Premier Zhao Ziyang said in a speech published yesterday in Peking that China's rigid wage scales for government-employed workers were out of date and would be changed in the near future, signaling that the country's leader are on the verge of implementing the most difficult and complex of all the changes they have undertaken.
Zhao said the wage scales, a pillar of the economic system of the Mao era, would be "quickly smashed in the future." Apparently it is to be replaced by a more flexible system placing greater emphasis on performance. China's leaders coupled his remarks with promises that more consumer goods such as refrigerators, washing machines and television sets would be available for the common man.
Even as they pressed forward with their plans for urban economic change, the Chinese leaders also disclosed a major move on the agricultural front: Zhao, according to the official New China News Agency, told a New Year's Eve gathering that China is ending the state monopoly in the purchase of major farm products as a second major step in rural economic reform.
Zhao told his audience that the move was a reform "we have hoped for but not dared to do for many years."
Most specialists agree that the impending shifts of China's urban wage and price system will prove to be by far the most difficult the Chinese leaders have yet undertaken during the past several years. If they are not implemented in a carefully coordinated way, the specialists say, they could bring China a bout of hoarding and inflation such as it has not seen in many years.
In his New Year's Eve remarks, some of which were printed yesterday on the front page of the party newspaper, the People's Daily, Zhao sought to counter anxieties that have been raised concerning the possible impact of relaxing prices, which have been artificially set for more than three decades. Zhao declared that rumors of price increases for food and other items were "street gossip."
Also yesterday, the Communist Party's theoretical journal, Red Flag, attempted to reassure its readers by asserting that growing consumerism in China was not incompatible with socialism. According to a Reuter news agency report from Peking, Red Flag stated that while some people believed that consumerism was an aspect of capitalism alone, this was wrong.
Zhao announced pay increases for state employes in several sectors, including education, science, technology and public health. But at the same time, he indicated that the heavy subsidies upon which most urban citizens depend in order to be able to obtain food, clothing and housing would be cut.
Zhao contended that the decision to scrap the state monopoly on major crop purchases would not cause price rises. He said it would mean "a more flexible policy" toward agriculture and would extend the role of the market under the guidance of the state.
The details of this latest rural shift were not yet known but American specialists considered the announcement to be significant.
"This system of mandatory purchases was the last major legacy of state planning and intervention in agriculture," said Nicholas Lardy, a leading specialist on the Chinese economy at the University of Washington in Seattle.
Lardy pointed out that when chairman Mao Tse-tung and his advisers introduced the system of mandatory purchases of major farm products in 1953, it vastly accelerated government intervention in the agricultural sector.
"Mandatory purchases have been an important feature of the institutional landscape of China for the last 30 years," said Lardy, adding that one factor pushing the Chinese toward lifting the purchasing monopoly was China's greatly increased grain production. Largely as a result of new incentives introduced under the reform program, China's farmers have produced as much grain during the past five years as they did in the previous 20.
Since 1978, the Chinese leadership under Deng Xiaoping has modified, and some say rejected, Mao's vision of a highly collectivized state guided by Soviet-style central planners.
Deng's aim has been to introduce a more flexible, mixed economy. His economists have pressed forward on two fronts, first rural and then urban. But until recently at least, the urban economic changes were being applied only on a piecemeal, experimental basis.
On Oct. 20, the Communist Party's Central Committee approved a major economic plan that would restructure the economy for the country's 200 million city dwellers. The ambitious plan could take several years to be fully implemented.
The urban changes would give new incentives to workers and greater rewards to productive enterprises while loosening price controls.
The rural changes have spread so rapidly with such apparent success that it is hard to imagine that they could be easily reversed. But it is widely agreed that the proposed urban changes will confront a greater series of difficulties.
Thousands of bureaucrats and managers are likely to feel threatened by the changes. Even at the highest levels of the government, there are said to be doubters.
Chen Yun, the senior Central Committee member responsible for the economy, was reported at one point to have said that the elimination of price subsidies in the cities could create chaos.