JPRS-CAR-93-043

28 June 1993

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JPRS-CAR-93-043 CONTENTS 28 June 1993

INTERNATIONAL

UNITED STATES

Article Views Changes in U.S. Global Strategy [XIANDAIGUOJIGUANXI20 Mar]

ECONOMIC

NATIONAL AFFAIRS, POLICY

Improve Price System To Meet GATT Requirements [JIAGE YUEKAN 15 Mar] 4

PROVINCIAL

Profile of Qinghai Province Private Economy [QINGHAIRIBAO 19 Apr] 9

FINANCE, BANKING

Suggestions for Managing Foreign Banks [GUOJI fANGBAO ^^B^^A^r]ZZZZZ ! 5

Potential Problems in Distorted Fmancial Markets JINGJI CANKAO BAU UAprj

Tax Regulatory Function in Market Economy tj^GJl

MBj^^l^T'XopW26^i .••• 19 Bright Future Forecast for Insurance Industry [Hong Kong CHING-CHI TAO-FAU JO Aprj

POPULATION

Use of B Ultrasound Prohibited [Hong Kong ^ 0 ^^ 22

'Chengde Population Control Model' Praised ^

H

^GGUO^NKOUBA0 15Marj

Major Obstacles to Ningxia's Family Planning Work [NINGXIA RIBAO 24 Apr]

FOREIGN TRADE, INVESTMENT

Article Analyzes Increasing Foreign Direct Investment [GUOJI MAOYI15 Feb] 29

ECONOMIC ZONES

Li Youwei on Shenzhen Land Abuse, Corruption [SHENZHEN TEQU BAO 23 Apr] 33

AGRICULTURE

Sichuan Aims To Stabilize Cotton Production ^^^NGJm^ABAOTAMZZZZZ 37

SÄTffiSÄ^ 33

7

8 i-coTÄ^^ s Customs To Facilitate Agricultural Imports, Exports [NONGMIN RIBAO 23 Apr]

Nanjing Customs Department Improves Agricultural Trade 39

[ZHONGGUO NONGJIHUA BAO 17 Apr] mMrnRWA0 23Ami ZZZ. 40

State Farms Corporation Profits Show Large Increa^^S^gff fJ 40

Peasants Worry About Entering Ma/

kejQE

Q

c

r^ "tZZZZZ Z.. 42 Fairly High Grain Prices Foreseen for 1993 [JINGJI RIBAO w May]

Summer Grain Crop Prospects Good [JINGJI RIBAO 2 May]
JPRS-CAR-93-043

28 June 1993

SOCIAL

Article Views Controversial Writer Xu Gang 44

Xu Gang's Return to China [Hong Kong MINGPAo'YÜE-klFÄprj 44

Review of'Dream in Paris' [Hong Kong KAIFANG 18 Apr] 4<

Further on'Dream in Paris' [Hong Kong KAIFANG 18 Apr] . A

'Dream in Paris,'Part I [Hong Kong KAIFANG 18 Apr] .. 47
JPRS-CAR-93-043

28 June 1993 INTERNATIONAL

UNITED STATES

Article Views Changes in U.S. Global Strategy

93CM0264A Beijing XIANDAIGUOJIGUANXI

[CONTEMPORARYINTERNATIONAL RELATIONS]

in Chinese No 41, 20 Mar 93 pp 31-35

[Article by Huang Hong (7808 5725): "Inherent Contradictions in the Readjustment ofU.S. Global Strategy and

Elements of a Restraining Effect on Such"]

[Excerpt] [Passage omitted] 3. Conflict between efforts

to maintain U.S. world leadership and the internal "new

isolationist" tendencies.

After the Gulf war, a great controversy has arisen inside

the United States, as to whether the United States should

revert to isolationism or continue its pursuit of a policy

ofglobal involvement. William Hyland, editor in chiefof

FOREIGN AFFAIRS, a highly influential publication

which in the past had eagerly advocated the "Atlantic

doctrine" and isolationism, was first in pointing out in

his article in THE NEW YORK TIMES that victory in

the Cold War will have the United States in the coming

ten years shift its thinking, attention, and financial

support away from foreign countries and to the domestic

scene ofthe United States itself. He frankly stated: "The

enemy is no more at our door, but quite possibly already

inside the house." Peter Peterson, chairman of the U.S.

Foreign Relations Committee, also mentioned in a

report, which had been endorsed by many foreign affairs

experts from both parties, that the domestic problems of

the United States "are exercising a direct effect that is

more powerful than any threat from a foreign source."

He suggested that the United States give priority to its

domestic agenda. In this discussion, Patrick Buchanan,

director ofPresident Reagan's Foreign Relations Liaison

Office and now a TV commentator, even more systematically advocated this new isolationism and became its

leading representative. He believed: "Our Cold War is

over, so let it now be the time for America to come

home"; his call was for "America first" in all affairs.

These circumstances clearly reveal that the "new isolationism," i.e. the primary concern of the American

people for domestic affairs, is outweighing their concern

for international affairs, is enjoying widest popularity,

and is very deeply founded.

Can Clinton's assumption of the presidency mean that

the United States might possibly give up its policy of

global involvement? Exactly the opposite is true. Clinton

assailed the foreign policy of the Bush administration

exactly for its lack of sufficient involvement. In several

of his speeches on foreign policy and in the policy

program of the Democratic Party during the election

campaign, Clinton's foreign policy idea has been systematically expounded, namely the idea of the so-called

"new strategy of U.S. involvement." His diplomatic

advisers speak of Clinton as a "staunch internationalist," to indicate thatthey will have the United States play

a leadership role, as fitting for the "post-cold war"

period, that they will intensify propagation of U.S.

ideologies, and that they will promote "democracy."

Compared with the conduct of diplomacy under the

Bush administration, Clinton's diplomatic strategy of

"new interventionism" is showing the following new

characteristics:

First, he believes it to be necessary to renew the nation's

security concept. He believes that at this juncture of

historical changes, Bush's proposals for a mere reduction

of the scope of military strength from the way it had

existed during the cold war, cannot meet the demands of

the overall situation. There is, he believes, a need to

readjust the very structure of U.S. military strength, and

believes, furthermore, that the core of national strength

must be regaining U.S. leadership in the international

economy. At the same time, promotion of "democracy,"

protection ofthe global environment, military affairs, and

the economy must altogether be made to constitute the

four large aspects of national security. He publicly proclaimed that the United States is bound to concern itself

with the ways in which other peoples administer their

countries, thus making his shade of ideological interference more poignant than that ofthe Bush administration.

Second, he emphasized that he will conduct "protectionist diplomacy," suggesting that he will intervene as early

as possible to resolve any problem in its infancy, and he

asserted that he would use military force in a decisive

manner, if necessary to protect U.S. interests. Of course,

the "new interventionism" advocated by Clinton is in

one point different from the old interventionism, namely

in that Clinton proposes to achieve his interventionist

objectives effectively and much more often through the

United Nations. For this purpose he proposed the establishment of a UN rapid deployment force.

Third, to regain U.S. leadership in the world economy,

he makes the economy part of his diplomatic policy and

integrates international economic interference with

political interference, and will thus actively participate

in the expansion of the international trade system. The

diplomatic strategy of Clinton's new interventionism

evidently runs counter to the "new isolationist" tendencies which are rapidly on the rise throughout the United

States. If it is said that the rise of this ideological trend

caused Bush to lose the glory that he would have

deserved for victories in the cold war and in the Gulf

war, the victor in fact becoming a loser, then the "new

strategy of U.S. involvement" advocated by Clinton will

certainly also come up against strong forces ofresistance.

There will, of necessity, be clashes with the domestic

"new isolationist" trend, and there will also of necessity

be more and more resistance.

4. The continuously intensifying contradiction between

U.S. efforts to export American-style democracy and the

serious socioeconomic problems facing the United States

internally, and also the resistance against foreign interference that will be felt in the developing countries.
INTERNATIONAL JPRS-CAR-93-043

28 June 1993

During its election campaign, the Democratic Party again

and again proclaimed that it will export to the whole world

the American value concepts and also export a "democracy" that conforms with the ideals and interests of the

United States. In testimony on foreign policy before Congress, Christopher further clarified that "promoting the

spread of democracy abroad and market expansion" will

be the "pillars" in the formation of foreign policy. He

declared that "our new diplomacy will encourage the

global democratic revolution which is in the process of

reshaping our world," and also that "the support of democracy and human rights abroad can and must be central

strategic principle in the improvement of our own security." International opinion has it that the foreign policy

under the rule of the Democratic Party will be more

expansionist in matters of ideology, and that the United

States will pursue power politics with even greater zeal

under the banner of promoting democracy and protecting

human rights. Among the team in charge offoreign affairs

in the new Clinton government, there are not only some

who have participated in and supported the human rights

foreign policy of the Carter administration, but we also

find enlisted certain personalities of the so-called "new

conservatism faction" of the Republican Party, who are

zealous proponents of human rights and who had been

critical of the Bush administration. Judging by the many

speeches and statements by Clinton and his team, the new

U.S. Government will intensify its human rights interventions in the following ways:

First, it will use the policy ofthe carrot and the big stick to

entice and pressure others to fall in line with its wishes,

using such economic levers as trade, economic and security aid, and the reduction or remission of debts. Clinton

has already made it clear that he will use such foreign aid

that the United States had formerly extended to Africa, the

Caribbean Islands, Latin America, and other developing

countries to support "democratic government systems."

Second, he wants to organize a "Democracy Corps,"

similar to the "Peace Corps," recruiting volunteers to go

abroad to propagate American-style democracy and

Western value concepts. Christopher furthermore "supports the establishment of a Free Asia broadcasting

station," to exert influence in the countries of Asia, and

he declared, "our policy will be to induce a broad,

peaceful transformation in China from the communist to

a democratic system by the method of encouraging

forces for economic and political freedom to emerge in

that great and extremely important country."

Third, he wants to energetically assist the newly formed

"democratic government systems" in the territories of

the former Soviet Union and in Eastern Europe, in order

to consolidate the victory won by the United States in

the cold war. Clinton considers assistance to the countries of the former Soviet Union in their efforts to

establish "free political and economic mechanisms" as

one ofthe most serious challenges that the United States

faces with respect to its own security. The Clinton

administration has also made some specific arrangements and arrived at some ideas as to how to support the

European Security Organization, intervene in the

fighting in Bosnia-Herzegovina, and to intensity human

rights interferences in Asia, Africa, Latin America, and

in the Middle East, in order to establish an international

orderthat would conform to the very own interests ofthe

United States.

There is no shortage of criticism in the United States and

abroad ofClinton's policy of human rights interferences.

It is generally believed that Clinton's speeches during the

election campaign and his speeches after coming to

power are too full of "party struggle" elements to win

over the electorate. There is also the fact that the huge

economic difficulties and social problems the United

States is facing will naturally have a restraining effect,

forcing the United States to give consideration to the

possibility that its own policy of human rights interferences will, as a matter of course, meet with general

resistance in the developing countries, and may quite

possibly have a negative effect on the own interests ofthe

United States. Indonesia's President Suharto said on 26

January at the Second Conference on Human Rights

Problems in the Asia-Pacific Region: "The developed

countries must not use economic aid as a means of

pressuring other countries to improve their human rights

conditions." He also pointed out: "At a time when we

still can see violations of human rights in the developed

countries, the above-mentioned pressures are really

somewhat of a satire." The repeated racial conflicts

continuously raises the crime rate in the United States,

while the polarization ofthe American people is growing

more serious by the day; unemployment refuses to go

down, domestic social problems are accumulating

without any remedy in sight, and the dark cloud of the

Los Angeles riots still hovers over the minds of all the

peoples of the world; it has not yet dispersed. For the

United States to assume the role of the world's

policeman is therefore really not a picture that will be

generally appreciated; it must, quite naturally, evoke

ridicule and resentment all over the world. As to the

relations between China and the United States, pressures

in the human rights issue will disrupt the normal development of economic relations between the two countries. The total amount of bilateral trade between China

and the United States is now as high as $30 billion, and

U.S. entrepreneurs have invested as much as $5.5 billion

in China in over 2,300 projects. Especially because ofthe

booming Chinese economy and its highest economic

growth rate in the world, U.S. entrepreneurs give more

and more attention to the large market of China. Some

famous international strategy experts have pointed out

m their writings that making an enemy of China by

pressuring it on questions of human rights is not in the

long-term interests ofthe United States. A research team

set up jointly by the U.S. Atlantic Committee and the

U.S.-China Relations Committee recently submitted a

report on U.S. policy toward China to the new Clinton

government, suggesting that they not impose conditions

on the trade status and that they oppose a "Free Asia
JPRS-CAR-93-043

28 June 1993

INTERNATIONAL

radio station," which would treat China as an enemy.

Chairpersons of this study team have been the former

deputy secretary of state John Whitehead and former

president of the World Bank Barber B Conabe, and

among the 74 members participating in the team there is

former secretary of state Edmund Muskey and former

secretary of defense Harold Brown, also former ambassador to China Leonard Woodcock and former member

of the House of Representatives, John Buchanan. It

shows that there are many voices among Americans in

and outside of the government in favor of developing

U S -China relations and opposing any retrogression to

occur in the relationship of these two countries These

voices are bound to have an impact on the way Clinton

will conduct his diplomatic policy.

5 In the overall view, the most fundamental contradiction is that the strength of the United States, which has

considerably declined, is inadequate for the objectives

which the United States intends to achieve.

There are indeed some other contradictions which may

be mentioned as inherent in the readjustment ot the

global strategy of the United States, ^".^«J^u

of the U.S. military strength while the United States is

assuming military responsibilities throughout the world,

contradictions between U.S. leadership in international

environmental protection while they are being condemned by world opinion for their reckless waste of the

world's natural resources and for contaminating the

ecological environment, etc. However, in the overall

view the most fundamental of these contradictions is

really showing up in the relatively weakened position ot

strength ofthe United States and its reluctance to give us

"world leadership," thus constituting a contradiction oi

inadequate strength and intended objectives. At the end

of the 1940's and in the early 1950's, the share of the

United States in total world production was as high as

somewhat over 40 percent, and its total industrial output

accounted for 60 percent ofthe total industrial output of

the world, while it also held somewhat over 70 percent ot

the total gold reserves of the capitalist world Howevw,

since the 1970's, and especially since the 1980 s US»

economic strength gradually declined In 1976,he

United States had for the first time a budget deficit and

turned from a country with a trade surplus into a country

with a trade deficit. In the 1980's, the United States sank

from the position ofthe world's major creditor nation to

the world's largest debtor nation. The share of the

United States in total world production had declined to

about 20 percent. The Gulf war fully revealed the U.S.

predicament of possessing inadequate strength to carry

out its desired objective; without dragging.and pressuring its allies to contribute somewhat over $50 billion,

the Armed Forces of the United States, we are afraid,

would not have been able to proceed to the Gull.

The Clinton administration, just as the Bush administration, had hoped that after some partial retrenchments

it would still be able to revitalize U.S. strength, to

maintain its dominant position in international afiairs,

and to have these endeavors become effective objectives

of its strategy. In his inaugural speech, Clinton emphasized- "The United States will not retreat in the face ot

the challenges of the new world," and declared, whenever our major interests are challenged, we will, it

necessary, use military force." His strategic alternatives

were clearly expansionist and aggressive. Very obviously, implementation of this strategy involves considerable risks. It can undo the internationa geopolitical

balance of power established during the cold war, introduce new elements of instability, and will unavoidably

result in increased trade friction between the United

States and its allies on the one side and all other

countries on the other side, and possibly further aggravate its conflicts with a large number of the developing

countries. Henry Kissinger, a former US secretary of

state, published an article entitled " o

n

and[the

World" in the 1 February 1993 issue ofNEWSWEEK, in

which he pointed out: "President Clinton seems to

believe that the United States should focus on affairs at

home, and that she should promote democracy when she

ventures abroad. ... His challenge as president will be to

understand that, for the firsttime in her history America

now finds herself in a world which she cannot dominate,

but from which she also cannot simply withdraw

Kissinger tells Clinton that he "must steer a path

between world domination and protection ol V.b interests " This truly is a dilemma; it is indeed the condition

and the prospect for the readjustment of the global

strategy of the United States.
ECONOMIC JPRS-CAR-93-043

28 June 1993

NATIONAL AFFAIRS, POLICY

Improve Price System To Meet GATT Requirements

93CE0508A Nanchang JIAGE YUEKAN[PRICING

MONTHLY] in Chinese No 3, 15 Mar 93 pp 21-24

[Article by Ma Song (7456 2646): "Relationship Between

GATT, Domestic Prices"]

[Text] Pricing is one ofthe points at issue for signatories

to GATT. GATT regulations regarding the matter of

pricing include Article 6, "Anti-Dumping Taxes and

Anti-Subsidy Taxes"; article 16, "Subsidies"; and some

others such as Article 3, "National Treatment"; Article

5, "Open Borders"; Article 8, "Stipulated Fees and

Export and Import Procedures"; and Article 17, "StateRun Trade Enterprises." The important points of these

regulations are:

1. Exports shall not be priced for dumping; there are four

standard measures for dumping: 1) Export prices shall

not be lower than domestic sales prices; 2) export prices

to a certain country shall not be lower than exports to a

third country; 3) export prices shall not be lower than

domestic production and sales costs plus profit; 4) when

exports of vertically integrated enterprises hide subsidies, the standard measure shall be the sales price to the

first independent enterprise after importing.

2 Export subsidies are not allowed. Subsidies ofthe kind

which permit exports to increase and restrict imports are

not allowed. However, GATT does not oppose subsidies

in general: one, where both domestic and foreign sales

are subsidized; two, such subsidies must not harm the

interests of other countries. Nevertheless, it opposes

direct government export subsidies (for example

directly subsidizing foreign trade enterprises, giving

them retained foreign exchange profits or bonuses, or

providing preferential, lower than cost transport, credit

°

r

.

m

i

urance)- If Primary industries are subsidized,

GATT requires: one, export prices shall not be greatly

lower than export prices of other supplying countriestwo, that country's world market share of that export

product must not be unreasonable. Developing countries

are permitted to subsidize nonprimary products provided they do not harm the trade and production of

other countries.

3. Regarding domestic stipulated fees and costs, discriminatory fees for non-nationals and dual pricing for

domestic products and imports is not allowed. Examples

include different fees by country for transport and

harbor use.

Based on the aforementioned regulations, in all previous

meetings of the GATT China Working Group, signatories proposed several hundred pricing questions to be

clarified. The essentials can be summarized as follows:

1. The current state of China's pricing and control

systems. For example, will providing a list ofstate fixed

price products according to customs tariff numbers

answer whether they are subsidized? What is the procedure for state price fixing and its influence on imports

and exports?

2. Aims of China's price reforms, timetable for completion. How will the state control prices under a market

economy? A timetable for abolishing the dual pricing

system.

3. China's import and export price reforms. What is the

timetable for abolishing import price subsidies? Do local

governments have control over import prices? Is there a

division by country of import prices? How are export

prices reformed? Do export commodities have hidden

subsidies via state price fixing? What is the timetable for

abolishing export commodity price fixing by the state?

What guarantee is there that state fixed price export

commodities will not be dumped?

4. Are there still stipulated service fees and charges for

non-nationals? Proportion of state fixed prices.

Some countries worry that China's state fixed prices may

assault international trade. They ask for written "special

guarantee articles" in agreements with China, such that

each signatory can unilaterally abolish custom tax reductions and promised numerical restrictions for China.

This is a discriminatory request which is contrary to the

principles of GATT since Article 19, "guarantees"

already protects the interests of each country. There is no

need to add "special guarantees" for China alone. Furthermore, some countries also ask for annual investigations of China's pricing system. They want pricing

reform progress reports, weighted average prices on

production factor inputs of exported commodities, plus

having state fixed and directed prices as low as possible.

China's pricing reform has been a great success. There is

no big disparity between our present price control system

and GATT requirements. In other words, they basically

coincide.

Market mechanisms gradually have been introduced to

China's pricing reform over 14 years. Market-generated

price mechanisms are in place. Most commodity prices

and service fees have been liberalized, fundamentally

altering the highly centralized price control system By

the end of 1992, among 37 fixed price products set by

relevant departments of the State Council (see Table 1)

six were of agricultural products, 29 ofproduction materials, and two ofindustrial consumer goods. The proportion of state fixed prices on the three types has fallen

continuously (see Table 2). By the end of 1992, the state

fixed price shares for retail prices, agricultural product

procurement prices, and industral production materials

were 10 percent, 15 percent, and 20 percent, respectively. In 1993 the shares will be reduced further below

some market economy countries.

Regarding imported commodities, 95 percent now have

representative prices. The state still fixes prices on eight

types of grain and chemical fertilizers which are under
JPRS-CAR-93-043

28 June 1993 ECONOMIC

plan and have high foreign and low domestic prices.

There still are fiscal subsidies for domestic and foreign

price differences. Subsidies aim to stabilize imported

consumer grain sales prices in coastal industrial cities

and agricultural production materials prices. This is

beneficial to foreign businessmen entering the Chinese

market. Regarding domestic procurement prices ot

export commodities, since 1980 bilateral price negotiations between suppliers and demanders have been

allowed because of differences in terms of quality, specifications, packaging, and delivery time limits between

export commodities and products sold domestically. By

the end of 1992, 90 percent of export commodities were

procured at market prices.

There also has been important progress in the marketization of China's production factor prices. Most raw

material prices have been or will be gradually liberalized.

