China's ruling Communist Party has been conducting a high-level reexamination of the scope and pace of the nation's economic change because of disappointing results and negative side effects in certain key sectors, according to western diplomats.
The party chiefs have focused in particular on how to bring corruption and other abuses under stricter control.
The diplomats are divided as to what some of the implications might be. But based on a close reading of the Chinese press and talks with Chinese officials, these envoys tend to agree that:
While the changes could be slowed down in some areas, it is inconceivable at this stage that they would be reversed.
Divisions persist among the Chinese leaders as to how far and how fast to proceed, but the leaders will try to reach a consensus before a special party conference convenes in September.
The most reform-minded leaders suffered what one diplomatic described as a "severe jolt" toward the end of last year when bank lending ran out of control and foreign exchange reserves dropped.
Decentralization of authority brought by the changes has increased rural prosperity. But some provincial officials and Communist Party cadres have taken advantage of that same decentralization to reap personal and illicit profits.
Officials have singled out for criticism the Shenzhen Special Economic Zone adjacent to Hong Kong, which was once cited as a model for development by Deng Xiaoping, the country's principal leader.
It had been hoped that Shenzhen would attract substantial amounts of foreign investment and technology while generating major export earnings. Instead, Shenzhen's main contribution has been in service industries.
Investment has been disappointing, and the special zone has been a drain on the government's foreign exchange reserves. Only one-third of the zone's production is exported, according to a high-ranking official quoted by the Far Eastern Economic Review.
Moreover, on two occasions in recent days, Deng, whose pragmatic approach has been the driving force behind the current reforms, has expressed caution over the reforms. Some diplomats suggest that this has amounted to a "preemptive strike" on Deng's part, designed to make the problems in the reforms his own issue and to head off some of his more hard-line opponents.
Last Saturday, Deng told an Algerian delegation that the Shenzhen economic zone was "an experiment." "We have yet to see whether this course is right or not," Deng was quoted by the official Chinese press as saying. "We hope it will succeed, but if it fails then we can draw lessons from it."
The comment stood in sharp contrast to a statement made by Deng following a visit to Shenzhen in January of last year, when he said: "The development and experience of Shenzhen have proved the correctness of the policy of establishing special economic zones."
This week, the New China News Agency quoted Deng as saying, "Although China has been carrying out reform policies for five years, we can only call it an experiment."
Shenzhen is the largest of four special investment zones established in 1979. They offer tax incentives and allow for western-style management. Foreigners are encouraged to invest in and run factories, enabling China to absorb foreign technology and business methods as well as boosting its exports.
In 1984, the Chinese government extended the concept and announced the opening of 14 coastal cities and Hainan Island to foreign investment, with many of the same incentives.
But Deng's cautious remarks on Shenzhen and other areas suggested that a readjustment or shift in emphasis might be in the making, diplomats said.
"If I were the mayor of Shenzhen, I'd be a little nervous right now," one diplomat said.
A report this week in the Hong Kong newspaper the South China Morning Post quoted a Shenzhen official as saying that in 1985, because of stricter controls on foreign currency spending, the budget for "infrastructural development" already had been cut 33 percent.