Li Guisheng's electric motors for water pumps sometimes don't work.

Last year his customers had to take them anyway, this being communist China with a planned economy. But this year the Chinese are testing the potent ingredients of capitalist-style competition, and so Li's state-owned workshop is in trouble.

"We have little fans in each motor for cooling, but they are made of plastic and sometimes don't work in high temperatures. Our clients want aluminum fans, but we don't have any. What do we do?" asked Li, the 56-year-old shop director who remembers long ago losing his job when his factory closed down in the days before the communist takeover.

"Last year the clients had no choice, but now they say they will buy elsewhere."

It is a sample of the pain suffered by a Chinese economy trying to embrace the concept of a limited free market, and the bewilderment and worry of men like Li who must make it work. Last year, Li's factory, the Peking Electric Motor Factory, met its quota of 700,000 kilowatts worth of motors and had no trouble selling them.Its one buyer was the government, which provided the motors to Chinese factories, turning a deaf ear to any complaints.

This year, the government will only buy half of last year's quota, and the factory must arrange to sell the rest directly to customers. It has only been able to scrape together 500,000 kilowatts in total orders, including the government's. Next year, the government says, it will not guarantee any purchases, and Li's factory will have to get all orders on its own.

"We live or die by quality," says a new slogan pasted up in the factory. "People want to buy from the Dalian Electric Motor Factory before they buy from us," Li admits. "They got the gold medal for quality while we only got the trusted products award, which is second place.

"We have decided not to make any aluminum fans, but try to buy them from another factory. In the meantime, my shop will work on another motor used for lathes, and reach our quota in that."

Li was yanked out of a poverty-stricken village south of here when he was 16 and sent to Changchun in the far northeast to work in a machinery factory in a then Japanese-occupied area. After World War II, the factory lost business and Li moved to Tianjin, and then Peking. In 1954, when the new communist government still allowed some competition, Li's small machine shop again went bankrupt but he found another job on his own, something that could not happen today with all personnel assigned by the state.

The current leaders, convinced of the failures of overweaning state control, look back on those days of the early 1950s with some nostalgia. Li also defends the uses of competition and praises the energy of older workers who remember those days.

Younger workers, however, have no such memories. Li said he had to discipline a young worker who was fiddling with co-workers' time cards as a joke, costing them their bonuses. "We use bonuses a lot now," Li said. Two other young workers lost their bonuses because they were careless and damaged an engine mounting.