For example, most steel, nonferrous metal, and industrial chemical prices have been liberalized. The market

price share of cotton prices will gradually increase until

they are liberalized entirely. Regarding coal as an energy

resource, at present the state only controls a small part ot

coal for unified distribution. Most coal prices have been

liberalized. Regarding crude oil prices which are monopolized, although the state continues to fix prices, negotiated prices gradually are being used together with original prices. Electric power prices also are monopolized.

The state only controls live wire sales prices. Foreign

power plant investors are allowed to negotiate on electricity prices for the plant and live wires, although in

general prices are set once a year, fluctuating according

to fuel price increases. Besides the price of material and

soods factors of production, there also has been progress

in the marketization of land, capital, and labor prices.

For example, there has been a change from no compensation to compensation for land use. At the outset land

use fees were collected from "three types ofinvestment

enterprises. Now prices are liberalized, and there are

negotiations, auctions, and bid sales, transfers and

repeated transfers. To prevent price cutting, the state will

stipulate base standard land prices. Interest is the price

of capital. The capital market has developed. Financing

takes the form of foreign-invested banks cooperative

financial organizations, bonds, stocks, and banks within

enterprises. Interest is liberalized.

Central government bank interest is the same as that of

market economy countries. The state controls it based on

macroeconomic regulation and control requirements.

Industry bank interest gradually will be liberalized.

Regarding the wage system, the situation whereby the

whole country was unified under plan has been

destroyed. Wages in nonstate-owned enterprises commonly are quite high. Since implementing contracts and

linking distribution to benefits, state-owned enterprises

have widened gaps in distribution. The share ofbonuses,

subsidies, and social welfare benefits outside unified

wage standards often exceeds wage standards. Diflenng

distribution compels labor to circulate. In sum, the

marketization of production factor prices will better

arrange production factors and make the factor market

grow, spurring on factor price reform.

An issue of concern to all signatories is the timetable for

basic completion of price reform. Although there have

been great changes in China's price control system

market growth still is imperfect. A number of important

commodity prices and service fees aw ait further liberalization. The production factor market is just growing.

Some commodity prices fluctuate greatly. Effect lve

regulation and control measures await improvement and

the price structure awaits further readjustment.

According to the party's 14th Plenum which established

the need for a socialist market economy, the pace ot

price reform will be accelerated as parties can bear it,

further making price relationships smooth. In approximately the next three years' time, pricing mechanisms in

which the market mainly sets prices will be created and

perfected. Overall control will ensure basic stability ot

overall levels of materials prices. Establishing mainly

economic and legal and secondarily administrative price

control measures, plus readjusting prices of some commodity prices and service fees of monopolies which

greatly affect economic development and the livelihood

of the people makes for a better arrangement of social

resources and an increasingly rational price structure.

China's "entry" to GATT is a question oftime. Departments, regions, and enterprise units pay close attention

to the matter, organizing forces, conjecturing as to

effects, studying countermeasures and formulating

plans. The effect of "entry" upon prices mainly concerns

price levels. For a long time, except for a few commodities the domestic dual price system basically is out ot

ioint Some price levels still differ greatly. In the past we

relied on customs levels and other measures to coordinate contradictions between domestic and foreign

pricing systems. "Entry" will weaken various isolationist

and protectionist measures between customs tariffs and

noncustoms tariffs. Predictably, "entry" will assault the

domestic pricing system. For example, regarding pricing

levels, lower customs tariffs and a reformed domestic

price system will force price levels down. Reforming the

dual RMB-foreign exchange system will make domestic

price levels rise, and there will be new readjustments in

the price structure. Certain rather high or low domestic

commodity prices gradually will approach international

market prices. For example, higher prices of new consumer goods may fall while prices of daily necessities

may not fluctuate much. Price levels of production

materials may rise. Rather high priced electromechanical product prices may fall, parity priced basic

raw materials and energy resource prices may further

approximate international price levels, or be used

together with negotiated prices, meaning higher price

levels. Service fees may increase greatly in line with the

need to develop international service trades and China s

growing tertiary industries.

Comparing domestic and foreign prices, certain Chinese

agricultural products, raw materials, and processed

product prices are far higher than international market
ECONOMIC JPRS-CAR-93-043

28 June 1993

prices. Ifwe consider linking them to quality and greatly

lower customs taxes, then high domestic commodity

prices will rise even more. Under present customs tariff

conditions, there are some domestically high-priced

foreign low-priced commodities; mainly agricultural

products, including vegetable oil, wheat, wool, granulated sugar; industrial consumer products, including

electrical appliances, chemical fibers, and plastic; industrial production materials, including nonferrous metals

steel, mimvans, and some chemical industry raw materials (see Table 3). Obviously, the aforementioned products have no price competitiveness on the international

market.

It is necessary to adopt some comprehensive countermeasures and pricing strategies to alleviate "entry's"

tremendous attack on domestic prices, improve the

competitiveness of Chinese products on the international market, and win more exports.

1. Comprehensive countermeasures. 1) Greatly lower

customs tariffs in the direction of the average level of

developing countries, but it must be done gradually

moderately and differentiate industries both to compel

faster development of China's foreign trade and be

appropriate to the level at which domestic industries can

a ccept it. 2) GATT's preferential principles for developing countries must be used for certain industries

adopting selective guarantee and protective provisions

to protect backward agriculture and key important

nascent industries which need it. 3) Import technology

and increase inputs from backward industries, mainly by

subsidizing production links, making them gradually

advance and become viable internationally competitive

industries. 4) Organize specialized cooperatives and

group industries, break down closed localized economies, create economies of scale and improve scale

returns. 5) Turn the domestic commod ity tax into an

added value tax, reform high tax policies, gradually

reduce added value tax rates which are too high and

improve the price competitiveness of commodities. 6)

Determinedly abolish arbitrary fees, fund accumulation

and apportioning of various types and aims. Reduce

burdens on enterprises and peasants. Create macroeconomic conditions for lowering commodity prices 7)

Reform the dual RMB exchange rate and foreign

exchange distribution system. Similar to lowering customs tariff rates, reforming the exchange rate system

must be both beneficial to promoting China's foreign

trade and consider domestic prices, macroeconomic

regulatory and control needs, and the ability to repay

prinicipal plus interest. Therefore there must be additional chosen places and times for dual use.

2. Accelerate and deepen the pace of price reform.

CJATT requires prices be set by the market. This is

consistent with the spirit of the party's 14th Plenum to

keep down to the lowest number st ate fixed price

commodities and service items. To welcome the asault of

entry, pricing departments' countermeasures are: 1)

bpeed up price reform related to import and export

commodities. Regarding imports, one, gradually abolish

me eight import commodity price subsidies (as of 1993

only five remain); two, liberalize independent import

commodity prices; three, control circulation costs in

state-run foreign trade. Regarding exports, one, promote

an export agent system; two, liberalize foreign trade

enterprise export commodity supply prices. 2) Accelerate reform of production factor prices, promote their

circulation and growth of a factor market, in particular

speeding up reform of export commodity production

factor input prices. 3) Accelerate tertiary industry price

retorm. There is a need to accelerate China's tertiary

industries, develop foreign service trades and join interim!??,31 ?

emce trade competition. According to the

OATT principle for national treatment, clarify and readjust various service fees. 4) Introduce effective price

setting policies and principles of market economy countries beneficial to developing market competition

reforming suited to international competition and the

needs of a market economy. Incorrect pricing methods

and principles often cause tremendous waste of social

resources. The notion of only considering domestic costs

and market demand must be changed. For example gold

jewelry prices must be connected to the rise and fall of

international gold prices to avoid high domestic prices

and a great outflow of foreign exchange. Medical equipment prices can be set based on marginal rather than

average cost to enhance better equipment utilization

rates and guard against blind duplicate imports. 5) Refer

to the international practices of market economy countries. Set up and perfect China's socialist market

economy national price macroeconomic control and

regulation system. Ensure the basic stability of overall

material prices. Establish mainly economic and legal

regulatory and control measures. 6) Augment study of

pricing decisions by enterprises, particularly large- and

medium-sized ones. Strengthen price controls within

enterprises and have better gathering and collating of

pricing information, and advanced domestic and foreign

pricing methods and principles. Establish pricing files

Tram pricing personnel. Only by mobilizing enterprises!

looking for loopholes, and formulating measures can we

take a firm stand in international competition.
JPRS-CAR-93-043

28 June 1993 ECONOMIC

Table 1. List of State Fixed Price Commodities (According to Annual Tax Code)

Notes

State purchase order portion

State purchase order portion
ECONOMIC JPRS-CAR-93-043

28 June 1993

25.01

30.02

30.06

30.14

39.37

Table 1. List of State Fixed Price Commodities (According to Annual Tax Code) (Continued)

Customs [fame Tariff Tariff Number Vnml.« Zl '. T~Z ' T ~ -i '

2501 0010

Numerical Order

35

36

37

Commodity Name

Salt

Some pharmaceuticals

Notes

Chemical, biological pharmaceuticals, biological products

Contraceptives, veterinary

pharmaceuticals

Table 2. Percentage Share Changes in Three Kinds of Pricing

Percentage share of gross social commodity retail sales

Percentage share of industrial product material exit factory

prices '

Percentage share of agricultural product procurement prices

State Fixed Prices

1978

97

100

94.4

1991

20.9

36

22.2

State Directed Prices

1978 1991

10.3

18.3

20

Market Regulated Prices

1978

5.6

1991

68.8

45.7

57.8

Product Name

Table 3. Domestic and Foreign Price Comparison of Some Imported Commodities

Vegetable oil

Wheat

Wool

Granulated sugar

Unit

Yuan/ton

Import Price

3079

Yuan/ton

Yuan/ton

21" Color TVs

Yuan/ton

Cut polyester

Short polyester chemical

fibers

Short acrylic chemical

fibers

Low pressure polyethylene

Methanol

Yuan/unit

Yuan/ton

Yuan/ton

820

24,750

1,562

Domestic Price

4400

860

18,500

3,000

2,500

Domestic versus Foreign Price

Comparison

1320

40

-6,250

7,200

Yuan/ton

Yuan/ton

Ethanol

Octane Alcohol

Yuan/ton

Yuan/ton

9,000

13,000

5,039

800

2,300

7,500

9,000

938

-700

Rapeseed prices for domestic

portion

More washed wool imported,

of higher quality

300

14,000

6,300

2,917

Phenol

Acetone

Natural rubber

Copper

Aluminium

Nickel

Yuan/ton

Yuan/ton

Yuan/ton

Yuan/ton

Yuan/ton

Yuan/ton

No.90 Gasoline

Santana sedans

Peugot sedans

Audi sedans

Qienuo JI Sedans

Xiali sedans

Yuan/ton

2,808

»,280

3,267

6,120

17,000

1,600

4,400

5,400

5,000

1000

1,261

800

1,483

2,592

4,500

7,536

9,248

Yuan/ton

US$/unit

US$/unit

US$/unit

US$/unit

US$/unit

50,320

1,600

10,800

16,600

28,500

16,600

6,500

22,000

13,400

76,000

1,600-1,700

720

1,233

1,416

5,000

4,152

25,680

100

20,500

22,700

41,900

20,200

13,600

9,700

6,100

13,400

3,600

7,100
JPRS-CAR-93-043

28 June 1993 ECONOMIC

PROVINCIAL

Profile of Qinghai Province Private Economy

93CE0521B Xining QINGHAI RIBAO in Chinese

19 Apr 93 pp 1,2

[Article by the survey team, Political Research Center,

Qinghai Provincial CPC Committee: "Survey of Development of Individual, Private Economies in Qinghai

Province"]

[Text] Developing the individual and private economies

is an important aspect in the adjustment of Qinghai s

ownership structure, and is also an important component part of the vigorous development of Qinghai s

economy. Recently we organized our forces to make a

special-topic survey of this matter. The survey respectively selected Xining, Haidong, and Hainan as representatives of cities, agricultural areas, and animal husbandry areas; and separtely held informal discussions

with the provincial Industry and Commerce Administrative Bureau and Tax Bureau, the provincial People s

Bank and the relevant departments of autonomous

prefectures and cities on problems reported and discussed in the survey, and, on this basis, formed some

views and opinions.

I Development of Individual, Private Economies Plays

Irreplaceable Role in Promoting Qinghai's Economic

Prosperity

Since the Third Plenary Session of the 11th CPC Central

Committee, because of the thorough implementation ot

the policy of opening up to the outside world and ot

invigorating the domestic economy, the enthusiasm ot the

masses for developing the individual and private economies has been aroused. They practice self-reliance, seek

their own profession, run factories, open stores, and

engage in transportation and in all sorts of business activities, thereby playing an irreplaceable role in promoting

Qinghai's economic prosperity.

A) Financial income has increased. In Qinghai in 1992,

57 28 million in taxes were paid by the individual and

private economies, accounting for 7.92 percent of the

province's industrial and commercial tax revenues and 7

percent of the province's financial income. Of the three

parts—autonomous zhou, prefecture, and city—in an

on-the-spot survey in 1992, Haidong Prefecture s individual and private economies paid 12.58 million in

taxes, accounting for 9.4 percent of its financial income;

Hainan Autonomous Zhou, 4.22 million yuan

accounting for 13 percent of its financial income; and

Xining City, 23.01 million yuan, accounting for 7.15

percent of its financial income. In Datong City, where

the individual and private economies were developed

fairly fast, in 1991 the tax revenue from state-run and

collective industrial and commercial enterprises was 3.7

million yuan, and the tax paid by the individual and

private enterprises amounted to 2.31 million yuan, equal

to 70 percent ofthe former, and the two sectors each did

its part.

B) Labor employment has expanded. With flexible forms

of making use of workers, the province's individual and

private economies absorb the idle personnel in cities and

the surplus labor force in rural areas. By the end of 1992,

the individual and commercial households had engaged

69,903 personnel and private enterprises had taken in

7 743 workers, thereby relieving, to a certain extent, the

pressure caused by difficulty in obtaining employment.

C) The pace of getting out of poverty and becoming

well-off has accelerated. According to the survey, the

annual average net income in the number of peasants

and herdsmen engaged in the individual economy in the

rural animal husbandry areas was about 800 yuan, higher

than the net income of other peasants and herdsmen in

the same areas. The average income of employers and

employees in the urban individual and private economies is higher than that ofthe urban residents, and many

people have become well-to-do householders. Private

entrepreneur Bai Jingbo [4101 7234 3134], ofthe Chuankou Dairy Products Plant in Minhe County, in 1986

started his own small powdered milk plant, and in the

short period of a few years he became a wealthy and

influential man with fixed assets of several hundreds of

thousands of yuan. After becoming wealthy he started a

feed-processing plant, and helped the people of Chuankou Prefecture to develop cattle raising, thereby

enabling some poor peasants to get out of poverty and

become well-to-do by raising milch cows.

D) The prosperity of urban and rural markets has been

promoted, therby making the people's life more convenient By the end of 1992, 266 county fair markets of

various kinds had been formed in the province's urban and

rural areas, and more than 80 percent of the individual

industrial and commercial households were engaged in

business activities on these markets, playing the role of

making good omissions and deficencies, thereby invigorating the markets and making the people's life nch and

convenient.

II. Difficult Points and Problems in Development of

Individual and Private Economies

As the "two small economies" in the total number of

national economies, the individual and private economies in the coastal and interior developed provinces,

assume a powerfully developed posture, but Qinghai s

development is slow and its disparities are very large.

The main manifestions of this situation are:

A) First, the province got started late and there is less

quantity. After the Third Plenary Session of the 11th

CPC Central Committee, the party and the state permitted the development of the individual and private

economies. This policy decision caused a big stir in the

coastal and interior areas, and the individual and private

economies sprang up vigorously like bamboo shoots

after a spring rain. Qinghai has gone through a very ong

process of wait-and-see, start-up development. Taking

Haidong as an example, by the end of 1980 there were in
10 ECONOMIC JPRS-CAR-93-043

28 June 1993

it 14,621 individual households employing 28,665 persons, and their annual volume of business was 94.5

million yuan; of them a considerable part was householders who had come from outside the province. For

seven or eight years afterward, the prefecture was in an

extremely slow process of development. By 1988 the

number of industrial and commercial households in the

prefecture had increased to only 21,722; they employed

39,873 persons and did an annual volume of business of

155.56 million yuan. Although this was a big stride

compared to 1980, in comparison with the rate of

development in China as a whole, it lagged far behind.

Furthermore, the situation in other prefectures in the

province is not as good as Haidong's. At the end of 1992,

48,676 individual industrial and commercial households

were registered in the prefecture, only 0.26 percent ofthe

total number in Qinghai; they employed 69,903 persons

only 1.5 percent of the province's total population. The

development of private enterprises was also slow: by the

end of 1992 only 356 ofthem had been registered in the

province.

Second, the scale is small and the level low. The funds

registered by individual industrial and commercial

households in the province amount to 198.91 million

yuan, an average of 44,086 yuan per household and 70

percent of the average in the country as a whole- their

volume of business is 882.52 million yuan, a per household average of a little over 10,000 yuan and only 65

percent of the average in the country as a whole- their

annual total output value is 207.46 million yuan,'a per

household average of 4,600 yuan, which far lower than

the per household average of20,000 yuan for the country

as a whole. The private enterprises employ 7,743 persons, a per household average of 22, and their registered

funds amount to 66.43 million yuan, a per household

average of 186,000 yuan.

Third, the structure is single and the business scope

narrow. Of the province's individual industrial and

commercial households, 23,311 are indvidaual commercial households, half the number of the former; and the

repairing trade and service trade, which the masses need

respectively only account for 2,456 and 2,845 households. This single structure, on the one hand, makes it

difficult to do business and, on the other hand, resricts

the effect of strengthening the province's economic

forces.

In the survey the managers ofthe individual and private

economies expressed heartfelt gratitude for the party's

and government's policy of enriching the people. At the

same time they spoke of many difficulties:

A) It is difficult to start a business. One difficulty is that

before you can get a business license you met get several

permits, and must run hither and thither to get them. For

the people in a given place the OK is given; people from

the outside who come in for the first time find the people

in this place and the place itself unfamiliar, and the

procedures involved in getting these permits chills their

hearts. The second difficulty is funds. If there are few

registered funds it is impossible to do business; if there

are many registered funds there is no place to put the

money and loan guarantors cannot be found. The third

difficulty is the business site. Because the building of

Qinghai's markets cannot keep pace, it is extremely

difficult for an industrial or commercial household to

find a fairly ideal economic site.

B) Discrimination. There still exists to a serious extent

the common prejudice that "the individual is not as good

as the collective, and the collective is not as good as the

state-run." No matter where the individual household

does its work it cannot do so smoothly, and it is bullied

and fleeced. As for getting donations and support, these

should be voluntary actions, but for the individual

household they have become rigid apportionments.

C) There are many "mothers-in law." The individual

and private economies are mainly market-regulated and

do not have any department in charge of them. This

should be a good thing, but they feel that they lack

protection: any department whatsoever can intervene in

their activities and act as their "mother-in-law." They

can only suppress their rage at irrational intervention.

They say that, for them, dealing with so many false

"mothers-in-law" is not as good as having one true

mother-in-law."

D) Taxes and expenses are heavy. The quotas for tax

collection go up every year, and the size of the increase

exceeds the size ofthe rise in business volume. There are

all sorts of expenses, but they are not clear about which

ones should be collected; in any case the person collecting them must have a basis or red-lined document.

Some of the expenses are governed by local or departmental "homemade policies."

E) Control is arbitrary. Unlicensed businesses gain small

advantages by unfair means, and licensed businesses

suffer big losses. Unlicensed businesses can evade taxes

and licensed businesses cannot get relieffrom all sorts of

taxes and expenses. They say that ifthe government does

not rectify the unlicensed businesses, the licensed businesses will avail themselves of loopholes or exchange

licenses and become "guerrillas." The individual households complain loudly that taxation is heavy and fees are

numerous. Articles in the press agree, but the tax departments feel wronged. They say that the lawful collection

of taxes is their responsibility and that the collection of

the annual quota is their task. The state has stipulated

that the total tax rate on individual industrial and

commercial households must not exceed 5.5 percent,

and Qinghai's current tax rate cannot exceed the rate set

by the state. Iftaxes are reduced or remitted, the task of

tax collection will not be completed. The individual and

private entrepreneurs complain loudly that it is difficult

to start a business, but the industrial and commercial

departments maintain that this is not so, because they

have already expanded the scope of business and simplified the operating procedures. If it is said that there are

difficulties with regard to funds, the comrades in banks
JPRS-CAR-93-043

28 June 1993 ECONOMIC 11

also have have their own difficulties. When some individual householders or private entrepreneurs go to a

bank for a loan, they carry false papers. Once the loan is

in their hands, they squander and waste it, recklessly

spending and arbitrarily using it. From where can the

bank regain this money! The banks feel that there is too

great a risk in making loans.

III. Several Problems Requiring Exploration

The complaints ofthe businessmen in the individual and

private economies and the difficulties of the relevant

trade departments reflect from different angles several

problems that need to be studied and explored in the

current development ofthe individual and private economies in Qinghai.

First, the problems awaiting solution must be recognized With a unified understanding there will be a

common language. With the "three advantages" as the

criteria for judging right and wrong, we must in everything proceed from vigorously promoting Qinghai s

overall situation. If there exists a bias against the individual and private economies, or ifthey drift away from

department work and economic construction—this

center and overall situation—this is bound to cause

"ideas to remain on the lips and policy preferential

treatment to remain on paper" and not be implemented.

In Qinghai, the problems of the individual and private

economies getting a late start and their scale being small

are not to be feared; what is most to be feared is that the

understanding will not keep pace and thinking will not

be unified.

