China's Communist Party, repudiating policies that have governed the nation for the past 35 years, today unveiled a radical blueprint to restructure the economy, injecting capitalist measures to invigorate its rigid Marxist system and to speed modernization.
The changes are the boldest and most far-reaching yet undertaken by Deng Xiaoping, the pragmatic Chinese leader who has systematically transformed the nation's political and economic life in the post-Mao era.
His latest move dramatically shifts China away from the Soviet model of central planning and moves the country closer to the flexible economic approaches of Yugoslavia and Hungary.
The plan, adopted by the party's Central Committee after a week-long meeting in Peking, calls for partial dismantling of the state planning system, greater autonomy for business enterprises, heavier reliance on market forces to determine output, free-floating prices for certain goods, competition to break up government monopolies, higher wages for skilled workers and a larger role for private entrepreneurs.
In its 16,000-word report, the ruling body said that tight state controls stifle initiative, spawn waste and ignore market demand.
It called Maoist egalitarianism a "serious obstacle" to economic growth, emphasized the need to "emancipate our minds more" and urged the adoption of advanced management techniques, including those practiced by developed capitalist countries.
"Socialism does not mean pauperism, for it aims at the elimination of poverty," declared the Central Committee in its report. "We must, with firm determination and maximum tenacity, concentrate on economic development and modernize China's industry, agriculture, national defense and science and technology.
"This is the inevitable trend of history and the wish of the people."
Deng has called the reforms a "revolution" that will enliven China's urban sector as profoundly as his capitalist agricultural policy of 1978 spurred production in the countryside. Many of the urban economic reforms have been applied experimentally on a piecemeal basis since Deng assumed power late in 1978.
Earlier this month there were reports in Peking that long-postponed price reforms were likely to be considered at this Central Committee meeting.
The Central Committee called the current pricing system irrational, asserting that "prices of many products reflect neither their value nor the relation of supply to demand."
The changes are designed to break the government's stranglehold on China's economy, which has long been dictated by an annual state plan. The plan sets targets for production of every industry and sales of every retail outlet according to the planners' concept of public need, not actual demand. Prices of most necessities are kept artificially low, subsidized by the state at enormous cost -- over one-quarter of the annual national income.
Ignoring market signals, the system often results in shortages of commodities in great demand and huge stockpiles of unwanted goods.
As a remedy, the new Central Committee plan frees a large but undefined portion of the economy from state planning while retaining control over "major products that have a direct bearing on the national economy and the people's livelihood."
Calling price reform a key element of China's economic restructing, the report said the prices of some products will be allowed to fluctuate within prescribed limits while others will be free to float to the level that consumers are willing to pay. The aim, according to the plan, is to bring up prices to reflect the value of goods to consumers.
The document took pains, however, to assuage public fears of inflation, saying the reform "will never bring about a general and spiraling price rise." Enterprises were warned against random price rises to increase profits.
As prices reach their true value, wages of employes should be increased to represent their contribution to production, the report said. The pay system today often fails to distinguish between unskilled and skilled workers, in line with Maoist egalitarianism.
The plan calls for gradual but substantial pay increases for deserving workers, rewarding the diligent and distinguishing between mental and manual labor.
"Egalitarian thinking is utterly incompatable with scientific, Marxist views on socialism," said the ruling body. "Common prosperity cannot and will never mean absolute egalitarianism or that all members of society become better off simultaneously.
"Only when some individuals are allowed and encouraged to get better off first through diligent work will more and more people be prompted to take the road of prosperity."
As the economy diversifies, the report said, the role of private entrepreneurs who provide consumer services should expand, and they should be permitted to take over enterprises now run by the state.
Deng's ability to obtain Central Committee approval for the changes on a nationwide scale reflects his domination of China's political scene. It also demonstrates his confidence that he can weather the social impact of the short-term inflation and unemployment that are likely to result from some of the measures.
According to earlier reports, the state will continue to plan output of such products as steel, coal, oil, munitions, large machinery and synthetic fibers.
Production of most consumer goods, however, will be guided by nonbinding government recommendations or market forces, according to the plan.
The blueprint envisions greater autonomy for most factories, assigning them responsibility to plan their own production, find their own markets, set wages for employes and determine their own prices.
The enterprises are also to be held responsible for losses, which means that the government will no longer bail out the one of every five factories that loses money every year. Bankruptcies could result in an unemployment problem.