Certain Measures of Capitalism

By Marguerite Johnson

To pep up its economy, Peking offers incentives and competition

Liu Ya, 22, an unemployed salesclerk in Peking, nervously clutched her handbag as the crowded, dingy train lurched through the countryside. The bag contained more than 2,000 yuan (about $1,200), which she had borrowed from friends and relatives. Liu's destination: Canton, 1,400 miles and 36 hours away, China's gateway to Hong Kong and now a bustling center of free enterprise. Upon her arrival, she rushed from one street vendor to another, buying up an assortment of modern-style dresses, blue jeans, sandals and high-heeled shoes. Twelve days later, Liu was back in Peking. Within a couple of days, she had sold her wares, reaping a hefty profit of 400 yuan ($235). It would have taken her one year as an apprentice worker to earn the same amount.

A few years ago, Liu's activities would have landed her in jail for profiteering. But that was before Mao Tse-tung's death in 1976. Under the economic reforms introduced by Communist Party Vice Chairman Deng Xiaoping, most efforts to turn a quick profit are being encouraged.

Since the beginning of this year, the pace of reform has quickened. Hardly a day goes by that newspapers do not publish photographs of happy peasants clutching fistfuls of cash from increased-productivity bonuses. In Peking, store clerks, who used to be slow and often rude, besiege shoppers with advice. The reason: many have signed contracts linking wages to sales. Says the English-language China Daily: "Everybody in the country, except the lazy, supports the application of the principle, 'He who works more, earns more.' "

The key to the new economic formula is the "responsibility system" approved last September by the congress of the Communist Party, which meets periodically to decide government policy. Many of the old Maoist economic shibboleths, including the idea that incentives should not be used to promote productivity, have been cast aside. Instead, in keeping with Deng's dictum that "a cat, whether black or white, is a good one as long as it catches mice," the government has turned to such capitalistic devices as bonuses, commissions and competition to rejuvenate China's sluggish economy.

In the countryside, farmers now sign contracts with a commune unit for a fixed quantity of produce to be sold to the state at the official price. Anything over the agreed-upon volume may be sold privately on the free market, and the farmer keeps the profit. Says a Western diplomat in Peking: "To all intents and purposes, collectivization is being abandoned."

The responsibility system has spread to nearly every sector of society, including industry, culture and the arts, public health and the military. Peking's Capital Iron and Steel Complex now gives bonuses to its 70,000 workers when they meet specific requirements. By 1985, according to the government, 72,000 hotels, restaurants, bathhouses and barbershops will switch to the new system. The businesses will pay taxes to the government. Anything earned above the taxes will be shared among employees or reinvested.

Taking advantage of the turn toward free enterprise, 268 doctors and dentists in Peking have opened private practices. Clearly, the changes will make life more difficult for some people. The government has cut the Peking opera troupe's $400,000 annual subsidy, for example, forcing it to make up the difference with bigger box-office receipts or by reducing expenses. As Peking progressively abandons the "iron rice bowl" system (everyone is entitled to basic staples like rice), the Chinese have had to deal with the hardship of unemployment.

The changes generally appear to be popular and effective. Farm output has increased by one-third in just five years, and officials claim that rural productivity has risen 50% in some places. But sudden wealth can bring problems. In Hubei province, a peasant who had earned $54,000 from a fresh-water fish farm was harassed by his neighbors, who stole four of his pigs, part of the cash and 50 tons of construction materials. Admonished the People's Daily: "Rich peasants should be advised to keep their money in banks rather than in their houses."

The economic reforms have run into ideological opposition, with some orthodox Communist cadres questioning whether they can properly be called socialist. Officials thwarted a group of peasants who wanted to start a transport business by calling them capitalists and confiscating their vehicles. But publicity in the national press forced the officials to return the vehicles. The government, similarly, ordered a Shanghai rubber-research institute to reinstate an engineer who had been demoted for helping a small factory improve its miniature rubber bearings during his off-hours. Wang Ying, an independent fruit vendor in Peking, found herself on the front pages of the newspapers when an outraged policeman confiscated her vendor's license. In the fracas, her mother suffered spinal injuries. Officials apologized to Wang and compensated her for her losses, including her mother's medical expenses.

The happy outcome in Wang's case was meant to reassure China's burgeoning ranks of entrepreneurs that a certain measure of capitalism is acceptable. But since many Chinese have suffered in the past because of unpredictable flip-flops in party policy, Deng Xiaoping has yet to convince everyone that this time the reforms are more than ephemeral. --By Marguerite Johnson. Reported by David Aikman and Jimi Florcruz/Peking

With reporting by DAVID AIKMAN, Jimi Florcruz/Peking This file is automatically generated by a robot program, so viewer discretion is required.