Second, the problem ofmany taxes and expenses must be

concretely analyzed. What should have been collected

certainly must have been collected, and what should not

have been collected must be resolutely sorted out and

returned. Paying taxes is the bound duty of the individual and private economies, and is not a burden. In

this survey we discovered that very many individual

households do not separate concepts of taxes and

expenses, and no matter who collects money from them

they say it is a tax. They should clarify the concepts of

taxes and expenses, and in this way the individual and

private businessmen will enhance their understanding of

tax paying and resist irrational charges. We think that,

for the individual and private economies, a policy of

ligh: taxes and strict punishment should be adopted,

thereby enhancing the consciousness of taxpayers m

stopping the undercurrent of tax evasion.

Third to change multi-headed control into unified

coordinated control, the industrial and commercial

departments should become spokesmen for the individual and private economies, and support them with

justice and force. In various places leading groups for the

individual and private economies should be set up, and

they should coordinate in solving the problems that crop

up in the development of the individual and private

economies. Industrial and commercial bureaus should

take the lead in controlling individual industrial and

commercial households; and organize tax, banking,

public security, public health, urban construction, other

departments to form joint working bodies that carry out

a coordinated process of examination and approval.

With regard to the control of individual industrial and

commercial households that go on county fair markets,

Shandong's experiences can be used as a reference.i.e.,

on the market comprehensive control is to be exercised

by the committee or office set up by the department

involved, and other departments or individuals must not

intervene at will.

Fourth, we must constanly sort out the unlicensed businesses. As much as possible, all businesses must be

licensed. With regard to those that are difficult to license,

we can designate places to effect special control; those

that have the conditions for licensing should be promptly

licensed; and unlicenses business sites should be withdawn and licensed business markets put in their place,

and the industrial and commercial departments should

provide the necessary services. We must resolutely

change the phenomenon in which licensed and unlicensed businesses are mixed on one market.

IV. Several Suggestions on Promoting Development of

Individual, Private Economies

Acceleration of the development of the individual and

private economies is of important significance for the

promotion ofthe prosperity of the province's urgan and

rual economies and for the invigoration of their markets—for example, expanding the social connections for

employment and achieving smoothly the second strategic goal. Acting boldly with a free hand to develop the

individual and private economies should become an

important task of party committees and governments at

all levels. To this end, we make the following suggestions:

A) Unify understanding and develop with a free hand. We

must get rid of the "Leftist" ideological influence of

"fearing the private" and "eliminating the private," smash

the bonds of traditional ideas, and sincerely and boldly

support the development of the individual and private

economies. We must resolutely do away with the idea of

equating the development of the individual and pnvate

economies with "privatization"; do away with the idea of

putting in opposition the development of the individual

and private economies on the one hand and the strengthening of public ownership on the other hand; and do away

with the idea that a simple analogy exists between the

individual and private economies on the one hand and the

private industry and commerce and the small proprietors

of the fifties on the other hand. We must expand the

propaganda and reportage on the development of the

individual and private economies and correctly guide

public opinion, so that a common understanding is

reached by all quarters of society, and a good public

opinion and social environment is formed for the development of the individual and private economies.
12 ECONOMIC JPRS-CAR-93-043

28 June 1993

B) We must both develop and control. The general

guiding ideology should be: first develp and then standardize, and, on the basis ofthe development, strengthen

control and with this strengthened control better promote development. Based on Qinghai's actual situation

policies must be further relaxed so as not to restrict the

business norms, not to restrict the conditions for starting

businesses, not to restrict the proportion of growth and

not to restrict the scope of development. At the same

time we must strengthen control, particularly plugging

the loopholes for tax evasion, so that after the tax burden

is lightened the actual amount of taxes collected is not

reduced.

C) We must make adequate use of policies and strenghten

measures. All policies that are stipulated in explicit terms

must be resolutely implemented, and must not be allowed

to tall short; and there must be regular inspections of the

situation in implementing the policies. With regard to

some departments that, in order to get a monopoly business, come up with illegal "licenses" and special-item

examination and approval systems, there should be a

resolute redress. With regard to some provisional policies

and measures that have been adopted over the past several

years, all those that have no basis in law or regulation do

not suit the current situation, or are not advantageous for

the development ofthe individual and private economies

they should be resolutely abrogated.

D) We must enhance leadership and unify coordiation

Party committees and governments at all levels must put

on their daily agenda the giving of full attention to, and

the support of, the development of the individual and

private economies, the regular hearing of reports, and

the taking ofthe initiative to coordinate the relationships

between relevant departments, so that the relevant policies that help maintain the development of the individual and private economies are put on a solid footing

In particular, they must make a point ofhelping to solve

the specific problem of site, funds, and raw materials.

E) We must expand the business scope of individual

industrial and commercial households and private enterprises All industrial and agricultural-sideline products

that the state releases should be permitted to be produced and handled in business by the individual and

private enterprises. After obtaining approval, the individual and private enterprises may sell on commission

the overstocked products of state-run and collective

enterprises, also may ask to produce, on a one-time basis

the products of state-run and collective enterprises. '

F) We must arrange for injured or sick people and for

youths awaiting employment to get positions by stipulated

proportion of private enterprises, which may, in accordance with the regulations for collective enterprises enjoy

special consideration for tax reduction or exemption

Cadres transferred to other work, youths awaiting employment, and students of secondary and higher educational

institutions, and surplus personnel in state organizations

and m state-run and collective enterprises who start up

private enterprises or go to work in private enterprises can

be calculated for seniority. The private enterprises will

take part in the overall planning for the insurance of the

staff and workers' retirement fund, which will be timely

handled by labor departments.

G) No unit may, at will, dismantle and remove or seize

the place of business registered or taken on lease by the

individual and private enterprises. With regard to those

places that governments at the county level and above

have approved for dismantling and removal, the unit or

individual doing the dismantling should, in accordance

with the rules, bear the cost of dismantling, and rationally arrange for removal to the new business site The

seizing unit or responsible person is responsible for

paying compensation for the losses incurred because of

the seizure of a site.

H) We must lead private enterprises in the direction of

developing into scientific and technological types and

export-oriented types. Private enterprises that run a

Sino-foreign joint venture or a Sino-foreign contractual

joint venture, or that contract to engage in the "three

lorms of import processing and compensation trade "

may apply for a reduction of half their taxes Private

enterprises that engage in planting, aquatic breeding, and

processing of agricultural-sideline products, or that provide services before, during, and after production may

also apply to the local tax organization for a reduction in

taxes.

FINANCE, BANKING

Suggestions for Managing Foreign Banks

93CE0520A Beijing GUOJISHANGBAO in Chinese

17 Apr 93 p 3

[Article by Wang Wenli and Li Zonghai: "Consult

Others Experience and Be Prudent in Making Selections, Regulating Foreign Banks in a Scientific Manner"]

[Text] To allow foreign banks to operate in—and to

introduce foreign banks into—China are an important

component ofChina's reform and opening to the outside

world In early 1982, the overseas-chartered South Sea

Bank became the first to be permitted to begin operation

in the Shenzhen Special Economic Zone, thereby starting

the process of introducing foreign banks into China By

the end of 1992, as many as 50-plus foreign financial

institutions had been introduced into China. Foreign

banks from eight countries and areas had established

branches in coastal cities like Shenzhen, Shanghai Xiamen, Haikou, Zhuhai and Shantou, conducting business

operations; in addition, over 220 resident representative

offices had been established. At the same time, China's

specialized banks had as many as 50-plus overseas

offices.
JPRS-CAR-93-043

28 June 1993 ECONOMIC 13

Presently, with the development ofthe economy and the

improving of reform and opening to the outside world,

we are faced with the task of introducing more—and

enhancing the regulation of—foreign banks. Therefore, it

becomes very necessary to consult the experience and

lessons learned by other countries and areas in introducing and regulating foreign banks.

I. The Benefits Resulting From the Introduction of

Foreign Banks

With the implementation ofthe policy of opening to the

outside world, the Chinese economy has joined the

world economy, resulting in the development of economic, trade and financial exchanges with countries

around the world as well as in closer ties and mutual

penetration. In order to accelerate economic construction on the basis of keeping the focus on economic

construction, it is not enough to just rely on our own

accumulation, but it is necessary to use large amounts ot

foreign investment. In this regard, the introduction of

foreign banks can satisfy the more advanced needs

occurred in the process of utilizing foreign investment,

as it can secure, for China, more foreign investment

based on financial capital, stimulating the development

of the banking and financial industries, thereby iurther

facilitating and promoting the overall development ot

our national economy.

It is necessary not to introduce only banks from the

developed countries (or areas); the developing countries

also have banks that can be introduced. This approach is

in accord with the trend of development in international

finance, and appropriate in view of the development oi

transnational corporations, transnational banks and

transnational investment. In the developed countries (or

areas), not only are domestic banks are moving toward

internationalization, but ever more foreign banks are

operating inside the countries (or areas) concerned

Examples: the United States, Great Britain, France, and

Hong Kong. Take the example of Hong Kong. By early

1992 there were 163 banks in operation in Hong Kong.

Ofthose banks, 133 were overseas-chartered banks (foreign banks), accounting for 81.6 percent ofthe total; but

only 30 were locally chartered banks, accounting tor 18.4

percent of the total. In terms of the number of banks

introduced, Hong Kong occupies the fourth place in the

world, with its number smaller than only those of the

United Sates, Great Britain and France. In terms ot the

situation of Hong Kong as a city, it has fewer foreign

banks than only New York or London does, while having

more foreign banks than any of such Western metropolises as Paris, Frankfurt and Zurich, and hasthus become

a city which has introduced one ofthe largest numbers ol

foreign banks internationally.

The introduction of a large number offoreign banks has

created great benefits for Hong Kong: First, the banking

industry has achieved significant development, especially international business and off-shore business

which have been developing rapidly. By early 1992 the

banking system of Hong Kong had foreigner-involved

assets and liabilities totalling US$502.1 billion and

US$431.6 billion respectively, occupying the fourth

place in the world and the second place in Asia. Second,

by absorbing large amounts of overseas capital, Hong

Kong has become the most important center of bank

lending and one of the issuing centers for debt secuntization in Asia. This situation has, in turn, stimulated the

development of such financial markets as the foreign

exchange, gold and silver, securities, and futures markets

and even pushed forward the development of the trade,

transport, real estate and tourism sectors. Third, the

competition mechanism of Hong Kong's banking

industry has been enhanced. This is helpful to the

improvement of management standards and the quality

of the personnel across the industry. Fourth, many new

financial tools and financial services and scientific and

technological achievements have been introduced

because ofthe presence offoreign banks. This has moved

Hong Kong's banking industry toward becoming highly

internationalized and modernized. Fifth, Hong Kong s

economic ties with the countries and areas around the

world have been getting ever closer. This has been

helpful to the establishment of an externally oriented

economic system in Hong Kong. From the preceding

analysis, we can see that being very densely populated by

foreign banks has been an important factor contributing

to Hong Kong's becoming an international financial

center, and also the chief symbol of its status as an

international financial center.

The introduction of a large number offoreign banks into

Hong Kong has further stimulated and facilitated the

economic development of Hong Kong. Similarly, the

actual process of introducing foreign banks in this

country over the past decade has also shown that the

introduction of foreign banks into China has provided

the conditions needed for establishing new and more

expeditious channels of introducing foreign capital and

various new things in the financial business, for developing international trade contacts and the capability to

supply instruments international settlement, for learning

the advanced knowhow relating to the scientific management of modern banks for the purpose of improving the

management standards of Chinese banks, for gradually

developing our banking industry's sense of competition

and capabilities to compete, for improving investment

environment, for exchanges and cooperations between

banks of different countries, and for the establishment ot

equivalent overseas offices of Chinese institutions in

foreign countries. Particularly, the introduction of foreign banks into China has played, and will continue to

play, an important positive role in securing—lor

China—more foreign investment based on financial capital and in alleviating the problem relating to the supply

and demand of capital, thereby further promoting and

facilitating the economic development.

II. Prudently Select the Policy on Introducing Foreign

Banks and the Types of Foreign Banking Institutions

To Be Allowed To Operate

As in the case of other things, the introduction offoreign

banks has both positive effects and negative effects.
14 ECONOMIC JPRS-CAR-93-043

28 June 1993

Especially, the introduction of more foreign banks will

inevitably exacerbate the competition in the banking

industry. This demands that we be prudent in selecting

the policy on introducing foreign banks and the types of

foreign banking institutions to be allowed to operate.

The policies on the introduction of foreign banks

adopted by various countries around the world can

largely be put into three categories: In the first category

are the policies of such countries as Iceland, Norway

Sweden, Portugal, and New Zealand which impose stringent restrictions on the commencing and conducting of

business operation on the part of foreign banks. Generally, these countries prohibit foreign banks from opening

branches or subsidiary banks within their borders only

allowing the establishment of representative offices In

the second category are the policies of such countries as

Canada, Spain, and Japan which have, only in the recent

years, begun to allow the entry of—and introduce—

loreign banks. In the third category are the policies of

such countries as Great Britain, France and the United

States which maintain relatively mild restrictions on the

commencing and conducting of business operation on

the part of foreign banks. Why would countries in the

world adopt different policies on—and attitudes

toward—the introduction offoreign banks? The decisive

factor here is the level of development and the degree of

openness of a country's financial market. However the

goal of any country's policy on the introduction of

foreign banks would be to obtain the funds needed for

economic development and stimulate the development

of domestic banking and financial industries through

introducing foreign banks, so as to facilitate and promote the overall development of its national economy

Everyone would be in agreement on this point. In today's

world, generally, a country would formulate its policy on

foreign banks on the basis oftaking into account the state

of the development of its national economy, its economic development strategy, its specific objectives to be

achieved through introducing foreign banks, and the

business characteristics of the foreign banks concerned

Nevertheless, in each case, the specific policy would

usually contain or be guided by three policy elements or

policy principles: the principle of protectionism (that is

imposing some restrictions on the commencing and

conducting of business operation on the part of foreign

banks and on the management of foreign banks so as to

accomplish the objective of shielding the domestic economic and financial development from disruptions, disturbance and control originating from outside sources)-

the principle of reciprocity, (that is, using reciprocal

policy measures to supervise foreign banks from another

country and their business activities, or, in other words,

following the principle of reciprocity and equality in

introducing and regulating foreign banks); and the principle of unilateral preferential treatment (that is

granting unilateral preferential treatment in introducing

foreign banks, while not requiring the other country

involved to adopt similar policy measures).

In view of the state of economic development (mainly

the state of financial development) of China and the

experience and lessons learned so far in the process of

introducing foreign banks into China, it is necessarywhile introducing more foreign banks—to consider both

the stimulating effect of the introduction of foreign

banks on financial and economic development and the

need to shield the development ofthe national economy

from excessive disruption, disturbance and control. In

our view, m the early stage ofintroduction and in coastal

cities, the principle of reciprocity can be given more

emphasis. After a certain number of foreign banks have

been introduced and after those banks have achieved

some development in business operation, that principle

can then be gradually applied to the inland regions. This

will be m accord with the rules of logic.

The introduction of foreign banks will inevitably involve

another question, that is, the question as to the types of

foreign banking institutions to be allowed to operate In

terms of the types of foreign banking institutions to be

allowed to operate, that is, the kinds of organizations that

foreign banks can set up in the host countries to conduct

business operations, there are three types of rather formal

institutions: the branch (when allowed to open branches in

a foreign country, a bank will be able to formally start

business operations in the foreign country); the subsidiary

or joint-venture banks (both are banks controlled by the

bank holding company and chartered in the host country

and, legally, are fully independent entities); and the international syndicate (a transnational banking organization

composed oflarge banks from several countries). There are

also three types of informal institutions which cannot

conduct substantive business operations: the representative office (m which there will be several representatives

and a few office workers who will be responsible for

exploring business opportunities for a large bank before a

formal business institution is established), the agency (a

form used during the transition from the representative

office to the branch); and the correspondent-bank arrangements (before setting up branches in foreign countries, a

bank has to make correspondent-bank arrangements with

foreign banks in order to be able to handle international

business).

From the standpoint of banks, each of the types of

institutions discussed above is appropriate in some

sense. In order to make a foreign bank become appropriate to the needs and development ofthe host country

so as to enable it to do a better job of entering the local

market, it is better to use such less-advanced types of

institutions as those of the representative office, agency

and correspondent-bank arrangements in the early stage

ofthe bank's operation, that is, before setting up a formal

institution of business operation. Turn the informal

institution into a formal one only when some time has

passed, when experience has been acquired, when familiarity with the market has been achieved, and when the

conditions are ripe. In view of the fact that the international banks of the developed countries are developing

more rapidly and more mature, in order to meet the

needs of the all-dimensional reform and opening to the
JPRS-CAR-93-043

28 June 1993 ECONOMIC 15

outside world, the coastal open cities ofChina can move

directly to considering introducing foreign banks in the

forms of branches, subsidiary banks, or joint-venture

banks, while large inland cities with strengths in the

areas oftrade and economy and development potentials

should mostly introduce foreign banks through the establishment ofjoint-venture banks.

Based on the preceding analysis, we believe that active

introduction of foreign banks is helpful to the development of our national economy. But, what is important is

to formulate our own policy on foreign banks in accordance with the needs ofthe development ofthe national

economy and the economic development strategy of our

country, and to formulate laws to embody that policy. In

the process of introducing foreign banks, it is necessary

to be prudent in selecting policy principles and the types

ofinstitutions, and carry out timely adjustments in view

ofthe developments and changes in the economy, so that

the introduction of foreign banks can both be appropriate to the economic development ofChina and play a

greater positive role in promoting the development of

the economy and the financial industry of China.

III. Further Enhance the Scientific Regulation of

Foreign Banks

As the situation in the international banking industry is

very complicated, all countries and areas have established special supervisory systems in introducing foreign

banks. It is not only necessary to supervise the local

branches offoreign banks, but also the headquarters and

all their other overseas branches and offices, so as to be

able to adopt effective measures as soon as problems are

discovered, in an effort to eliminate or reduce relevant

losses. As far as the foreign banks that have already been

introduced into China are concerned, they all have

various problems to varying degrees. For instance, some

foreign banks evade foreign exchange control through

transfers between the headquarters and branches. While

the account of the Chinese branch shows losses, profits

have in fact already been transferred to the account of

the headquarters abroad, resulting in a situation where

the bank concerned appears to be making losses, but is in

fact making profits. Some foreign banks use little of the

deposits they received for loans to be used for production and construction purposes, while transferring operating funds abroad, resulting in capital outflow. The

operating risks and possible bankruptcies on the part of

some foreign banks—which are transnational banks—

also lead to financial instability within and outside

borders.

Therefore it is very important to further enhance scientific regulation of foreign banks; and this is also an

importanttask that the host country has to accomplish in

order to exercise its state sovereignty. To carry out

scientific regulation offoreign banks, first, it is necessary

to abide by the principles ofthe Basel Agreement and the

GATT. Follow the principles of "appropriate protection,

reciprocity, national treatment, and serving our purposes." It is necessary both to protect China's underdeveloped financial industry still in its infant stage so as to

promote the development of that industry, and to

encourage the setting up of banks and investment in

China, protecting the legitimate rights and interests of

foreign banks. Second, it is necessary to speed up the

development of laws and rules used for carrying out

scientific regulation of foreign banks. Formulate, at an

early date, a rather comprehensive national law on the

regulation of foreign banks. At the same time, promulgate related laws and rules, so as to provide legal protection for foreign banks with regard to their business

operations in accordance with the laws and rules. It is

necessary to carry out regulatory activities in accordance

with the law, to abide by the law, to strictly enforce the

law, and to hold those violating the law accountable.

Third, it is necessary to gradually establish a system of

scientific supervision of foreign banks in accordance

with the principles of the Basel Agreement. First of all,

set the capital adequacy guidelines on the basis of the

capital/risk assets ratio and the method of determining

the minimum capital rate provided in the Basel Agreement. Stipulate that a foreign bank's capital/risk assets

ratio should not be lower than 80 percent, and that the

core capital/risk assets ratio should not be lower than 4

percent, thereby ensuring safe operations. Second, it is

necessary to establish and develop a system of examining

and monitoring the financial, tax-related, and

accounting reports of foreign banks. Third, it is necessary to strengthen the information exchange and cooperation with the supervisory agencies of the home

country. Fourth, improve the standards of scientific

regulation. The central bank should select high-quality

personnel who will carry out scientific regulation of

foreign banks in accordance with the law, and provide

them with the necessary training, so as to develop a body

of foreigner-involved financial supervisors who have a

good grasp of policy and laws, strong capability to

accomplish domestic and international tasks, and high

integrity.

Potential Problems in Distorted Financial Markets

93CE0466A Beijing JINGJI CANKAO BAO in Chinese

12 Apr 93 p 4

[Article by He Jiawu (0149 0502 2976): "Financial

Distortion Presents Major Potential Problems for

Reform and Development"]

[Text] While China's banking has been steadily reformed

and developed in recent years, it has also experienced a

series of distortions, which not only are directly affecting

current economic stability, but also are severely limiting

further growth and reform. This has caused continuous

breakouts ofpotential problems that might flare up again

at any time, which deserve to be emphatically studied

and solved.
16 ECONOMIC JPRS-CAR-93-043

28 June 1993

1. The nonopenness of banking credit-fund operations.

While the credit-fund operations of China's banking are

apparently strictly planned and controlled by the central

bank (the PBC), with both savings and loans being

restrained by directive plans, this is actually a completely

superficial statistics-reporting phenomenon. All comrades in the banking field know that the actual savings

and loans of all banks are completely different from the

situation reflected in plans and reports. The real savings

and loan figures are considerably larger than those

reflected in plans and reports, with the actual amount of

loans made in certain places being double or even more

than reported, producing a large amount of "secret

loans," and causing a severe phenomenon of nonopenness of banking credit-fund operations. Behind the

planned apparent figures, banking funds are being

invested in economic operations through a variety of

means, far exceeding planned figures, while the bankloan volume reflected on report forms remains simply

the planned figure. A great many acts, such as hypothetical calls, assumed trusts, and unaccounted loans, are an

open secret in banking circles, over which the central

bank has no control. This nonopenness of banking

credit-fund operations has severe consequences. It

directly distorts the credit activities ofbanks, turning the

most accurate and sensitive "barometers" of economic

operations into absolutely insignificant false figures, and

leaving the state economic-policymaking sector unable

to either understand the true financial and economic

situation or make correct decisions based on authentic

figures.

