BEIJING, JAN. 12 -- China today published a draft law aimed at freeing factory managers from Communist Party interference and making them fully responsible for profits and losses.
The law would clear the way for a controversial bankruptcy measure that would allow the government to close badly managed factories that consistently lose money.
The proposed legislation, which has been approved in principle by the Politburo and is expected to be enacted in March, is said to be China's key reform for this year and is considered vital to efforts by China's political leader Deng Xiaoping to decentralize the country's industries.
The draft law has been nine years in the making, Chinese sources said.
Leaders were divided previously in their opinions on the legislation, and it was withdrawn last year from consideration by the National People's Congress, China's legislature.
While the Soviet Union talks about carrying out reforms similar to those introduced here, China's reforms are much more advanced, particularly in agriculture. In industry, the Chinese have been working longer and are more willing than the Soviets to experiment with leasing, private enterprise, and joint ventures with foreign firms. But they also have encountered many problems.
Both the Chinese and Soviets are introducing laws aimed at giving factory managers more decision-making power, and both have encountered great resistance to industrial reforms.
China's new draft law on state-owned industrial enterprises says all factories are to adopt a system in which the factory manager, and not the factory's Communist Party secretary, assumes full responsibility. Party organizations are to support the manager, it says.
Many factory managers have held economic power only in theory. In practice, they have been frustrated by party officials who interfere in production, marketing and personnel decisions.
According to official Chinese press reports, the long-awaited draft was published today to stimulate public discussion. But Politburo approval in principle several days ago makes it certain that the congress will approve its essentials in its next session in March.
A trial bankruptcy law, however, has encountered resistance. It was approved in December 1986, but opposition from some officials caused the congress to postpone consideration of a full-fledged bankruptcy law.
In the past, state-run factories rarely faced bankruptcy because they could count on government subsidies and tax exemptions.
Some officials who oppose the law have argued that bankruptcy is a capitalistic procedure that removes the protection of the state and puts factories and workers at the mercy of the market.
Critics say the bankruptcy law, which has been postponed three times, will result in unemployment. Unemployment, they say, is unacceptable in a communist country.
Chao Siyuan, head of the drafting committee for the law, explained in an interview last year that most Chinese see bankruptcy as a "monster" threatening their security under the economic system, which is supposed to guarantee them employment.
The new draft law dealing with factory management should have an even more profound impact than the bankruptcy law. It will affect tens of thousands of factories and millions of workers throughout the country.
The rural reforms introduced by Deng in the late 1970s won support because they raised production and living standards in much of the countryside. But the more recently introduced industrial reforms have encountered strong resistance from bureaucrats and party cadres who fear a loss of power and privileges.
Some factory workers, fearing unemployment and inflation, have also opposed the industrial reforms.
The reform of China's heavily subsidized price system was once considered the key to other reforms. But Chinese economists began arguing last year that many factories were so inefficient and poorly managed that they failed to respond to price decontrols as expected.
More than 20 percent of state-owned industries are said to be losing money.
The party decided to emphasize factory reform. Only by improving their management and increasing their decision-making power could factories be made responsive to price reforms.
Price reforms are still considered essential to the success of other reforms, but they have been postponed.