign of the pitfalls ahead for Peking's economic innovators, including the new premier, Zhao Ziyang.
Chen found the housing bureau wanted to raise his rent, now that he had a commercial venture. Other government departments wanted to raise his taxes and challenge his right to sell anything but noodles and dumplings. His new riches, said one complaint, were a slap at "the superiority of the socialist system."
A series of Congress speeches on economic reform, capped by a solid endorsement from outgoing premier Hua Guofeng, a perhaps reluctant reformer has convinced foreign analysts here that the Chinese government really intends to move away from rigid central management of its economy. But, said one economic expert, "they cannot do this until they reform their tax and price system," and the Congress offered scant advice on how to do that.
Like Chen's restaurant, Peking's top planner -- even Premier Zhao -- are at the mercy of hundreds of thousands of middle-level managers and bureau-crats who have no experience with decentralization and who have in the past suffered greatly when they too eargely supported short-lived policy shifts.
Under the new system outlined by state planning commission head Yao Yiling and Finance Minister Wang Bingqian, a factory would no longer turn over its profits to the central government. It could keep some or all of them to make improvements and buy equipment necessary to manufacture more and better products.
Under the present system, if a factory wants to buy new equipment, its manager must persuade the central ministry to budget the money in the state plan.
Once they get the funds, however, "there is little incentive for the factory to use them wisely," one analyst said. "They don't pay anything from their own revenues for the equipment" and even if they use the machinery officiently to raise their profits, "all their profits are remitted to the state anyway." Even if their profits do not rise, they can still ask for more equipment the next year.
Under the new system, factories would also be expected to borrow directly from local banks to finance new equipment purchases, a reform that suggests enormous future bottlenecks to industrial growth, one analyst said. The banking system is not well enough developed to handle the volume," he said. "The local banks do not have guidlines, they do not have decision-making authority."
But without such authority, local banks will pass loan applications up to Peking. Just the kind of centralization the new government wants to dismantle.
Forcing factories to rely on their own profits for expansion raises questions about the prices they could charge for the goods. Prices for coal, for instance, have not risen significantly since the mid-1960s because of government controls.
As a result, the coal industry cannot now easily survive without government subsidies. Would the government loosen its controls on prices, letting mines sell to steel mills for whatever they could get?
"I certainly don't see the Chinese waking up next Monday and saying, "okay, we're going to let all prices fluctuate,'" said one analyst.
One way for the government to strike a compromise between control and local autonomy would be through a complicated tax system, taking a big bit from healthy factories and smaller bites from other, but so far there has been little elaboration of Peking's new tax schemes.
Instead, the Chinese are indulging themselves in dreams of far-ranging changes without giving much thought to the consequences. A professor at Ginghua University, Quian Weichang, even suggested to the People's Daily that the government abolish the system that forces a worker to stay at his original work unit throughout his lifetime.
The system now rivals the family as the basis of modern Chinese society and politics, and its end would be tantamount to second revolution.
Analysts here say the government appears to be moving slowly and carefully on all suggested reforms, despite the rhetoric of the recent Congress.
Although not a philosophy that lends its self to rapid change, the idea now seems to be to try a little of anything that works. As the people's Daily said about Chen's restaurant, "It is needed and welcomed by the masses."