The essential cause of the nonopenness of banking

credit-fund operations is the conflict of bank operations

becoming more businesslike and fundraising more market-oriented, while bank management is planned. Banks

can maintain their operations only through raising funds

on markets at a certain price (interest and fundraising

costs), which funds must be invested and loaned at a

certain price (interest). If the funds raised by banks

cannot be correspondingly loaned out, this is bound to

and ought to cause breaking out of planned restraints to

loan or operate through other means. In other words, the

nonopenness of banking credit-fund operations is due to

market-economy laws forcing banks to use irregular

means to resist the traditional planned-management

system. The only solution to this problem is to comply

with market-economy demands, by practicing assetsliability-ratio (balance-sheet) management ofbank credit

funds, and allowing banks to make more loans in line

with the growth oftheir available funds, in order to make

their credit operations public. The state macroeconomic

policymaking sector can then adjust the assets-liability

ratio to effectively balance credit, and credit-fund operations will then openly and accurately reflect and balance economic operations.

2. The "black hole" of credit-fund demand. While the

fundamental part of banking credit funds is deposit

liability, based on the operating principle of compensated use and cyclical turnover, China's banking is now

faced with a severe phenomenon ofunpaid loans, with at

least one-quarter of loans being overdue and one-fifth

being unrecoverable. Meanwhile, as banks are still actually regarded as government and departmental cashiers,

they are often put under great pressure to make loans

that they should not. This is precisely the cause of the

credit-fund-investment "black-hole" phenomenon, in

which loans are absorbed just like matter into "black

holes" with no chance of escape. These "black holes" of

credit-demand pressure and unrecoverable loans leave

banks with little credit-asset flexibility. And once the

central bank tightens money just a bit, many bank

branches are faced with a payments crisis, enterprises are

unable to make regular purchases and payments, and the

state is forced to abandon its tight policy, the end result

of which is steadily-growing and uncurable inflation.

The basic cause of this "black hole" of credit-fund

demand is that banks are regarded as government and

departmental cashiers, being forced by directive plans to

make loans to enterprises with no repayment capability.

The only way to solve this problem is to speed up the

reform of bank lending mechanisms, by allowing banks

to make their own lending decisions guided by national

industrial policy, and to be selective of enterprises in

order to promote the conversion of enterprise operating

forces, curb irrational loan demand, and increase bankloan recoverability, so that banks can more flexibly

implement state credit-regulation measures, and become

effective means of regulating the economy and promoting economic development.

3. The nonbank trend of credit activity. While state

specialized banks are the major part ofChina's financial

system, which should be regarded as the major channel

for China's credit activity, recent years have seen a large

flow ofbank funds in forms, such as deposit transfer and

fund call, into nonbank financial instutions, such as trust

companies, finance companies, and urban credit cooperatives, causing a phenomenon in which nonbanks

conduct investment and loan credit activity. As the

lending by these nonbank financial institutions is essentially not controlled by planning, the nonbank trend of

credit activity has increased both the amount of credit

that is hard for the state to regulate and control and the

difficulty of macroeconomic regulation and control.

The basic cause ofthis nonbank trend of credit activity is

that specialized banks have been overcontrolled, while

nonbank financial institutions have been undercontrolled and deregulated too arbitrarily. This is similar to

the situation of industrial enterprises in which the overcontrol of large- and medium-sized state enterprises has

sapped their vitality. In banking, if we do not bring the

dominant role of banks into full play, but allow it to be

supplanted by other nonbank financial institutions, the

state's financial macroeconomic regulation and control

effectiveness will be sharply discounted. Invigorating

state specialized banks, by allowing them to play the key

financial role in a market economy, will be a major

matter affecting our economic development and overall

reform.
JPRS-CAR-93-043

28 June 1993 ECONOMIC 17

4. The disorder in banking activity. The disorder in

banking activity is concentrated in the central bank

becoming more businesslike and specialized bank operations becoming "more diversified." In either international practice or China's banking system, while a central

bank should be a nonprofit management organ, whose

highest code of conduct should be socioeconomic development and currency stabilization, China's central bank

certainly has its own profit earnings, handling a considerable amount of direct lending business. Meanwhile,

the specialized banks that should operate like enterprises

are having trouble doing so, being accounted as businesses, while having to turn over their profits to state

revenue according to plans, so that there is no direct

relation between their realized profits and their selfdevelopment and employee interests, genuine profit

restraint and incentive forces have not evolved, and they

cannot acquire a self-development capability or raise

their employee income through correct credit operations. This leaves specialized banks not conscientiously

running credit operations, but rather busily providing

various services, dealing in bonds and real estate, and in

certain cases becoming "grocery stores" that will do

anything. This disorder in banking activity is very dangerous. The business activities of the central bank not

only prevent improvement ofits management regulation

and control, by intensifying the conflicts with its regulation and control targets, but also affect the fairness ofits

actions, thus severely affecting state financial macroeconomic regulation and control and banking reform. The

current banking reform problems of a centralization

trend and financial regulation and control methods

becoming more administrative are examples ofthis. And

the diversification of specialized bank operations

severely affects their normal credit operations, creating a

severe threat to China's healthy banking development.

The basic cause of the disorder in banking activity is that

market economy demands and current international principles have not been used to delimit the functions of the

central bank and state banks. Our central bank not only

uses the traditional planned-economy directive plans and

emphasis on various means of administrative examination

and approvaljurisdiction to control specialized banks, but

also violates international practice by directly making

loans and earning profits. And as to the businesslike

management of specialized banks, the concerned parties

certainly have a negative approach. Specialized banks

cannot realize their own profit aims through normal credit

operations, while having to maintain their operation, pay

interest to depositors, and turn over taxes and profits to

the state, so that the only way they can develop and resolve

their employee interests is through all sorts of supplemental "sidelines." This "diversification" trend ofspecialized bank operations is profit-driven, as well as being

forced on them to a great extent. So the solution to the

disorder in banking activity can be summed up simply m

that the PBC needs to become a genuine central bank and

specialized banks need to become genuine enterprises. It

will be only by applying this international principle to

delimit and standardize China's banking activity, enabling

our banking system to operate in a standard manner, that

we will be able to provide a reliable basis for economic

development and reform.

Tax Regulatory Function in Market Economy

93CE0466B Beijing JINGJIRIBAO in Chinese

9 Apr 93 p 7

[Article by He Zhenyi (0149 2182 0001): "The Tax

Regulatory Function in a Market Economy"]

[Text] As all throughout China are now devoting their

efforts to reform aimed at establishing a new socialist

market economy system, we need to speed up our tax

reform pace to adapt to these new conditions. And we

ought to give first place to converting the regulatory

function oftaxation, as a necessary means of macroeconomic regulation and control over market operations.

I. Market Economy Development Will Mean Perfecting

the Tax Regulatory Function

The economic development experience of all countries

shows that establishing market economy operating forces

means building a corresponding tax regulatory mechanism. The essential feature of a market economy is that

markets play the key role in the disposition ofresources,

making them the basic director of economic operations.

While this excludes the traditional form of disposition of

resources whose basic orientation was directive planning, it certainly does not exclude the necessity of state

macroeconomic regulation and control. On the contrary,

as markets per se also contain certain weaknesses and

imperfections, a market-oriented foundation still

requires that the role ofstate macroeconomic regulation

and control be brought into full play to correct and

supplement market-regulation inadequacies, in order to

ensure the sustained, steady, coordinated, and efficient

growth of the national economy. So when building a

market economy system, it will be necessary to enhance

the role of state macroeconomic regulation and control.

Of course, this role enhancement is absolutely not ofthe

old form of macroeconomic regulation and control of

allocating funds and materials through direct interference in the actions of the key market players, but rather

simply of a new form of macroeconomic regulation and

control suited to and determined by a market economy.

This new form ofregulation and control is characterized

by the state acting in accordance with economic laws,

particularly the demands of market economy laws, by

drawing up macroeconomic development strategies and

guidance plans, and then using the necessary policy

means, mainly fiscal, monetary, and industrial policy, to

indirectly guide the actions of all key market players, so

that their operations are oriented toward these macroeconomic guidance plans. In other words, macroeconomic regulation and control in a market economy is

indirect regulation and control through the role of economic parameters.
18 ECONOMIC JPRS-CAR-93-043

28 June 1993

In such a system of regulation and control, taxation

occupies a conspicuous position. Taxation distribution

touches upon all areas ofthe economy and society, being

a key means of economic regulation directly controlled

by the state, as well as an important parameter ofmarket

economy operations. As taxation changes directly affect

the interests of all key players in the economy, as well as

having an indirect impact on market prices and supply/

demand, improving and enhancing the tax regulatory

function is an indispensable link in establishing a macroeconomic regulation and control system for a market

economy.

II. Streamlining the Tax Function Is the Only Way To

Perfect the Tax Regulatory Function

Our current tax regulatory mechanism evolved out ofthe

second stage of the substitution-of-taxes-for-profits

reform in 1984. While this regulatory mechanism has

played a positive role in areas such as promoting reform

and regulating the economy, which achievements cannot

be denied, it is certainly very unsuited to the needs of a

market economy. This is because the second stage ofthe

substitution-of-taxes-for-profits reform certainly did not

completely escape the framework of the old taxadministration thinking. While the taxation design of

this reform chose a compound taxation system in accordance with market economy demands, it certainly

remained built on the old thinking that tied the ownership function to taxation in its construction of all major

tax-category functions. This was expressed mostly in the

tax-policy construct of the second stage of the substitution of taxes for profits, which adopted a triple regulation plan for enterprise earnings, i.e., using circulationtax reform for the first regulation of enterprise earnings,

income taxes for the second regulation, and regulatory

and bonus taxes for the third regulation, in order to

achieve the end result of squeezing enterprise retained

profits to the designated level, in order to ensure the

same amount ofstate revenue. This method oftying the

ownership distribution function to the tax function not

only directly undermined the tax function, but also

brought many conflicts and difficulties to subsequent tax

operations.

The distribution and regulatory functions of ownership,

as opposed to the distribution and regulatory functions

of the state as the administrator, are two absolutely

different matters, with the two having different operating bases and aims. As to their different regulatoryfunction aims, the regulatory aim of ownership is to

improve enterprise operating conditions, by optimizing

the disposition of enterprise resources to achieve maxlmim earnings, while the regulatory aim of government

administration is to maximize the overall efficiency of

the national economy through optimizing the overall

disposition of resources. One is aimed at enterprises,

while the other is aimed at the overall national economy,'

so that tying these two regulatory functions together in

tax operations causes sharp friction between them,

resulting in tax operations violating market economy

demands.

1. It weakens and distorts the tax function. As it is only

when all major market players in a market economy have

equal standing and conditions in competition that the

positive role of the market disposition of resources is

brought into full play, market economy development

means that taxation must either treat and regulate all

major market players equally, or destroy the conditions

and climate of equal competition. So tying the ownership

regulatory function into the tax function blurs the line

between the two functions, making it difficult for governments at all levels in their regular use of taxation to

distinguish the jurisdiction of their ownership function

from their administrative one. Using taxation to

improve enterprise operating conditions as the owner in

ways such as using tax reductions and exemptions to

resolve difficulties created by poor enterprise management, jeopardizes the tax base, weakens the tax income

function, violates the principle oftax-regulation fairness

causes situations, such as taxation cracking down on the

advanced and protecting the backward, and thus creates

distortion in the tax regulatory function. An analogy is

often drawn between using taxation to resolve enterprise

fund demand and operating difficulties and "turning on

the water to cultivate the fish," and "cultivating fund

sources." Of course, while it is beyond reproach that the

government as the public administrator must pay attention to cultivating fund sources through tax operations,

this is essentially different from resolving the funding

difficulties of a few enterprises, and the two must not be

confused. Resolving the operating difficulties and fund

demands of a few enterprises is essentially an ownership

function, not the job of state tax regulation, so that

transferring this job to tax administration violates the

nature of taxation and causes tax operations to overstep

their bounds. This is because using taxation to administer the ownership function puts tax-system development and collection management in a two-way bind, in

that exercising the ownership function in tax development and management to pay attention to the varying

demands of various enterprises undermines tax standardization and the solemnity of tax laws, causing

damage to the tax function. And protecting the uniformity and standardization ofthe tax system makes it hard

to perform the ownership regulatory function, leaving

certain enterprises that deserve consideration without

the conditions to improve their operations and overcome their difficulties.

2. It individualizes and micromanages the macroeconomic regulation and control function of taxation.

Market regulation is an individual regulation, whose

major defect is that its lack offorce in overall economic

control and macroeconomic structural regulation must

be supplemented with the use of macroeconomic regulation means by the state. So it is only when taxation as the

state's key means of macroeconomic regulation and

control converts its regulation focus completely to the

macroeconomic for overall regulation that it can effectively supplement market defects in the area of the

disposition of resources. But when the tax regulatory

function is tied into the ownership regulatory function,
JPRS-CAR-93-043

28 June 1993 ECONOMIC 19

the limitations of divided ownership powers and functions unavoidably brings tax-jurisdiction decentralization, sapping the overall nature of the regulatory function, and thus causing friction between tax regulation

and market regulation.

In short, the many defects that are showing up in our

current tax-function operation, and its many disparities

with market economy operations, are all due to taxation

being tied into the ownership function. In order to rationalize our tax system and enhance the tax function to

contribute to market economy development, it will be only

through taking major tax reform action, by conducting an

overall inventory of our tax system and collectionmanagement rights and responsibilities, in order to clear

out the ownership function that has been tied into taxation

for so many years and streamline our tax function, that we

will be able to achieve this successfully.

Bright Future Forecast for Insurance Industry

93CE0529B Hong Kong CHING-CHI TAO-PAO

[ECONOMIC REPORTER] in Chinese No 16,

26 Apr 93 pp 9-10

[Article by Mu Zi (4476 4793): "Bright Future Forecast

for the Insurance Industry"]

rText] Insurance can broadly be divided into general

insurance and life insurance. According to the annual

report of the Insurance Industry Supervisory Commission there were 233 insurance companies in Hong Kong

as of 31 December 1992, including 40 life insurance

companies, 173 general insurance companies, and 20

reinsurance companies. Insurance has gradually become

acceptable to the people of Hong Kong. For people who

take out a mortgage to buy a house, at least, purchasing

fire insurance is now a must. People who purchase a car

on an installment basis must buy both general insurance

and third party insurance as the law requires. Those in

the import and export business must take out a transportation insurance policy for their merchandise. In

addition, of course, numerous people take out a life

insurance policy for themselves. In 199 general insurance coverage was worth a total of HK$ 11,246,000,000,

ofwhich the largest portion, 29 percent, was for property

insurance; followed by auto insurance, 22 percent; general liability insurance (including employee compensation insurance), 15 percent; and accident and health

insurance, 10.3 percent (see table).

Raising General Insurance Premiums To Offset Losses

In general insurance, the risk of auto insurance, employee

compensation insurance, and construction insurance all

increased this past year. As a result, insurance companies

had to pay out huge sums in damages; meanwhile losses to

reinsurance companies continued. According to the annual

report, losses for all types of general insurance in 991

amounted to HK$309 million, including HK$24» mrlhon

in damages for general liability insurance and HK3.122

million for property damages.

In the past few years losses to insurance companies

caused by auto thefts have been mounting by the day.

According to documents submitted by officials of the

security branch of the Hong Kong government to the

Legislative Council [Legco], auto theft has become an

increasingly serious problem in the course of the past

five years from 3,555 cases in 1988 to 7,000 cases last

year. Meanwhile, the auto recovery rate has been

declining steadily, from 62.7 percent in 1988 to 57

percent last year. Using this as a justification, insurance companies have adjusted auto insurance premiums two years in a row. The Hong Kong Accident

Insurance Association has disclosed that losses due to

car thefts amounted to a high HK$557,600,000 last

vear up 154 percent over the preceding year, a

record. Most sought-after by car thieves are Mercedes

Benz, BMW, Honda, and Mazda sedans. The Accident Insurance Association believes that if car theits

continue to increase, many insurance companies will

be forced to take measures to protectthemselves, such

as amending the terms of a policy midway through its

life or terminating a policy.

Table 1. General Insurance: Premium Incomes

proportional contract

Total
20 ECONOMIC JPRS-CAR-93-043

28 June 1993

As a matter offact, since January this year car owners no

longer receive commission refunds on the premiums

they pay. So indirectly car owners are paying more to

have their cars insured. Such harsh treatment by the car

insurance companies has naturally provoked a storm of

complaints from car owners and angered some public

organizations, which demand that legislation be adopted

to regulate the car insurance industry. Commissioner

Xue Ming [5641 2494] of the Insurance Industry Supervisory Commission, however, argues that with 84 insurance companies in the business of auto insurance, the

auto insurance market is competitive enough to make

the companies offer reasonable terms and rates.

Auto insurance premiums are not the only premiums

that have been going up. Last year maritime insurance

premiums climbed 50 percent as a result of the contraction of the London insurance market.

Slight Expansion of General Insurance Business

President Huang Baoheng [7806 1405 0077] of the

Insurance Federation pointed to the uncertainty in SinoBntish relations as the primary impediment to the

growth ofthe insurance industry this year. Meanwhile, in

the wake of the collapse of several companies on the

reinsurance market overseas, most insurance companies

in Europe are not seeking to expand their scope of

operations. This translates into higher reinsurance costs

for local insurance companies. In particular, some ofthe

smaller local concerns may be forced to merge with other

companies. Thus merger will be a growing trend in the

insurance market in the future. Huang Baoheng expects

a growth rate of 10 percent for the general insurance

business this year.

Life Insurance Has Enormous Potential

Of the various kinds ofinsurance, in fact, life insurance

stands out on account of both its annual growth and its

market potential. In 1991 the gross premiums of longterm insurance in Hong Kong stood at

HK$ 10,765,000,000. In terms of premiums, individual

life insurance and annuity operations accounted for the

greatest share of the market, about 60 percent, followed

by retirement plans, 35 percent, and long-term business

tied to individual investment, 3 percent.

There were about 1,500,000 individual life insurance

policies in effect last year, their combined premiums

being HK$6,747,000,000, equivalent to HK$4,264 per

family.

At present about 20 to 25 percent of Hong Kong households are covered by life insurance, far below the level in

other developed nations. This shows that the potential

market for life insurance in Hong Kong remains enormous. In the past nine years the number of people in

Hong Kong who took out a life insurance policy

increased seven-fold. While life insurance has not yet

become totally acceptable, the demand for it is growing

daily. As increasingly more people become familiar with

life insurance, the industry has also been broadening its

targets to include all social strata and all age groups. Last

year was a banner year for the industry on the children's

and women's markets. The average age of policyholders

has also been declining steadily, from 32 years in the past

to 30.

To attract more people to buy life insurance, the life

insurance industry has introduced a diverse range of

products tailored to meet their clients' needs, including

savings insurance and medical insurance, both of which

have proved most popular.

For years the insurance industry has been plagued by a

shortage of workers. Right now just 12,000 people work

in the industry, not enough to meet the needs of its

development.

Rapid Development of Long-Term Insurance Industry

Apart from life insurance, retirement insurance and

group insurance plans are also targeted for growth by the

industry. There are currently 5,949 retirement insurance

policies in effect, collecting HK$3,735,000,000 in total

premiums in 1991. According to the November 1992

monthly report put out by the Hong Kong and Shanghai

Banking Corporation, if retirement insurance plans are

made mandatory, the industry can look forward to an

even rosier future since as much as HK$20 billion in

pension funds may be collected each year. What is

worrisome, though, is that currently the public can

choose from among fewer than 20 pension fund management companies, there being some risk inherent in the

over-concentration of funds. In addition, if retirement

insurance is made mandatory, there will be a severe

shortage of insurance consultants and actuaries, potentially lowering the overall quality of the services they

offer. The responsibilities of the Insurance Industry

Supervisory Commission will be broadened this year to

include the registration of local professional retirement

insurance plans. Xue Ming said that a registration

system will better assure employees that they will actually receive the retirement benefits their employers have

committed themselves to providing.

Turning to medical insurance, according to statistics

from the Medical Insurance Association, the number of

people covered by medical insurance plans offered by

organizations rose from 329,000 in 1988 to 476,000 in

1991, while the number of residents who bought individual medical insurance increased from 162,000 in

1989 to 223,000 in 1991. Although the increase in the

number of participants in medical insurance plans has

been slowing down, the prospect of having to pay higher

medical costs after the creation of the Medical Control

Office may prompt vastly more people to purchase

medical insurance in the next two to three years.

