ACCESSION
NUMBER:354181
FILE ID:EPF505
DATE:07/22/94
TITLE:CIA: ECONOMIC 'SOFT LANDING' PROVES ELUSIVE FOR BEIJING (07/22/94)
TEXT:*94072205.EPF
*EPF505 07/22/94
CIA: ECONOMIC 'SOFT LANDING' PROVES ELUSIVE FOR BEIJING
(Article on annual CIA report on China economy) (450)
By Robert F. Holden
USIA Staff Writer
Washington -- China's efforts to cool its overheated economy have failed to
yield the "soft landing" of manageable growth levels Beijing wants so
badly, according to the most recent Central Intelligence Agency (CIA)
assessment of China's economy.
The report, which is prepared annually by the CIA for the Subcommittee on
Technology and National Security of the Joint Economic Committee, was
released July 22.
"Beijing's administrative measures to cool the economy have produced mixed
results," the report says. "China's investment boom eased somewhat in the
first half of 1994, for example, but inflation levels have remained
stubbornly high and have been accompanied by social strains."
According to the report, urban living costs in China increased by more than
23 percent in 1993, 10 percent higher than 1992. "Beijing continues to
face demands to provide new loans to help state enterprises pay workers and
to fund higher grain prices for farmers," the report says. "These
pressures threaten the regime's hopes of achieving a soft landing and could
set the stage for another round of retrenchment in China's boom-and-bust
cycle."
The report suggests that Beijing's failure to conclusively hit the brakes on
the economy has bolstered the demands of policymakers calling for changes
in China's reform strategy. "Whereas previous reforms frequently
stimulated growth by giving local authorities more autonomy, a new approach
1mplemented in early 1994 has attempted to recentralize some powers to help
Beijing modulate the boom-and-bust cycles as well as to enforce financial
discipline on the local authorities," the report says.
Establishing the economic institutions -- a strengthened central bank and a
sounder regulatory framework for its emerging financial markets -- needed
for Beijing to improve its ability to regulate the economy will be neither
easy nor fast, the report says. "Many local leaders, for example, appear
worried that Beijing will use enhanced powers gained from taxation and
other centralizing reforms to stifle local development efforts," it says.
"Local resistance will probably result in further slippage in Beijing's
reform timetable."
Sustained long-term growth in China will require further expansion of market
forces within the country, the report says. "Beijing's challenge is to
construct a sounder institutional and regulatory framework to support these
markets without stifling them," the report says.
If Beijing can combine a successful centralizing reform effort with a
renewed commitment to the role of markets in the economy, the report says,
the results could include "smoother economic development, less opportunity
for corruption, and improved ability by Beijing to transfer coastal
resources to boost hinterland areas, ultimately benefiting the entire
country."
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