Registration Will Enhance Confidence in Brokers

Presently the conduct of insurance professionals is not

regulated. People in the industry prefer self-discipline

and self-policing. To safeguard the interests ofinsurance

policyholders, however, all life insurance sales personnel
JPRS-CAR-93-043

28 June 1993 ECONOMIC 21

have been required since 1 January this year to register

with a central registry, meet basic professional requirements, and comply with the professional rules ofthe Ute

insurance industry, namely, an agent may represent a

maximum of four clients, only two ofwhom at most can

fall into the life insurance category. Registration would

help enhance client confidence in insurance workers.

Furthermore, regulations governing intermediate brokerage

organizations are being drafted, hopefully in time to be

presented to Legco in September. The regulations will make

a clear distinction between independent insurance brokers

and insurance agents. An independent insurance broker will

not be allowed to work for any insurance company at all; he

can only act as a liaison between a client and an insurance

company, representing the former's interests. An insurance

agent, in contrast, works for an insurance company and

represents the company's interests. The regulations will

explicitly prohibit a person from acting in both capacitates,

both as an independent broker and as an agent. The regulations will also stipulate in no uncertain terms that the

independent broker and insurance representative must register with the Independent Brokers Association and the

Insurance Industry Federation, respectively, before they are

allowed to practice their trade.

Opening Up Mainland Market Will Help Industry Grow

Competition among insurance companies has intensified in the wake of the outward migration of companies

and factories from Hong Kong to the mainland, Thailand, Malaysia and other places as their base of production. Meanwhile, Hong Kong has been free from major

natural disasters or fires in the recent past. As a result,

most insurance companies had to lower their property

insurance rates. Industry insiders believe that an urgent

task for insurance firms these days is to open up the

market outside Hong Kong.

Seeing the rapid growth of the insurance market in

China, many insurance companies are casting a covetous

glance toward the mainland. Blazing the trail, the Metropolitan Insurance Company of the United States

opened a branch office in Shanghai last October. Nevertheless, China as yet has no clear laws and regulations

governing the entry of foreign insurance companies into

the mainland market. So it will be sometime before the

mainland market is pried open.

POPULATION

Use of B Ultrasound Prohibited

93CE0522A Hong Kong MINGPAO in Chinese

22 Apr 93 p 8

[Special dispatch: "Male Over Female Birth Proportion

Continues To Worsen; China Prohibits Use of B Ultrasound To Abort Female Babies"]

[Excerpts] Under the influence of the Chinese people's

traditional idea that "men are superior to women,

individual place on the mainland are using B Ultrasound's sexual distinction of the embryoi to>carry-out

abortion by choice. Jiang Zhenghua [5592 2973 5478J,

vice minister in charge of the State Family Planning

Commission, has said that the Chinese Government is

taking seriously the current situation in which more male

than female infants are being born and in which the

proportion is higher than the internationally recognized

standard, and that the authorities are taking many measures to avoid the continual worsening ofthe imbalance,

[passage omitted]

He said that China's sex ratio now in its total population

is about 106.6 [as published], which is not much different than the internationally recognized male-female

sex ratio.

At present the internationally recognized view is that

under normal circumstances, for every 100 female

infants born there are 106 male infants born, and so the

birth sex ratio is about 106.

According to calculations made by a department

involved, at present in China of the infants born every

year, about 400,000 to 500,000 more males are born

than females. After doing research, some population

experts concluded that, half to three-fourths of the

difference was caused by failure to report, or misreport,

female babies, and that a part of the difference was

caused by the carrying out of artificial abortion by choice

after B Ultrasound had identified the sex of the fetus.

Jiang Zhenghua said that the main social cause for the

rise of the sex ration was the influence of the idea that

"men are superior to women."

In China, especially in the vast countryside, the influence of the traditional ideas of "treating females as

inferior to males" and of "continuing the family line by

producing a male heir" is fairly deep. Particularly in

those areas in which the economy is not developed, the

cultural and educational levels are low and the natural

environment is fairly poor, men are still the mam form

of labor power.

Jiang Zhenghua said that the Chinese Government

"takes extremely seriously" the phenomenon over the

past several years of a rise in the birth sex ratio. Besides

enhancing monitoring and research, the government has

taken a series of administrative and legal measures to

effect control and prevent, during the process oflowering

the birth ratio, the problems that could appear oi the

birth sex ratio being on the high side.

He said that China has formulated a series of laws and

regulations to ensure that women enjoy equal rights with

men in politics, the economy, society, and the home, and

to ensure women's legitimate rights and interests. In the

"Constitution," the "Marriage Law," as well as the Law

Ensuring Women's Rights and Interests," which was

promulgated last year, there are articles of law that
22 ECONOMIC JPRS-CAR-93-043

28 June 1993

protect women and children, and crack down severely on

illegal behavior that discriminates against and ill-treats

women who give birth to female babies and that abandons female babies.

He said that China has formulated specific measures to

strictly control the practice of using B Ultrasound to

identify the sex of a fetus and then perform abortion by

choice, a practice that has now appeared in some localities. The Ministry ofPublic Health and the State Family

Planning Commission have issued explicit orders, and

they are now pushing legislative departments to formulate articles oflaw that punish the illegal identification of

the sex of a fetus.

Jiang Zhenghua said that China is vigorously developing

safeguards in the rural society: it is providing preferential old-age insurance for women that have only female

children; and is striving to provide the peasants with

various kinds ofservices in production, life, and birthing

in order to get rid ofthe worries caused by the absence of

male children in a family.

'Chengde Population Control Model' Praised

93CE0442A Beijing ZHONGGUO RENKOU BAO

in Chinese 15 Mar 93 pp 1, 2

[Article by Peng Zhiliang (1756 1807 5328) and Li

Xianglin (2621 0686 2651): "Taking Control of Population and Advancing the Economy: the Chengde Population Control Model"]

[Excerpts] Editor's note: The Chengde area is typical of

those which are "hilly, old, deficient, and poor." Therefore, the government and local CPC committees at all

levels have regarded population control efforts there as too

important to ease up on, and family planning in the area

has been notably successful. Through a long period of

investigation and practice, they have progressively constructed an overall control system which is economically

and culturally compatible with the region, taking it along

a successful family planning route which is bringing

poverty and ignorance under control while promoting

prosperity. The State Family Planning Commission and

population experts have dubbed it the "Chengde Population Control Model."

Research on and analysis of the Chengde population

control model's background, connotations, characteristics

value, and developmental trends, is not only of vital

practical significance for family planning efforts in undeveloped areas, it is also of importance for scientific

research on population and family planning work.

Chengde is a mountainous region north of the Great

Wall in northeastern Hebei. It is typical of undeveloped

areas which rely primarily on an agricultural economy.

More than 80 percent ofthe region's area is mountainous

and only 8.6 percent is under cultivation, what is commonly called "eight mountains, a body of water, and a

piece of land." There are 24 minority peoples here

including those ofthe Manchu, Mongol, Hui, and Korean

nationalities. There are three minority self-governing

counties, and 59 minority self-governing townships, with

minorities composing 47.2 percent ofthe total population

5>ix ot the region's seven counties are impoverished counties supported by the national and provincial governments

For many years, the entire region has absorbed an average

of over 43 million yuan annually in state subsidies. The

fundamental conditions for a developed economy are

lacking here, agriculture is the mainstay industry, and

secondary and tertiary industries are undeveloped. Ofthe

total population, 16.42 percent is illiterate or semi-literate

while 2.34 percent of the rural populace suffers from

various forms of insanity, mental deficiency, endemic

diseases or henditary illnesses which are locally serious.

Under these conditions, the government and local CPC

committees at all levels are guiding the region's people in

conscientiously implementing the party's basic line

while building a socialist market economy system. They

are putting their maximum effort into population and

family planning, and attaining unimaginable successes.

Tu on'

the ratio of women of child-bearing age and the birth rate has all along stayed below 1.63 while

the rate of planned births has stayed above 98 percent.

Hebei's fourth population survey showed that in a comparison of 18 localities and cities in Hebei, only Chengde

had an average annual rate of population increase ofless

than 10 percent. This was not only far lower than other

regions m the province, it was lower than the average

urban growth level in Hebei. Every year since 1988

family planning work in Chengde has led to its being

called Hebei's advanced family planning region.

In 1992, the third highest year for births, the birth rate

for the entire province was only 11.72 percent, with the

natural rate of population increase being 6.29 percent

The total birth rate among women of child bearing age

decreased by 1.29 percent.

Their success in this area has drawn unanimous praise

from State Family Planning Commission leadership, as

well as Chinese and foreign population experts and

scholars, and has led to their population and family

planning experiences being termed the "Chengde population control model." [passage omitted]

After the Third Plenary Session ofthe 11th Party Central

Committee, the party established three strategic objectives for economic construction to develop every part of

China under socialism with Chinese characteristics

However, m Chengde, the per capita GNP was only 196

yuan, with the per capita income only 178 yuan, far from

the goal of a comfortable standard of living.

At that time, the leadership of local party committees

and administrative offices figured accounts, and found

that from 1952 to 1981 the population of the region

increased from 123,280,000 to 233,040,000, and grain

production from 950 million jin to 1.448 billion jin

These were increases of 89 percent and 52.4 percent
JPRS-CAR-93-043

28 June 1993 ECONOMIC 23

respectively, but a 149.3 jin per capita decrease in grains

for the same period of time.

The grim economic and population circumstances presented all levels of Chengde's leadership and the broad

mass of its cadres with serious questions that demanded

response and resolution: How to get the masses to cast

off their poverty and attain the necessities of life? How

will the people here reach a comfortable standard ot

living by the end of this century? [passage omitted]

In 1983 Chengde's party and administrative leadership

formulated a strategic program to declare war on poverty

and lead all the region's people to a comfortable standard

of living. To counter a realistic situation in which a

rapidly growing, low-quality population was seriously

restricting economic development, they proposed economic development policies of "poverty control requires

birth control; prosperity demands the elimination ol

ignorance"; and, "lay equal stress on the two forms ot

production, with simultaneous development (manpower

and resources)."

The local party secretary in that year was Hu Guangyi

T5170 1639 5030]. Elaborating on this grand deveopmental strategy for various county party and governmental leaders, and responsible people reporting to

them, Hu noted that "planning population growth and

generally raising the quality of the rural population are

two fundamental prerequisites to achieving this guiding

objective." Tang Quanjie [0781 0356 2638], formerly

the administrative office specialist, stated that: population and economics are two aspects of the same issue.

It is only by resolving the population problem simultaneously with taking control of the economy that we will

quickly solve our economic development problems, cast

off poverty and attain prosperity." The current administrative specialist, Li Zhanshu [2698 2069 2579], has in

numerous addresses to regional meetings stated that:

"Population growth can produce a chain reaction, with

long term and cumulative effects. Controlling economic

development without controlling a too-rapid population

growth is not wise leadership." This understanding on

the part of a handful of experts soon spread to the

region's cadres at all levels, and to the broader masses.

As a result, the recognition that taking control ol the

economy requires resolution of the population problem

became commonly understood among the masses. Control of population advances the economy became the

unified opinion among cadres and masses throughout

the region.

In the Chengde region, party and government leaders

have not just been oral advocates of family planning in

meetings, but also in their writings. Even more valuable,

they have all practiced what they preach, and taken the

lead in setting the example. Whenever they have encountered a serious problem in their family planning efforts,

they have chosen measures to deal with them on the spot.

The family planning leaders in the region's seven counties identified 117 problems in 10 categories, such as

setting up organizations, disseminating education, styles

of work, etc., and these were all resolved one-by-one on

the spot.

In their family planning leadership, besides implementing a system of layers of responsibility for objectives, every level of leadership has set up a system ot

regular meetings to study the content of family planning

work. At these quarterly meetings, whatever problems

are identified are given prompt resolution The local

party secretary, Hu Zhenguo [5170 2182 0748], stipulated that the busier the work, the more orderly will be

our family planning work; the stricter the finances, the

more limited will be the use offunds for family planning;

the more restrictive the plan, the more family planning

cadres will have to be assigned to the work.

In the daily work of population and family planning,

leading members of the local party committee and

administrative offices have put into operation a county

contact system, in which each member ofthe committee

or administrative office has a contact count. They check

with that county at intervals which may be either fixed or

irregular, directing the work there.

Expressing the majority view of controlling the population problem, Wu Shaoxian [0702 1421 0341], Director

of the local family planning commission, said, not

without some emotion, that: "Party central authorities

and the State Council have stressed the personal responsibility that party and government at all levels have for

family planning. While this is very important, I believe

that overall emphasis and joint control by leading groups

is also very important. This sort of overall consciousness

and approach by our local party committees and administrative leadership have been important factors in the

successful development of our work over the years,

[passage omitted]

Western population experts recognize that poverty produces population, and in China the widely used expression is "the poorer the people the more the births. 1 he

Chengde leadership firmly believes that reliance on the

superiority of socialism and widespread education can

definitely change attitudes and practices concerning

births, and then get people out of poverty through family

planning. They have founded the development of their

population and family planning work precisely in accordance with this view. They have indeed placed widespread education at the forefront, creating a strong

momentum and atmosphere.

When you enter the borders ofthe Chengde region, you

can see from time to time posters and placards proclaiming population control and family planning. Wired

broadcasting is installed in over 90 percent of the rural

households in the region, and the masses hear daily

through loudspeakers the advantages offamily planning.

Party education departments throughout the region now

require that all curricula include a population course in

their content. Since 1991, courses in population theory

and national conditions have been common. Since 198 /,
24 ECONOMIC JPRS-CAR-93-043

28 June 1993

Xinglong County has had population education in

classes above the fifth year level of elementary school In

addition, every village and town in the region has

estab ished comprehensive population education

schools, which at regular intervals train village cadres

and women of child-bearing age as small group leaders

In addition to systematic studies of population theory

family planning policies and programs, and the advantages of family planning, they learn of programs and

methods aimed at each stage of family planning work

and existing problems. After these people return to their

villages, through study activities in small groups of

women of child-bearing age, it is then implemented

among every such couple.

£?«£r desP

read education, Bao Dechang [7637 1795

2490], Chairman of the Pingquan County Family Planning Commission, speaking from considerable experience has stated that: "In developing family planning

work, we are dealing with huge masses of people, amd

widespread education is essential to creating

momentum. But every problem of the masses of childbearing age is a specific one. If we are to resolve these

problems, we can only suit the remedy to the case

proceed according to actual circumstances, and use different methods to deal with different problems." In its

work of broad education, through continual summarizing, they have instituted a system called the "Five

Visits." (These are: a visit to disseminate the party's

family planning policies; a visit to deliver information

on attaining prosperity; a visit to publicize good people

and good events; a visit to publicize the advantages of

family planning and provide information on contraception and birth control; and a visit to allay worries and

resolve difficulties.) Chengde's party committee and

administrative officials are promoting Pingquan's

methods throughout the region, to raise the broad results

ot family planning efforts here to a higher level.

In the Chengde region, competition has become an

important form of their broad educational work in

population and family planning. This activity has been

carried out in each county annually since 1986 Prior to

the contests, small study groups are organized to study

population policies and the facts offamily planning On

this foundation, contests are held at the village and

township levels to choose those who will later compete in

the finals. From the masses of contestants, there have

emerged a considerable number of people who can

answer 100 questions, even 1000 questions correctly

There are so many people whose knowledge of population and family planning policies is so detailed, and their

knowledge of national, regional, county, and township

characteristics is so clear, that it leaves many family

planning cadres breathless.

An even more common form ofspreading the word is in

every village, the fulltime village head and the leader of

the small group dealing with women of child-bearing age

to make regular calls at these women's homes. They talk

with these women one-on-one, educating them in their

homes through casual conversations. They subtly influence those who are ignorant or unconvinced by

becoming familiar with their feelings, understanding

their thinking, knowing their needs, and later help them

work out their problems.

Some people describe Chengde's family planning educational work as "shouting into the air (loudspeaker broadcasts) running on the ground (public buses), posting on

walls (poster slogans), and mass meaning (population

economics)." In brief, deeply penetrate public feeling!

This is precisely because there is a momentum and

atmosphere for population control and economic development, which has created a favorable public opinion

environment and atmosphere for implementation of

basic national policies. It has obviously helped to

improve the smaller environment of peasant family life

and transformed people's thinking, and built a reliable

f?S?, Ä^« carrying out family planning. Li Pengtu

[2621 7720 0956], head of the local party propaganda

department, evaluated the region's family planning propaganda work in this way: "We not only provide knowledge, the first task under heaven,' we are trailblazers

guiding the entire region in a new surge of publicizing

education and development." [passage omitted]

Chengde's leadership at all levels knows very well that

controlling the numbers of our population and raising

the quality of the population is a basic national policy

and a systematic process. To do this work well demands

a complete set of policies, with compatible measures

with all concerned departments working together carrying out comprehensive operations.

Since the beginning of 1984, when local party committees and administrative workers initiated their work

throughout the region, they have always bundled their

economic quotas with their population quotas, simultaneously arranging, simultaneously checking, simultaneously comparing and assessing them. At the same time

they have bundled together party and government at all

levels, responsible leadership, and other leading office

personnel, with everyone sharing whether the planning

work is done well or poorly, sharing honors and shame

rewards and punishments, with each keeping his own

accounts.

Chengde lies in a heavily mountainous area, one in

which minority peoples reside in compact communities

so policy allows each peasant to have two children. In

order to closely and seriously control population growth

regional stipulations are that the village and unit must

have done a good job of the previous year's unplanned

birth work, before planning second births.

When relevant departments at all levels of government

draw up rules and regulations, they all start out from the

standpoint of what is good for developing family planning. In such matters as labor personnel departments

allocating and inviting applications forjobs, when family

planning cadres apply for jobs, etc., there are always

expressly provided rules and regulations. Departments
JPRS-CAR-93-043

28 June 1993 ECONOMIC 25

which oversee businesses stipulate that should a particular company violate family planning policies, not only

will there be mandatory education, the Companys

license to do business will be taken back. Departments

which provide assistance for the poor have made the

development of family planning among these people an

important part of their work, and have made the status

ofpopulation policies implementation an important part

oftheir assessment of how well assistance to the poor has

been accomplished. In their anti-poverty work, they give

to those poor families which have conscientiously practiced birth control, especially single child households, or

those in which the woman has had a tubal hgation, such

preferential consideration and arrangements as antipoverty grants and materials, support in the form of

production materials, etc., which can bring them to

prosperity, so that these families enjoy societal welfare

and relief. As for those poor families which have not

decided to attain the necessities of life and meet the

two-child requirement, they must "first cast off poverty,

then hvae children; not casting off poverty is not

arranging birthing objectives." Some county regulations

and accompanying policies require that families

applying to have a second child must have a per capita

income which is one-third higher than the average

income in their locality; this is to avoid their slipping

back into poverty after the second birth. Poor households which do not seriously practice birth control must

undergo serious education and choose contraceptive

measures before they can receive relief.

Chengde's counties have all adopted positive measures

to raise the quality of the region's population, and there

has been a noticable decrease in the cycle of serious

hereditary illnesses, such as insanity, feeble-mindedness,

and stupidity. The Civil Administration has stipulated

that marriage licenses will not be given to close relations.

The Health Department insists on pre-marital examinations, and those who fail cannot marry. These measures

lowered the rate of infant pre-natal defects from 28.3

percent in 1986 to 10.03 percent in 1990.

To control population control, each county has empowered family planning departments to make other investigations in their allocation ofjob-changing cards, visas

for overseas labor services, social welfare benefits, circulating funds for agricultural use, moving from places of

permanent residence, agricultural travel fees, agricultural materials which are in critically short supply, and to

give right offirst instance in contracting for 10 nurturing

and cutting projects on the hills, orchards, and forests.

Without the signed approval of village, township, and

group family planning managerial personnel, relevant

departments will without exception refuse to approve

the processing of these.

In order to encourage people to have fewer children, and

relieve people of their worries at home, the region and

counties have joined their localities' actual circumstances, and adopted measures to establish and perfect a

system of social services and safeguards. Starting in

1986, the region's civil administration system built 219

homes for the elderly throughout the region. At the

present time, 56 percent of the institutionalized elderly

are enjoying the five guarantees. The life of those in the

homes is higher than the middle class standard ofliving

for the entire region, making the homes so attractive that

some elderly who have children are very envious of the

people in the homes. Since 1989, all counties in the

region have had safety insurance for children caring for

their aging parents and having only one child themselves. This has resulted, on a large scale, of people

returning their second child permits, vivid examples of

how these can be converted into old age insurance,

[passage omitted]

At the beginning of the 1980's, Chengde's family planning efforts also started down the road of tackling rush

cases. In a region of high mountains and deep valleys,

with a widely dispersed mass of people, even a major

strike force thrown into the effort could not handle the

needs of every household. As a result, there was too little

money and too few facilities for each rush case, making

it difficult to satisfy people desires. Leadership and

masses, aware of the facts, determined to strengthen the

building of a force which would deal with everyday work,

and give this force their fullest support. On the problem

of complementing family planning cadres, the leadership

oflocal party committees and administrative units had a

strong desire for strong family planning work policies, so

where the work was difficult, they required personnel

departments in the organizations to choose people who

were the cream of the crop, and ordered that family

planning departments do likewise.

After 1984, they began to strengthen their building of

grass-roots level organizations. Throughout the region,

193 rural townships and villages founded such organizations as family planning committees, set up work stations, technical services stations, and schools for comprehensive population education, with full-time family

planning assistants for village and township heads. There

are 2 240 villages which have these family planning

specialists, and more than 80 percent of these villages

have established full-service family planning offices,

which can at any time provide such services as pregnancy testing, population education, etc. There are

20,630 residents groups which basically supplement the

work ofthe group leaders among women of child-bearing

age.

Leaders at all levels hold these cadres in the greatest

respect. Those with family planning responsibilities at

the township level receive salaries which are at the top

for township level personnel, while specialized cadres at

the village level enjoy top salaries for that level. At all

levels, wages of family planning cadres are one or two

levels higher. Owing to the deployment of grass roots

level family planning specialist cadres, there are group

guarantees to normalize managerial activities, which

cuts down on the incidence of corruption in centralized

activities and greatly economizes on expenses. In 1983,

expenses for development of centralized activities
26 ECONOMIC JPRS-CAR-93-043

28 June 1993

reached a peak of 12.05 million yuan, while normal

expenses now are only one-fifth what they were then.

In addition to administrative and managerial personnel,

Chengde s family planning contingent includes a contingent oftechnical personnel, which has fully mastered the

specialties of educating the masses of couples of childbearing age in the advantages of family planning, contraception, etc. The region's 7 counties and 193 villages

or townships have all built standardized technical services stations, employing 1,026 people of all levels and

classifications. On the average, each county station

employs 23 people, while each township station employs

lour technical personnel. They have formed a systematic

and complete regional family planning technical services

network which has the county technical stations at the

center are linked by the township work stations, and

have the village service offices at the base.

Because there are these networks for normal family

planning work and technical services, they have implemented guarantees for normalizing family planning For

several years, there has been an annual increase in the

number of contraceptive surgical operations performed

by the county and township technical services systems

so that in 1991, 98.37 percent of these operations performed throughout the region were done by this system

Eighty percent of the townships peformed the "three

techniques" within the townships themselves, with only

the four techniques" requiring outside payment, more

than 2.6 million yuan annually paid into national contraception. Moreover, while this technical contingent

was performing contraceptive surgical operation services, they extensively opened up comprehensive service

activities for the masses such as the "five guarantees" of

health care for the elderly, health care services for

single-child couples, prevention and treatment of

women's illnesses, midwifery, and other illnesses not

connected to obstetrics. They have used excellent technology and a good service attitude to gain the trust ofthe

masses, and thereby move family planning efforts from

being a difficult task to being something easy.

In the course of building a family planning contingent

they gave special attention to building this contingent's

thinking and style, opening up widely throughout the

region the "three studies and one affection" movement

r¥<US'/n r Ieading cadres at a11 levels t0 study

J

iao Yulu' 13542 5940 4389], family planning specialist cadres to

study Lei Feng [7191 6912], and technical personnel to

study Bai Qiuen [4101 3061 1869], all with the warmest

allection for their family planning work. A spirit of

respect emerged among the family planning contingent

a surge of the "three comparisons" comparable to the

size ofbenefits and the depth ofservice. Family planning

cadres at all levels have been working so hard to implement national policies, serving the real needs of the

masses, that they have gained the trust of the masses as

well as their support. In 1992, when the village of

Znouyingzi, m Shenping County, elected its representative to the county assembly, the director of the village

lamily planning committee, Liu Guifang [0491 2710

5364], was not a candidate. But the election resulted in

her receiving the most votes, a typical instance.

Throughout the region, there were five planning workers

who became provincial model workers, and several tens

who became advanced workers above the provincial

L

e

,

vel

-

T

*le re£

10

,nal familV Planning commission gained a

Ihird Class Collective Citation Award in 1988, and after

five consecutive years of objective examination received

the prestigious "superior unit" designation.

While building and allocating a worker family planning

contingent, and a technical corps, they also have a

massive contingent offamily planning coordinating personnel. In the entire region there are 270 cadres who

specialize in coordinating family planning, with each

area and county designating five family planning coordinators, villages and towns two each. Throughout the

region, every administrative level above the village has

set up a coordinating organization, and there is a contact

household below that level. At every level coordinators

are widely developing the self-educating, self-control

self-service activities of "help the group through the

group, educate the group through the group, and control

the group through the group." The smooth development

ol lamily planning throughout the region has been of

important benefit in the effort to cast off poverty and

achieve prosperity, [passage omitted]

In many years of family planning practice, Chengde's

party and government leaders at all levels have gradually

come to recognize and master the objective laws of

population production, and have formulated a set of

family planning managment systems and procedures

which are suitable to these laws and the realities oflocal

conditions.

In population and family planning throughout the

region, they have implemented a system of control called

four routes, one focus." The "four routes" are, the party

affairs route, the government affairs route, the specialist

cadre route, and the coordinating committee route The

one focus," of course, is the couple of child-bearing age.

The party affairs route: local committee—county committee—township or town party committee—village

party branch—party member—focus couple.

The government affairs route: administrative officescounty government—township or town governmentvillage committee-village (resident) people's organization

head—locus couple.

The specialist cadre route: local family planning committee—county family planning committee—township or

town family planning committee—head of the village

specialists—head of the couples of child-bearing age

small group—focus couple.

The coordinating committee route: local family planning

coordinator—county family planning coordinatortown or township family planning coordinator—village

coordinating committee—members of the committee

committee personnel—focus couple.
JPRS-CAR-93-043

28 June 1993 ECONOMIC 27

In "four routes, one focus" control, the party affairs route

has the goal of implementing the management responsibility system and the party member contact household

system The government affairs route concludes and signs

population goals responsibility certificates, and the two

together produce examinations, rewards and penalties.

The family planning specialist cadres extend rewards and

penalties based on the contracts. The coordinating committee route does education and service work among the

masses of child-bearing age through committee members

and contact households, coordinating the work of administrative and government managerial organizations, jointly

furthering the implementation of population policies. All

this is of importance to common management and comprehensive control.

In the management of family planning, they have persisted in seeking truth from facts, adhering to the bottom

to top top to bottom principle. To have a first child, the

individuals make application—the unit (village) reports

to higher authority—township level investigates—

implementation is made to the person; to have a second

child, the individuals make application—the unit (village) reports to higher authority—there is investigation

at the township level—examination and verification at

the county level—regional review—examination and

approval at the county level—implementation is made

to the person. They following the proclamation of Zhang

Bang [1728 2831] to accept supervision, and seek permission to have children.

To manage couples of child-bearing age, they have

developed the "serve a dragon" management activity.

They are carrying out classified management of couples

in the 15 to 49 year age group, according to differing age

groups and situations. Within these parameters, those in

the 15 to 29 year old age group are divided into live

classes according to their different situations. One objective is education, chiefly aimed at unmarried women ot

child-bearing age, focusing on educating them on such

matters as population and the national situation, educating them in their youth, prior to their marriages. This

is done through at-home interviews and discussions,

aimed at their specific situations. The second objective is

health care, with the focus group being childless married

couples, setting times for them to receive hygiene and

health care services, and organizing their basic education

in population and family planning and their family s

technical support in attaining prosperity. This provides

them with a foundation for continually producing,

living and child-bearing. The third objective is solicitude aimed at couples of child-bearing age who have a

child but have not adopted long-term birth control

measures Regular solicitude is shown for these people,

through monthly visits, and prompt assistance in

resolving whatever problems they may have, so that they

will consciously practice family planning. The lourth

objective is observation, aimed at couples who are m

their first year of practicing birth control. For these

couples, in addition to ongoing education and solicitude,

the emphasis is on helping them to cast off their poverty

and attain prosperity, so that by passing their days well it

will have a positive effect on other aspects of their

working and living. The fifth objective is stability, aimed

at those who have practiced birth control for more than

a year, without a history of failure. The stress here is on

helping them to become more productive in their work,

and to enrich their lives, guiding them in paying greater

attention to the education and nurturing of their offspring. Through this classified management, breaking

down the mass ofthese couples into groups, complicated

management becomes clear-cut and specific, thereby

making it easier to grasp the vital points, and accomplish

the task, [passage omitted]

In the course of leading the people of the region to cast off

poverty and attain prosperity, guiding them to a "comfortable standard ofliving," the party committees and governments in Chengde have all along twisted two types of

production together, having at its core the fact that in

mastering the economy we must not forget to control

population, and that taking charge ofthe population serves

our economic construction.

Given that much of the populace has a living standard

below the poverty line, that the forces of production are

at a fairly low level of development, and that a "many

children make for many laborers" attitude is still prevalent in the minds of the bulk of the peasants, those

developing family planning efforts have paid attention to

guiding the masses in seeing the dialectical relationship

between the size of the population and how rapidly

prosperity is achieved. Through a massive amount ot

work, they have gotten the peasants excited about

becoming more prosperous.

Since 1988, at the same time that they have made use of

comprehensive population schools and village comprehensive family planning service offices to instruct the

masses on population and family planning, they have

been instructing the masses of peasants on urgently

needed science and technology. Examples of these are:

corn membrane cover technology, paddy soaking technology for raising rice seedlings, high-yield fruit technology, standardized afforestation technology, technology to improve animal husbandry, technology to

fatten livestock and poultry rapidly, water-conserving

irrigation technology, etc. Because these technologies

require little investment, and have obviously high production and yield, they have been warmly welcomed by

the masses of the peasants. Not only have they resulted

in a heightened interest in learning on the part of couples

of child-bearing age, they have attracted a great many

others to participate, ranging from young people still in

their teens to seniors upwards of 70 or 80 years old.

While allocating these specialized family planning cadres,

they gave attention to selecting "capable people,

requiring that while they were doing their family planning

work among women of child-bearing age, they would also

pay attention to merging their family planning work with

that of organizing young women to study the technology

which will help them cast offpoverty and attain prosperity.
28 ECONOMIC JPRS-CAR-93-043

28 June 1993

For example, in Yangzhang, a village of 50 families in

«"}„ ei?,Pui8quan County'

Comrade Xu Shurong [1776

3219 2837] took on the responsibility of heading up a

group of women of child-bearing age in 1987, and utilized

small group activities to teach everyone the techniques and

skills of planting watermelons, peanuts, and wheat; and

how to rapidly fatten pigs and raise geese, etc. Every

household m the village soon began to earn more, raising

the per capita income from not quite 300 yuan in 1987 to

over 500 yuan in 1990. The support she received from the

masses was so absolute that when the village held its 1991

elections to choose a new committee, she received 699 of

700 votes cast, every one but her own. Through family

planning work and the fact of many people having fewer

children and improving financially, a greater number of

people are gradually coming to realize that the old saying

the more the children, the more blessings," has given way

to the more children, the more burdens," and that the

route to rapid prosperity is through having fewer children.

At the same time that the Chengde region is controlling

its population increase, it is putting much effort into the

work of raising the quality of the population,

throughout the region, it is developing its work of

education relieves poverty" and "science and technology take us to prosperity." They are working hard to

foster technical talent in every household; this not only

steps up the pace of prosperity, but also conversely

iurthers helps to control the population increase. An

example of this is Weichang, a Manchu and Mongol

self-governing county. After years of effort, there now

over 60,000 peasants who have received their "green

certificate," and they have produced over 160 000

people of technical talent in all categories. The households here not only have people who understand family

planning, they also understand science and technology

The masses of child-bearing age are devoting their spirit

and energy to expanding common agricultural techniques to build up their family fortunes. Last year, all

agricultural projects in the county produced economic

benefits amounting to 56.77 million yuan, which meant

a 113 yuan per capita increase in income for the county's

peasants. At the same time, the county had 3,764 holders

ol child-bearing licenses who postponed the time when

they would have a child or abandoned the idea of a

second child altogether.

In the Chengde region, due to the effective efforts to

control the numbers of the population and constantly

enhance the quality of the population, economic construction has begun to move along at a rapid pace, on a

fast track.;' The effects of controlling the population

and advancing the economy are becoming more obvious

every day. In 1992, the total output value for the entire

region was 3 billion yuan, 5.6 times again what it was in

1981; the rural per capita income was 462 yuan 46

times again was it was in 1981. Chengde has the slowest

average population growth rate of all regions in Hebei,

but it had the fastest average economic growth rate

among these regions. They have brought about an overall

increase m our socialist economy and brought a synchronized per capita increase and coordinated development

to a new position. The regional planning committee has

made some calculations; for example, when the pace of

average population increase was calculated for the 19

year period from 1954 to 1973, and then compared with

the average increase for the 19 years from 1973 to 1991

|

t

i^*Äd tha!.durinS

the latter period there were

1,129,600 fewer births. Without this decrease in the

birth rate, the region's per capita gross output value

would be about 800 yuan, more than 370 yuan lower

than the actual current per capita figure, or slightly less

than one-third. Speaking with feeling, the region's

Deputy Assistant Director Li Jinghua [2621 2529 54781

tod reporters that, "We have put a great deal of effort

into population control over the past several years and

it s actually like plucking a pipa. If the population is

under control, then there is a corresponding increase in

economic benefits. This in turn eases the pressure of

population on economic development, so that leaders at

all levels can put even more effort into controlling the

economy. So in the dialectical view, taking charge ofthe

population is the same as taking charge ofthe economy

and will be of economic benefit."

Li Zhanshu [2698 2069 2579], Assistant Director of the

Administrative Office, told reporters that, "Taking

charge of the population to further the economy is the

obvious developmental route for a poor region like ours

and taking such a route in the past has led to today's

results. And in the future we will follow this path to gain

even greater victories."

We give Chengde our warmest blessings in its monumental undertaking of controlling population and furthering the economy. May they have more success and

make even more contributions.

Major Obstacles to Ningxia's Family Planning

93CE0522B Yinchuan NINGXIA RIBAO in Chinese

24 Apr 93 p 1

[Article by Niu Qi (3662 3823), Secretary of the Party

Group, Ningxia Hui Autonomous Region Family Planning Commission: "On Factors Restricting Ningxia's

Family Planning Work"]

[Excerpt] Although marked successes have been

obtained in Ningxia's family planning work, in China it

is still considered a backward area in this respect and its

population situation is still extremely grim. Data from

f

e

f

ourth national census shows that in the period from

1982 to 1990 Ningxia's population growth rate was 2 25

percent on average per year, 0.77 percentage points

higher than the national average and the fastest growth

rate of all provinces and autonomous regions in China.

The factors conditioning Ningxia's natural population

growth rate so that it remains high are multifaceted, but

the two most fundamental factors are:
JPRS-CAR-93-043

28 June 1993 ECONOMIC 29

1 The problems exisisting in implementing the Regulations on Family Planning in the Ningxia Hui Autonomous Region" are an important factor restricting the

development of Ningxia's family planning work. Promulgation and implementation ofthe "Regulations are

an important matter in Ningxia's family planning work

that indicate that this work has entered the stage ot legal

control. However, because the leadership in some areas

do not take this work seriously and the propaganda work

on it is not sufficiently thorough, or because improper

methods have been adopted, there has not been formed

a climate for this work, and up to now the masses in

some mountain areas do not know what the Regulations" are supposed to do. On the other hand, some

family planning cadres and township-village cadres,

because they lack knowledge of the law, when dealing

with outside-plan births, have a lingering fear that it they

do not deal with them carefully they will become the

accused in a lawsuit, and therefore they would often

rather be "loose" than "tight." At the same time, our

legal system is not sound, the building of the strength ot

basic-level judicial organizations has not been sufliciently perfected, and some townships (towns) do not

have courts, so it is very difficult for family planning

work to meet the demand for legal control. At present, in

actual work the great majority ofthe bodies that enforce

implementation are still the township (town) people s

governments and family planning departments, and are

not the people's courts. The provisions for punishment

stipulated by the "Regulations" do not go beyond the

two categories of administrative disciplinary measures

and economic fines. However, in actual implementation,

some of the masses which are having difficulties find it

impossible to bear even the lowest fine, and some

wealthy families disdain to worry about paying the

highest fine, as some ofthem say: At worst I have put out

several thousand yuan to buy a son. Thus the goals ot

family planning are not attained. Therefore, in the

process of implementing the "Regulations," we must

constantly sum up and accumulate experiences that will

be advantageous for the smooth development ot

Ningxia's family planning work.

2 Over-quota births, early marriage and early birth, and

short intervals between births are a key factor that

restricts and bogs down Ningxia's family planning work.

According to statistics, in 1990 in Ningxia the abovequota birth rate was 4.21 percentage points below that ot

1989 but the number of above-quota women giving

birth'was 15.69 percent of the total number of women

giving birth, being 17,000 women. According to a

iurvey, some peasants in Ningxia in 1990 gave birth to

their 10th child, and some even gave birth to a 12th

baby. The situation of early marriage and early birth is

extremely serious in poor mountain areas. In Ningxia in

1990 5 863 females under 19 years old were married lor

the first time, accounting for 15.18 percent of the total

number of first marriages in Ningxia; the birth rate ot

child-bearing-age women 15 to 19 years old was 28

percent. In addition, the "Regulations" clearly stipulate

that if permission for giving birth to a second and third

child is granted, the intervals between births must be

four years or more. However, the departments in charge

in some localities have gotten the wrong impression

about implementing the family planning policy. They

think that, provided the "one, two, three" birth policy is

upheld, delayed birth and early birth are one and the

same Thus they basically take a laissez-faire attitude

toward births within the number of pregnancies.

According to incomplete statistics, in Ningxia in 1990

more than 15,000 women gave birth before the prescribed birth interval.

The calculation of numbers is dull, but its result makes

people stare tongue-tied: if there are no over-quota

births, the birth rate ofNingxia's population will tall 5.1

per-thousand points; if there are no early marriages and

early births, this birth rate will fall another 1.59 perthousand points; and ifthe interval between a permitted

second and third birth is four years or more, this birth

rate will fall further by 3.37 per-thousand points. Adding

the above three figures means that the birth rate ot

Ningxia's population will fall a total of 8.66 perthousand points. Compared with 1990, when the birth

rate ofNingxia's population was 24.36 percent, after the

"three crucial factors" are strictly controlled, the birth

rate will fall to 15.6 percent. Of course, this is only a

hypothetical result, but at the same time there is potential in family planning work that can be tapped, [passage

omitted]

FOREIGN TRADE, INVESTMENT

Article Analyzes Increasing Foreign Direct

Investment

93CE0455A Beijing GUOJIMAOYI[INTERTRADE]

in Chinese No 2, 15 Feb 92 pp 21-23, 32

[Article by Jiang Fan (3068 1581) ofMOFERT's General

Office: "On the Surging Tide of Foreign Investment ]

[Text] After Deng Xiaoping's speech in the south at the

beginning of last year, great numbers of traders came to

China from more than 70 countries and regions,

including Hong Kong, Macao, Taiwan, the United

States, Japan, Korea, Singapore, Canada, Thailand, Australia, and Malaysia. What started as a surge of enthusiasm for investment at the year's outset gradually

became a tidal wave by year's end. During the period

from January through November, China approved a

total of 40,291 foreign investment projects, with agreements for a total of $45.89 billion in foreign funds. This

was 1.5 times that for the same period in 1991. With

such increased momentum in foreign firms' mvestments

in China, far surpassing the two great surges of 1984 and

1988, 1992 can truly be called China's "year of foreign

commercial investment."

Surging Foreign Investment

1 The sources of foreign investment are pluralized. In

this surging tide offoreign investment, that from Taiwan
30 ECONOMIC JPRS-CAR-93-043

28 June 1993

has been the most brisk, catapulting Taiwan from its

1991 position of fourth on the list to second in 1992

behind only the Hong Kong-Macao region. Investment

Irom the United States and Japan still displayed a rapid

expansion momentum, with the two nations continuing

in third and fourth positions. Korean investment in

China also developed rapidly, vaulting into fifth place

Along with the establishment of Sino-Korean diplomatic

relations, Korean investment here will develop even

faster The rest of the top ten investing nations in order

are: Singapore, Canada, Thailand, Australia, and

Malaysia. Besides the traditional sources, such countries

as Cyprus, Lebanon, Poland, Hungary, and Romania

also began investing in China in 1992. In the first half of

last year, Asian nations that expanded their scope of

investment in China were: Singapore, 5.4 times again

that of the same period in 1991; Malaysia, 4.5 times

again; and the Phillipines, 17 times again. Of the European nations: France, 19 times again; Italy, 12 times

again; Australia, 5.4 times again; Canada, four times; the

United States and Japan, more than two times again that

2. There is a wider area receiving foreign commercial

investment. In the 1980's, such investment was concentrated mainly in the coastal open areas of China, with

inland areas receiving foreign commercial investment

constituting only 7 percent of the national total. Last

year, while the coastal open areas continued to draw in

foreign direct commercial investment at a rapid pace

there was also a sizeable increase in the work of developing such investment in the inland regions. During the

period from January through September, 30 percent of

the nation's total of foreign commercial direct investment was in the 14 coastal open cities of Tianjin

Shanghai, Dalian, Qingdao, Ningbo, Guangzhou, Qinghuangdao, Yantai, Lianyungang, Nantong, Wenzhou

Fuzhou, Zhanjiang, and Beihai. At the same time 11

percent of the national total was in the inland areas

Some areas m the interior and minority-impacted areas

also will combine their energy resources and the foreign

investment they have attracted. The Inner Mongolian

Autonomous Region approved more than 100 foreignfunded enterprises during the January to September

period, with agreements for a total of $88 million in

foreign funds. Presently, foreign commercial investment

in China is moving from the coastal regions to the

interior, from the economically developed Northeast to

the border areas of the West, and expanding into many

provinces, self-governing regions, and municipalities

directly under the central government. Throughout

China, we are moving into a situation of simultaneous

development for both coastal regions and interior.

3. There is widespread expansion of investment regulations. A major characteristic offoreign direct investment

in 1992 was that it went for large projects. For January

through November, direct investment agreements called

for an average ofmore than $11.3 million per project an

increase ofmore than 23 percent over the same period in

1991. A considerable number of the newly approved

projects included some higher technology, compensating

lor areas in which China lacks. These are projects which

will have a major effect on China's economic development. Some examples: the U.S. Motorola Corporation

has invested m a Tianjin project for electronic parts and

communications products; the Mitsubishi Corporation

?LT?an,

has invested in a Shandong cement projectIBM in the United States has invested in a series of

Beijing projects dealing with electronic parts; Japan's

Dasailu [1129 6857 3873] Corporation has invested in

an acetate fiber project in Xian; the New World Group

ol Hong Kong has invested in the Pearl River power

station project in Guangzhou; the U.S. company BorgWarner is investing in a Beijing gear project; there is

Hong Kong investment in an acrylic fiber project in

Fujian, Sino-French joint investment in the Shenlong

Automotive Corporation, Ltd., etc. In Shenzhen, foreign

commercial investment during the month of October

1992 in excess of $10 million constituted more than 25

percent of the total, with more than 50 percent of the

total in the $5 - $10 million range. Obviously, the model

ol foreign investment China is attracting is moving from

low levels to high.

4 New changes are taking place in those industries where

there has been foreign commercial investment. During

the first half of 1992, ofthe total volume offoreign funds

in contractual agreements, 70.1 percent were classed as

industrial; 17.8 percent was in real estate; communication, transportation and post constituted 6 percent- the

commercial food and beverage industry made up 1 6

percent; and the forestry and animal husbandry industry

1.3 percent. Compared to the same period for 1991 the

greatest changes were: the proportion for communication, transportation and post climbed from 0.6 percent

to 6 percent; real estate's share of the total volume of

foreign commercial investment rose from 12.8 percent to

17.8 percent. The proportional relationships between

primary, secondary, and tertiary industries is fairly moderate. Foreign commercial investment tends to be concentrated in the electrical power and resource industriesafter these, successively, are light industry, electronics'

machinery, textiles, and clothing. Advanced technology

enterprises and export enterprises constitute 13 percent

of the total number of industrial projects. In the main

the industrial arrangement offoreign commercial investment in China seems rational, basically in accord with

what is needed for the development of the domestic

economy.

5. There are attempts to find new channels and models

for attracting foreign commercial investment. Regions

which are promising for investment are opening up

constantly. To cite some examples: there are test sites for

joint Smo-foreign investment stock companies in

Shanghai and Shenzhen, and these have been successfulmany medium- and large-scale state-run enterprises have

been amassing the funds to carry out their technological

transformation through the issuance ofstock certificates

(including foreign funds' B-type stocks), which has invigorated most of these enterprises; by emphasizing land
JPRS-CAR-93-043

28 June 1993 ECONOMIC 31

development, the real estate industry has become a hot

spot in the competition for foreign investment; there is a

gradual expansion in the number of areas which are

promising to set up banks for foreign funds, and in five

special economic zones, Shenzhen, Zhuhai, Shantou

Xiamen, and Hainan, foreign banks have set up over 270

offices or branches in China. Presently, Shanghai has

established China's first negotiable securities exchange

market in conjunction with the Citibank and Bank of

America, the Credit Lyonnais Bank and Banque

Indosuez, France, the Nippon Kogyo Ginko Bank

Sanwa Bank, and Dai-ichi-Kangyo Bank ofJapan, all ot

which have established Chinese branches. The Sinoforeign jointly invested International Financial Corporation, and the Joint Financial Corporation have set up

facilities in Pudong, to extend foreign exchange loans to

likely enterprises in Shanghai. Tertiary industries have

using foreign investment have begun to pick up

momentum, while there have been breakthroughs in the

attraction offoreign commercial investment by the commercial and foreign trade areas in Shanghai, for

example, the large supermarket, which was jointly constructed in Pudong by the No. 1 General Merchandise

Company and the 800 Yaohan International of Japan,

will not only operate as a product sales operation, but

will also enjoy certain import and export rights. The

independently funded foreign trading corporation set up

by Japan's Itochu Corporation and Mitsui Trading Firm

at the Baoshui area high bridge outside of Pudong is now

open for business. Two Japanese foreign trade companies Marubeni Corporation and Sumitomo Corporation as well as a group of foreign trade companies from

the United States and Saudi Arabia, will likewise open

for business.

Causes of the Foreign Investment Tide

There are many reasons for the surging tide of foreign

investment in 1992.

First China has a stable government, a stable society,

and a booming economy. Comrade Deng Xiaoping s

speech in the south symbolized that China's opening to

the outside has entered a new period of development.

From the standpoint of opening to the outside world, the

initial formation ofthree large open belts along the coast,

along the river, and along the border, has now begun a

new pattern, going from the exterior to the interior,

all-embracing, overall development. As to administrative levels opening, we have already broken through the

original 1980's administrative structure. Not only have

there been increases in the policies enjoyed in the special

economic zones, the policies which opened up the

Baoshui area have been implemented successively in

Shanghai's Pudong, Shenzhen, Tianjin, and Dalian.

China's multilevel, focused pattern of overall openness

has doubtlessly been a major factor in producing foreign

commercial direct investment.

Second, the conditions restricting the course of foreign

investment have changed. One change m China s new

open structure, which includes the attraction of foreign

commercial investment as a strategic concept, has been

from a development strategy which was centered on

various regions, to a merged strategy, in which industries

are primary, with regions as their complement. In 1992,

through practicing openness in all aspects, on the basis ot

continually practicing a bias towards regions, the locus

of attracting foreign investment was shifted to industrial

development, while also implementing a series ot supplementary measures. Examples of this are the policies

which are preferential to industries, such as extending

the deadline for tax payments to anyone whose investments support key businesses, etc., in order to resolve the

problem ofmerging the tilttoward regional development

toward a tilt toward industries. Therefore, the course of

foreign investment is even more dependent on the

funding and technological content offoreign investment,

as well as the degree to which it is linked up with

industrial development. This developmental strategy lor

attracting foreign investment will influence the course ot

direct foreign commercial investment to a considerable

degree.

Third, the trend toward relaxed restrictions on the

course of foreign investment has created more flexible

forms of investment. In 1992, there was an obvious

relaxation in the restrictions on the areas designated tor

foreign commercial investment, with measures to implement test sites in commerce, finance, travel, and real

estate Along with the continuous advancement ot stock

market pilot sites, engaging in negotiable securities

investment has become a new form of foreign commercial investment in China. Concurrently, there has been

further expansion of investment regions and industries.

Fourth cut down on government oversight in order to

increase work efficiency. China has turned over some ol

the review and approval powers for projects to the

provinces, autonomous regions, directly administered

cities and 14 open cities along the coast that formerly

belonged to the People's Government and relevant agencies of the State Council. While conferring upon

Shanghai rights of review and approval over five

projects, it also gave to Shanghai the right to raise money

in five complementary areas. Several provinces and

municipalities have been delegated the power to approve

projects funded with foreign investments, and the review

and approval mechanisms in some of these provinces

and municipalities have implemented "one stop service, which has greatly decreased time frame for review

and approval. This better efficiency rate has attracted

still more investors.

Fifth there has been a sharp increase in people's enthusiasm. Comrade Deng Xiaoping's speech in the south has

caused the formerly latent enthusiastic attitude of the

people into an improved soft and hard investment

environment. The coastal areas which opened up earlier

have made progress in resolving the problem of lmprefect basic facilities and complementary service facilties,

with one after the other expanding the scope oftheir laws

and regulations which relate to foreign investment. Some
32 ECONOMIC JPRS-CAR-93-043

28 June 1993

inland areas, learning from the successful experiences of

the coastal areas, have stepped up the pace at which they

utilize foreign investment through their advantageous

low-priced land and labor force, abundant resources and

improvements in the basic facilities of the industries

they have already. An increasing number of enterprises

realize that bringing in foreign investment is a shortcut

to transforming their machinery, raising their management level, and upgrading their products. One after

another they are taking the initiative to seek good

relationships, and greater opportunities for foreign

investment. 6

The Results From Utilizing Foreign Investment

As the United Nations recent publication, "1992 World

Investment Report" points out, China has one of the

highest foreign investment climates in the world. By the

end of November 1992, there were 82,000 projects

approved for receipt offoreign commercial direct investment, with agreements for a total of $98.23 billion in

foreign funds. Approximately one-third of those enterprises to be set up with foreign funds are already in

operation.

In the overall view, China's foreign investment enterprises have entered their harvest season. Statistics show

that beginning in 1987, China's foreign investment

enterprises began to break free from conditions of low

economic benefits, and changed to normal production

operations, having now entered a profitable period

About 70 percent are profitable. During relief efforts to

stricken areas in 1991, the Sino-U.S. corporation Smith

Kline Pharmaceuticals, Ltd., contributed RMB200 mil-

^Lrav

n at one stroke

-

Zhao Yongming [6392 3057

2494] the assistant general manager of this company

said that all large corporations have this sort ofstyle but

they first had to be profitable. The Smith Kline Corporation, an enterprise jointly funded and managed from

lo^jm ?u the United States'

went int0 operation in 198/, and began to show a profit three years later The

company's sales volume puts it in sixth place among 88

stock enterprises, and its profits put it in the leading

position among China's pharmaceutical firms. Last year

760 foreign investment enterprises received the China

Foreigri Commercial Investment Enterprise Association s Double Excellence" commendation for acquiring

funding in excess of U.S.$20 million, with profits of

more than $10 million. This was double the number for

1991. In 1990, China reviewed 500 enterprises in 30

industries, which showed the most profitability; ofthese

those in the pharmaceutical, electronic, instrumentation,'

fodder, and foodstuffs industries were the leaders among

those enterprises which had received foreign investment.

The benefits from foreign commercial investment enterprises also carry with them considerable comprehensive

economic and societal benefits for China, and provide

great impetus to the development of the national

economy.

1. Foreign commercial investment enterprises actual

investment and profits help make up for a lack of

construction funding in the interior ofthe country. Up to

the end of November 1992, $31.64 billion in foreign

investment was so used. Foreign commercial investment

has become an important source of construction funding

the the coastal areas.

2. They have brought in advanced technology and equipment. Since 1987, altogether $24 billion in electromechanical equipment has been imported this way

which is 29 percent of the total of such equipment

imported here in the same period. Bringing in advanced

techno ogy and equipment has filled in some domestic

technological empty spaces, with such products as

sedans, elevators, color television kinescopes, switchboards, optical fiber cables, etc., being manufactured by

foreign commercial investment enterprises. A large

batch of products have risen to the next level with

numerous state-run, collective enterprises being transformed technologically. Such basic facilities as power

stations, docks, and public roads, operated with foreign

commercial investment, along with a batch of travel

service facilities, have furnished the fundamental conditions for development ofthe travel industry, and greatly

improved the investment environment.

3. They have served an exemplary and promotional

Junction in transforming the management system of

China s state-run industrial enterprises. China referred

to the international ways of doing things, and respected

the objective laws of economic development in drafting

the necessary laws concerning foreign commercial

investment and the government's special methods of

handling enterprises. This was to manage enterprises by

legal methods while simultaneously using laws and regulations to ensure that enterprises would have the right

of self-management and operate in accordance with the

market economic mechanism. A sizable number of foreign commercial investment enterprises are jointly

funded or operated by foreign businesses and Chinese

state-run industrial enterprises. In order to satisfy the

needs of foreign investment enterprises, Chinese enterprises are transforming themselves by raising the level of

their equipment, technology and management, bringing

their products to a new level, lowering their prices and

warmly welcoming domestic and foreign markets. This

will greatly raise the enterprises' economic benefits.

4. They are bringing in new managerial styles. Foreign

commercial investment enterprises are managing with

the commodity economy outlook and methods which are

geared to deal with both domestic and overseas markets

implementing rigorous management and competition

systems within the enterprises. Through operations and

management, managerial personnel in China are

learning foreign advanced management thought and

experiences, cultivating a group of talent.

5. They have promoted the conversion of our coastal

economy m its form and in its orientation to the outside

and the development of China's foreign trade. During the
JPRS-CAR-93-043

28 June 1993 ECONOMIC 33

first 11 months oflast year, the nation's foreign commercial

investment enterprises exported $ 12.7 billion in products, a

65 4 percent increase over the same period in 1991, and

19 1 percent of China's total volume of exports, 5 percentage points higher than the same period the year before.

In looking atthe export product mix, we see thatthe product

level was higher, a huge majority being finished products. Ol

these electro-mechanical products and textile products are

still in the leading position, and considerably improving

China's export product mix. For the first 11 months of last

year, foreign commercial investment enterprises imported

$7 5 billion, a 53.7 percent increase over the same period in

1991 and 18.5 percent of the nation's total volume of

imports, which was an increase of 2.4 percentage points over

the same period in the previous year. There was an overall

surplus in the foreign investment enterprises' foreign

exchange balance of payments, with the enterprises foreign

exchange structure and payments to the foreign exchange

adjustement center increasing annually.

6 They have increased China's revenue and employment By yearend 1991, foreign investment enterprises

which were in operation had directly hired 2.8 million

people. The industrial output value of these enterprises

in 1991 was RMB100 billion yuan, approximately 4.4

percent of the nation's industrial output value.

7 Establishing foreign commercial investment enterprises

on a large scale has closely integrated the economic relationships of Hong Kong, Macao, Taiwan, and the Chinese

mainland. It has also stabilized Hong Kong and Macao and

begun to have a positive use in promoting the peaceful

unification of both sides of the straits.

Experience shows that the use offoreign investment has

furthered the development of China's forces of production has strengthened the nation's overall strength,

raised the people's standard ofliving, and has become an

important segment indispensable to the development of

China's national economy.

New Approaches To Attracting Foreign Investment

In order to deal with this new tide offoreign commercial

investment, we must progressively liberate our thinking,

and enthusiastically search more deeply for new methods

and measures which differ from the earlier phase before

we can welcome foreign traders with completely new

approaches.

Simultaneous with the implementation of a coastal economic development strategy, we must step up the economic pace ofthe interior frontier cities and the provincial capitals, extending to them the same preferential

policies enjoyed by the coastal open cities. This will give

impetus to accelerating the economic development ot

the interior.

The preferential policies for attracting foreign commercial investment should be changed from a regional bias

to an industrial bias. Put the emphasis on encouraging

basic facilities projects which are badly needed for the

development of our national economy, in such areas as

agricultural development, energy, transportation, and

communications. Allow these projects to expand the

scope of their operations, and to add more complementary service projects. Encourage capital intensive and

technology intensive projects, promoting the rise of

projects in which the products have new technology, high

technical content, and add high value. Further, give to

projects ofthis type a preferential tax status, expanding

their domestic sales market. Encourage projects which

deal with raw materials, spare parts and peripherals, and

raise the proportion of foreign investment enterprise

products, especially products for export, which are made

in China, to increase our net foreign exchange. Lead the

foreign businesses use of the joint investment and joint

operational model to accelerate the technological transformation of existing enterprises, spurring those enterprises' technological progress and renewal.

We must move forward to expand the scope of foreign

commercial investment, enlarging foreign commercial

investment test sites in commerce, foreign trade,

finance, insurance, and air transport. Encourage foreign

commercial investment in land use and tourism. Move

forward in relaxing the restrictions on foreign investment in the service industries, in real estate, hotels and

restaurants, culture and recreation, food service, news

and communications, etc., and look into experimenting

with projects in those areas which we have not set loot

into before, but are still useful for developing China s

economy and building the spirit of civilization.

We must expand new forms for using foreign investment. Summing up on the basis of the experiences of

Sino-foreign stock corporations, expand the scope oftest

sites and progressively draft and perfect relevant regulations. At present, many large- and medium-sized staterun enterprises, Sino-foreign jointly funded, jointly operated enterprises, are amassing the funds for

technological transformation through issuance of B-type

stocks overseas. This is also a new effort at attracting

foreign commercial investment, and, along with the

maturing of China's stock market, this form will occupy

an increasingly important position in the attraction of

foreign investment.

ECONOMIC ZONES

Li Youwei on Shenzhen Land Abuse, Corruption

93CE0532A Shenzhen SHENZHEN TEQU BAO

in Chinese 23 April 93 pp 1, 2

[Article by Zhang Zhimin (4545 2535 2404): "In Interview With Mainland and Hong Kong Reporters Li

Youwei Talks Freely About Utilizing and Giving a New

Lease on Life to the Special Zone's Advantages"]

[Text] At the first press conference held at the Fifth

Session of the First Municipal People's Congress yesterday afternoon, Mayor Li Youwei answered relevant

questions brought up by reporters.
34 ECONOMIC JPRS-CAR-93-043

28 June 1993

Reporters from 36 mainland and Hong Kong news

organizations were present at the news conference.

A reporter from the Shenzhen radio stations asks: Shenzhen's present land erosion is extremely serious, creating

a series of problems such as inflated vegetable prices.

Does the municipal government have determined and

feasible means to solve this problem?

Li Youwei: This problem is quite acute. In Bao'an and

Longgang districts usurping land and usurping and wantonly destroying cultivated land is serious. The municipal government already is aware of this problem and is

taking action to solve it. If Shenzhen is to become an

international city, we must have a good plan to make full

use of land development. The municipal government is

now studying a decision for the top grade land market to

resolutely provide accommodations. We must carry out

the five unifieds: unified planning, unified requisitioning, unified development, unified selling, and unified administration. These five aspects all should be

controlled by the government. The new plan for Bao'an

and Longgang districts is about to go into effect. All

construction must be carried out in accordance with the

new plan and the government is preparing to gather and

requisition all mountainous, hilly, or uncultivated land

that has not been requisitioned, and it will ensure that

ample cropland remains. Relevant departments also are

drawing up a draft law to protect land resources and

preparing it to be discussed first by the municipal

government and then by the municipal people's congress. After it becomes law, whoever again usurps land

will be punished in accordance with the law. While

developing land, we also must do a good job of environmental protection, especially protecting water resources

Whoever wantonly develops a water resource protection

area will be resolutely punished without the slightest

equivocation. I believe that, with the joint effort of this

session of the municipal government and district and

town governments, we can do a good job of solving this

problem.

A CHINA NEWS AGENCY reporter asks: Quite a few

people have indicated that administering the special

zone is extremely difficult now. After the new administration takes office, what measures will it take to remedy

the difficulty of administering the special zone?

Li Youwei: A great number of things have caused this

problem and keep it in existence. The main cause is that

there are complicated contradictions in converting from

a planned economy system to a market economy system.

The municipal government is striving to closely combine

the conversion ofgovernment functions with the conversion of enterprise operating mechanisms to truly operate

by market economy rules. To solve the problem of

administrative simplification and delegation downward

of authority and difficulty in administering, we must

first improve our understanding of the market economy

and unify our thinking. The real mainstay in the functioning of the economy is the enterprise. The market

economy mainly uses the market to allocate resources

and allows enterprises to act independently and to take

the initiative in going to the market and participating in

fair market competition. The government only provides

services and legal assurances to create the circumstances

and an environment offair competition. Former governments' micromanaged examination and approval

authority must all be delegated back to enterprises. To

summarize this issue, the government cultivates the

market, the market frees the government, the government frees enterprises, and enterprises free productive

forces. So, we must truly delegate authority to the grass

roots, delegate authority to the market, and delegate

authority to enterprises. We now have quite a few

departments and quite a few fields that are adopting

measures for delegation of authority. It is something of

an improvement and somewhat more efficient than

before. Certainly, this isjust a good start. There are some

issues that have not been thoroughly enough resolved

and there are some reforms that still are not complete

enough. This is a rather complicated issue, first because

there still are traditional concepts and secondly because

it involves authority and some people often look at it as

readjusting their individual interests or the interest of

their small group. We still must continue to work arduously and meticulously. In addition, we must simplify

organization so that the municipal government organization that is set up can adapt to market economy

demands. Government functions must convert from

being primarily microcontrol to being primarily macrocontrol, from vertical and horizontal to dispersed relationships, from conducting a department ownership

system to governing society, from examination and

approval being primary to the market being primary,

and from administrative methods being primary to legal

system methods being primary. We are concentrating

our efforts on doing these tasks well, and little by little we

are succeeding.

This paper's reporter asks: You were formerly chairman

of the standing committee of the municipal people's

congress with government oversight. Now you are

mayor. What do you think that the government should

do to better accept the supervision of the municipal

people's congress?

Li Youwei laughingly answers: I was formerly chairman

of the standing committee of the municipal people's

congress in a position to oversee the government. Now I

am mayor in a position to be supervised. I could say that

it is a 180 degree turn. If the government is to better

accept the supervision of the municipal people's congress, it must improve education and unify thinking.

First, our government functionaries must take the initiative in accepting the supervision ofthe people's congress

so that the people's congress can be at ease and have a

free hand in supervising. There are these specific points:

First we must accept the legal supervision ofthe people's

congress. We should let the people's congress check on

how the municipal government is implementing relevant

laws and regulations. Second, we should accept the

functional supervision of the people's congress. For
JPRS-CAR-93-043

28 June 1993 ECONOMIC 35

example, if the municipal government work report is

amended after discussion by the people's congress and

given the effect of law, future municipal governments

should accept the people's congress's supervision on how

the work report is carried out. As regards the form of

supervision, the leaders ofthe standing committee ofthe

municipal people's congress are invited to participate in

regular meetings of the municipal government to facilitate the link up and make it easier for them to understand the working ofthe municipal government, thereby

making supervision easier. At the same time, the municipal government should conscientiously make proposals

and reasonable suggestions to delegates to the people's

congress. After delegates to the people's congress feed

back to relevant departments the suggestions that they

have heard directly from the people, these departments

should conscientiously study and resolve them. In sum,

the municipal government should set up the initiative to

actively accept the idea of oversight by the people s

congress.

A reporter from Hong Kong's HSING-TAO DAILY asks:

In your work report you brought up the slogan "Utilize

Advantages, Give a New Lease on Life to Advantages."

So, which advantages does Shenzhen have after all?

Li Youwei answers: Although the form and the circumstances have changed, Shenzhen still has advantages.

These are mainly in the following aspects: First, people s

market concepts are relatively stronger. That is to say

that people's psychological predisposition toward

reform, including their understanding of competition,

their understanding of equality, their understanding of

performance, and their understanding ofinformation, is

stronger. Second, there is the advantage of talent. Shenzhen has a large concentration of people with outstanding talents and we have trained a group of entrepreneurs that can adapt to the domestic and the foreign

market. Third, Shenzhen also has a systemic advantage.

We have conducted more than ten years of market

oriented reforms, converting from the planned economy

system to the market economy system. This cannot be

accomplished in one or two years. It requires a process,

and we have had 12 years to form a series of market

systems, but some places on the mainland are just

beginning. Fourth, there is the advantage of drawing in

the foreign and linking with the mainland. Shenzhen

presently has more than 6,000 enterprises with foreign

investors and more than 4,000 enterprises linked to the

mainland. Shenzhen is a hub linking the domestic with

the foreign market. The number of mainland enterprises

coming to Shenzhen to invest is growing by leaps and

bounds and foreign firms also look favorably on Shenzhen This year's investment trends are even better than

last year's. Fifth is the advantage of tertiary (service)

industries. Shenzhen's present proportion of primary,

secondary, and tertiary industries is 4:50:46. Tertiary

industry is developing very fast, its share is the highest in

the country. Sixth is the information advantage. This

place is the closest to the international market and is

gradually becoming an information exchange center.

Seventh, we still have a substantial advantage in policy.

For example, we have a bonded area and a free market

for capital goods, and Yantian port will become a free

port. Very few places in the mainland have this kind of

policy. Eighth is the advantage of location. Shenzhen is

very close to Hong Kong, which means that it is very

close to the international market. Shenzhen and Hong

Kong are located right where the North American

market, the West European market, and Asia-Pacific

regional economic center link up, a special geographic

position and a very good location. We must be fully

aware of these advantages and continue to utilize them

and give new advantages a new lease on life.

A SHENZHEN SHANGBAO reporter asks: What measures is this administration prepared to adopt to thoroughly solve Shenzhen's traffic problems?

Li Youwei answers: The municipal government is

adopting these measures. First, we will accelerate road

construction. More than 600 kilometers of highways

connecting with the outside, the majority of them highspeed highways, are planned to be completed within

three to five years. One hundred kilometers of highways,

including a high-speed trunk in the city center and an

eight-lane, high-speed beltway, will be completed in the

special zone in three years. In the Luohu subdistrict, a 13

kilometer elevated railroad will be completed in about

three years. Plans are being speeded up to construct a

land railroad and a light railroad from the airport to

Huanggang port and from Shekou to Luohu. This year

we will open the double-line Meilin juncture and the

Nantou and the Buji double-line junctures will be

upgraded to improve transportation capabilities.

Second, we will enhance and improve management of

the road going to and from the port. Customs has already

adopted measures so that it essentially will not be

dogged with vehicles. They will establish modern traffic

direction and control systems to appropriately limit

increases in the volume of traffic.

A SHENZHEN FAZHIBAO reporter asks: Delegates to

this people's congress reacted rather strongly to the fact

that the state of social order is not too good. What

measures is the municipal government adopting to solve

this problem?

Li Youwei answers: This issue is of concern to investors,

is of concern to citizens, and is of even more concern to

the municipal government. We have never relaxed our

control of social order. These measures will be taken to

solve this problem. We will enhance population control

and increase control ofrented rooms, high-rise buildings,

and the transient population. We will improve the infrastructure. On the one hand, we will enhance the development of the public security force and improve the

quality ofthe public security law enforcement force, and

on the other hand, we will build up mass defense and

mass order. At the same time, in accordance with the

law, we will quickly and strictly attack the criminal

element and frequently organize special attack activities.

Only if we mobilize the force of the entire society and
36 ECONOMIC JPRS-CAR-93-043

28 June 1993

combine the professional forces with mass defense and

mass order can social order take a turn for the better.

A Central People's Broadcasting Station reporter asks: In

this report you emphasized an unremitting anticorruption struggle. What specific measures does Shenzhen's government cleansing have?

Li Youwei answers: Government cleansing is an important task ofthe city government. We will conscientiously

take charge ofit because itis an issue that affects whether

the people are for or against us and whether or not they

support the government. Our measures essentially are

simplifying administration and delegating authority. In

addition, we should improve education and develop

traditional Chinese national virtues. When General Secretary Jiang Zemin took part in the discussions of the

Guangdong delegation at the First Session ofthe Eighth

National People's Congress, he spoke 64 words: "Liberate your thinking; seek truth from facts; actively probe;

dare to innovate; struggle arduously; press forward in the

face of difficulties; emulate foreigners; constantly strive

to improve yourselves; be modest and prudent; be neither arrogant nor rash; be of one heart and one mindtake the situation as a whole into consideration- be

hardworking and thrifty; be clean, honest, and just; rouse

yourself to vigorous efforts to make the country prosperous; and selflessly contribute." These 64 words summarize traditional Chinese virtues, culture, and style and

features. We must make a great effort to develop them

and we must advocate a spirit of rousing ourselves to

vigorous efforts to make the country prosperous and

selflessly contributing. In engaging in the market

economy, we should oppose individualism and the worship of money and everything revolving around individual interests. Everything revolving around money is

incompatible with the goal ofserving the people. We also

should perfect the supervision system and establish mass

supervision, supervision by society, and the supervision

of public opinion, and fully utilize the functions ofsuch

departments as the discipline and inspection committee,

supervision, auditing, and notaries, and we should establish a responsibility system. Cadre rotation is another

measure. It is combined with reform of the civil service

system to systematize it. Not only those who manage

money and manage things should be rotated, but those

leadership positions that neither manage money nor

things also should be rotated. This year we should study

ways to implement the civil service system as well as'

systematize and legalize the rotation of cadres. At the

same time, we should appropriately improve the wages

of public servants and the wages of law enforcement

personnel, such as public security people especially

should be appropriately raised again. This is beneficial

for clean government.

Mayor Li Youwei also answered reporters' questions on

Shenzhen Airport and Yantian port construction.

AGRICULTURE

Sichuan Aims To Stabilize Cotton Production

93CE0479B Chengdu SICHUAN RIBAO in Chinese

17 Mar 93 pi

nn?!?!e by Staff reP°rter Xu Yuanliang (6079 0337 UU81)]

[Text] On 12 - 13 March the Sichuan provincial government called a province-wide meeting on cotton production The deputy governor Zhang Zhongwei [1728 0022

0251] expressed the hope that all localities understand

the cotton production and marketing situation, and

make a serious effort to mobilize the peasants in the

cotton-growing areas to be more involved, thereby

assuring the stable development of cotton production in

Sichuan province this year.

Last year, there was a nationwide slippery slope in cotton

production. The total cotton output decreased by 20

percent, and the amount available for purchase was cut

29 percent. Though the cotton production picture in

Sichuan was stable, or even showed some increase, the

volume available for purchase still dropped 11.6 percent

Moreover, cotton production in Sichuan province has

always been inadquate to meet its own needs, and every

year it has had to import cotton from other provinces As

a result, it was proposed at the meeting that government

and related departments on all levels pay special attention to cotton production that will not let up under anv

circumstance.

It was also proposed at the meeting this time that the

overall plan for cotton production in Sichuan province

this year require stabilizing the planted acreage, and

depend on technology to improve per unit area yield to

increase the total output. In the first place, we must work

to have the cotton planted acreage reach 2.3 million mou

m the whole province, of which 2 million mou are

allocated to the 19 important cotton-producing counties

Second, we must work to implement a plan for

increasing cotton production, organizing the large numbers of agricultural technicians to be trained to accept

and use technology, broadening use of quality seed, and

promoting use of scientific techniques for growing

cotton. Third, we must improve on the coordination of

cotton production data and resources to assure the

timely arrival of production materials such as chemical

fertilizers, agricultural chemicals, agricultural film

diesel oil, etc. Fourth, we must put in place capital

resources for cotton purchases and avoid empty coffers.

At the meeting, the deputy governor also announced the

province's policy on the purchase and marketing of

cotton for this year.

1. Continue to implement policy of set prices for orders

contracted for purchase and for cotton available for

purchase and set aside. The plan for the contracted

cotton quota for purchase must be implemented on each

level down to the household level, from the supply and
JPRS-CAR-93-043

28 June 1993 ECONOMIC 37

marketing commune and the high-quality cotton processing plant in the high-quality cotton growing areas to

the cotton-growing peasant, with whom they sign a

contract for purchasing a fixed quota, in an overall

operation. The fixed quota of cotton to be purchased is

guaranteed by the state, and amounts of cotton in

surplus beyond that set in the contract is purchased at

guaranteed prices and set aside.

2 To support production, the State Council has determined this year that for each 50 kg of the cotton quota

contracted for purchase, the state will release 45 yuan

toward interest on loans for purchasing cotton. This

money will be available after the contract has been

signed. All localities must observe central government

regulations to keep released funds available for this

purpose.

3 Beginning 1 September this year when the new cotton

crop comes on the market, the cash awards granted to

encourage sales will be changed. Instead, awards for

cotton quotas contracted for purchase will be replaced by

awards in kind in form of price difference supplements.

That is, for each 50 kg of cotton set aside for purchase,

the awards will be chemical fertilizer, diesel fuel, etc.,

worth a difference of 12 yuan at state-set prices. They

will be given directly to the cotton peasants following

cotton purchases, in form of value added to value.

4 The provincial treasury will provide a production

subsidy of 25 yuan for each 50 kg ofthe cotton quota in

grades I to IV contracted for purchase. No subsidies will

be provided for cotton in grades V and below.

5 As for the clause contained in the contract for cotton

quota purchase which calls for 15 percent of this cotton

to be retained by the county, it should be noted that

cotton needed by county cotton textile plants is now

supplied by the provincial planning commission which

distributes it proportionately among them according to

its overall plan. This amount of cotton distributed is

based on 10 to 15 percent ofthe cotton quota contracted

for purchase.

Guo Jinlong [6753 6855 7893], member of the standing

committee from the provincial committee also spoke at

the meeting.

Production Figures of Agricultural Machinery

93CE0506B Beijing ZHONGGUO NONGJIHUA BAO

in Chinese 7 Apr 93 p 1

The Ministry of Agriculture Farm Mechinization

Department recently published national figures on the

farm mechnization development, the original value of

farm machinery in China during 1992 reached 120 649

billion yuan, representing an increase of 8.838 billion

yuan in investment and a growth rate of 7.9 percent over

1991 The total power of agricultural machinery in 1992

reached 303.377 million kw, marking an increase of

9 1959 million kw and a growth rate of 3.13 percent over

1991. The total revenue for the operation of farm

machinery in 1992 reached 75.662 billion yuan, representing an increase of 9.895 billion yuan and a growth

rate of 15.04 percent over 1991. The net income from

the operation of farm machinery in 1992 reached 29.88

billion yuan. The net income from farm machinery

households was 26.585 billion yuan with the average

income for each household reaching 1,645 yuan,

marking an increase of 327.33 yuan and a growth rate of

24.8 percent over 1991.

In 1992, the number oflarge- and medium-sized tractors

in China continued to decrease after a continuous drop

for a period of four years. The number of such tractors

was 758,100, down 26,000 over 1991, of which the

number ofwheeled tractors was reduced by 35,400. This

indicates that the number of large and medium-sized

crawler tractors increased. This is the result in implementing the policy to upgrade large- and medium-sized

tractors.

As ofthe end of 1992, the total number ofsmall tractors

reached 7.504 million, marking an increase of 201,500

and a growth rate of 2.76 percent over 1991, ofwhich the

number of small wheeled tractors totalled 3.4611 million, up 154,500 from the 1991 figure. Seventy seven

percent of the additional small tractors in 1992 were

small four-wheeled tractors.

Agricultural Banks Ensure Grain, Cotton Purchase

Funds

93CE0506C Beijing NONGMIN RIBAO in Chinese

22 Apr 93 pi

[Article by Reporter Li Xu and Correspondent Wang

Lingling: "Cotton Loans of 4 Billion Yuan With Interest

Prepaid by State Basically Available, Advanced Payments Totalling Seven Billion Yuan For Future Gram

Purchases Expected To Be Made by End AprilAgricultural Bank Resolutely Implements Decision

Made by State Council To Release 'Two Funds'"]

[Text] Our reporter learned from the Agricultural Bank

of China on 21 April that in this year's advance payments for the purchase of grain and cotton totaling 11

billion yuan, the four billion yuan cotton loans with paid

interest are basically available, and the seven billion

yuan advance payments for the purchase of gram will be

made by 30 April.

After the State Council adopted a resolution to extend

cotton loans with interest prepaid by the state and make

advance payments for the purchase of grain this year, the

Agricultural Bank of China has swiftly earned out the

work of fund-raising and making payments in this connection. With the vigorous support ofthe Head Office of

the People's Bank of China, the Agricultural Bank of

China and its branches have overcome difficulties such

as the fund-raising craze in the market, serious dispersion of rural capital and deplorable lack of financial

resources; and firmly given top priority to raising these

"two funds" and making preparations to make payments. They have tried one thousand and one ways to
38 ECONOMIC JPRS-CAR-93-043

28 June 1993

attract deposits, rejected other loans, and effectively

raised 11 billion yuan for this purpose. It is reported that

a major cotton and grain growing province would have

funds totaling 900 million yuan this year in this connection, while an ordinary province would have approximately 300 million yuan. The state treasury will pay all

the interests for the loans.

In order to be ready to make payments for this purpose,

ensure the planting areas for grain and cotton and reap a

good harvest this year, the Head Office of the Agricultural Bank of China had organized 11 work teams from

the beginning ofApril this year. Led by president of the

bank Ma Yongwei and the directors of various bank

departments, the work teams visited various major grain

and cotton growing regions. They went to the forefront

to check how payments were being made to the peasants

and help speeding up the process.

Right now, there is not much time left before the 30

April deadline in completing all the payments. The Head

Office ofthe Agricultural Bank of China recently issued

another emergency circular, calling on all its branches

which had not yet completed all the payments to stop

granting other loans so as to ensure that such measure in

support of agriculture be fully implemented.

Arable Land Drastically Reduced Again

93CE0506D Beijing NONGMIN RIBAO in Chinese

26 Apr 93 pi

[Article by reporters Fu Zhidi and Li Xiuping:"Arable

Land Drastically Reduced in China Again"—Red-Hot

Winds From Development Zones Sound Alarm; Per

Capita Arable Land Drops to 1.22 Mu]

[Text] Due to the rapid expansion of the development

zones and other reasons, China's cultivated areas have

once again sharply reduced after remaining basically

stable for a period of two years. According to reports

from various localities on arable land, the areas under

cultivation were reduced by 11.31 million mu in 1992,

down 3.76 million mu over 1991, and the area of

per-capita arable land has dropped to 1.22 mu.

There are many reasons for the reduction of cultivated

lands. For example, the areas of land reclamation

dropped, and farmland has been used for nonfarming

construction projects well beyond the state plan. However, as seen from the surveys conducted by the State

Statistics Bureau in 768 counties in 27 provinces, municipalities and autonomous regions, various development

zones and industrial districts occupied as much as 45

percent of the total area of arable land reduced. This

constitutes the main reason for the creation of such a

situation. It is reported that various development zones

and industrial districts in the coastal region in East

China exceeds the average figure for the occupation of

arable land. In addition, the trend of development zones

and industrial districts appropriating more cultivated

areas is even more serious in large- and medium-sized

cities. According to statistics compiled in some districts

and counties in Beijing, Shanghai, Tianjin and Chengdu,

the areas of occupied arable land have reached 115,000

mu. What merits attention is the fact that this trend is

still gaining momentum. This year, the development

zones and industrial districts in the 768 counties are

expected to occupy 660,000 mu of land, an actual

increase of 10,000 mu over 1992. From 1993 to 1995,

such zones and districts are expected to occupy 1.467

million mu of arable land, accounting for 0.24 percent of

China's total area of arable land in 1992.

It is for this reason that the department concerned calls

for efforts to strictly control the number and the scale of

development zones. It is hoped that various localities

will clear up the existing development zones, and subject

those disqualified development zones and industrial

districts to another procedure of examination and

approval. Permits for those that do not have the necessary conditions should be resolutely revoked. Excessively large zones and districts should be instructed to

reduce their size. For those which meet the requirements, it is necessary to develop one lot at a time instead

of occupying vast land ahead of schedule. At the same

time, we must introduce market mechanism for the use

and transfer of land as soon as possible. Right now, a

large portion of occupied land in China is farmland with

stable and high yields, while there is a serious shortage of

funds needed to develop arable land and increase soil

fertility. Thus, we must encourage paid use of arable

land, set prices according to the grade, and establish a

fund for arable land. Some of the funds from leasing

arable land should be used in developing basic infrastructure of the development zones, while most of the

funds should be used in reclaiming wasteland and cultivating abandoned arable land so that the limited funds

from arable land will be used in the development of

arable land in order to ensure that China will basically

have the same acreage of arable land. When conditions

permit, various localities should also gradually set up an

arable land compensation and protection system so as to

maintain long-term stability in developing agriculture.

Grain, Cotton Funds Slow To Reach Provinces

93CE0506E Beijing NONGMIN RIBAO in Chinese

27Apr 93 pi

[Article by reporter Sun Luwei: "Information Provided

by Ministry of Domestic Trading Shows, 'Two Funds'

Generally Unavailable in Various Localities, Although

Plans Are Set To Release Such Funds"]

[Text] Recently our reporter learned from the Ministry

of Domestic Trade that most of this year's funds earmarked to make advance payment for the purchase of

cotton are not yet available. The main reason is that

plans have been made to make this advance payment,

but funds are not yet available. Many provinces are

energetically raising funds to solve this problem.
JPRS-CAR-93-043

28 June 1993 ECONOMIC 39

Although Zhejiang Province has decontrolled the price

of grain, and signed purchase contracts with the peasants, it needs 250 million yuan to make advance payments. Now it has asked for a bank loan of 200 million

yuan. It is ready to make the payments as soon as the

loan is granted.

Shandong, Henan, and Hubei have changed advance

payments into interest payments based on the actual

situation there. The amount of such payments is much

smaller, and therefore, it will be much easier for various

provinces to solve this problem.

Zhejiang and Shaanxi have made advance payments to

major grain growers so that these two provinces can

easily centralize the funds and ensure the production of

cotton and grain crops.

Guangdong has made advanced payments to major grain

growers and the rural areas where grass-roots organizations are sound. This measure is also taken so that it can

ensure the production of cotton and grain crops.

Jilin Province has made advance payments of 228 million yuan, accounting for 60 percent ofthe total amount.

One third ofthe counties in Heilongjiang have not made

such advance payments yet. These counties and the

agricultural banks in the region are out of funds.

For the purchase of cotton this year, peasants will be

given an interest payment of 45 yuan and a 12 yuan price

differential for each dan of cotton. AH cotton growing

peasants in Anhui have received this payment. It is

reported that it is not a panacea. Mainly, the local

agricultural banks supply the money.

Right now, many local cotton and ramie companies are

also working out some measures. Independent loans are

being granted in Hubei with interest payments prepaid

by the state. The cotton and hemp company signs

purchase contracts with cotton growers who apply loans

with the agricultural bank on the basis ofsuch contracts.

The provincial government has approved this practice in

principle. The agricultural bank and the supply and

marketing cooperative in Linyi County, Shanxi, have

issued a joint circular, calling on all their sub-branches,

basic-level cooperatives and cotton procurement centers

to earnestly coordinate with each other in helping process the aforementioned loans in support of cotton

production. The specific practice is that 60 yuan will be

paid for each mu of irrigated land and 30 yuan for each

mu of dry land. The payment will be made in two

installments. Thirty yuan will be paid for each mu of

irrigated land and 20 yuan for each mu of dry land as the

first installment mainly in the form of plastic sheeting

for agricultural use, pesticides and chemical fertilizers.

The second installment will be paid in cash when cotton

emerges from the soil and after verification is made.

Customs To Facilitate Agricultural Imports, Exports

93CE0506F Beijing NONGMIN RIBAO in Chinese

23 Apr 93 pi

[Article by Tang Yuanjie: "Customs Actively Supports

Agriculture"]

[Text] The customhouses in various localities

throughout the nation have energetically supported agricultural development, winning widespread acclaim from

the local governments and the broad masses.

The General Administration of Customs has regarded its

support to agricultural development as a major task. At the

beginning of this year, it issued a "Circular Regarding

Support to Agricultural Development" to various customhouses in the country, calling on them to give preferential

treatments in terms of custom duties to imported supplies

used in farming such as chemical fertilizer, pesticide and

raw materials needed to manufacture plastic films for

farming and water pipes for irrigation. It called on them to

simplify the procedure, speed up the inspection and release

ofimported supplies for farming, support agricultural development which will earn foreign exchange through exports

and help townships develop export-oriented economy. The

customhouses in various localities establish a system to

maintain ties with the local agricultural departments and

take the initiative to solicit latter's views. Some of the

customhouses have set up support-agriculture teams and

gone to the "forefront" to conduct investigation and study

in order to understand the actual situation in the development of agriculture. Others set up on-the-spot offices to help

solve a large number of acute and difficult problems.

In order to avoid missing the farming season, many

customhouses set up special windows to handle customs

declaration for the import of supplies for farming. Special customs staff members have been assigned to accept

applications. Supplies for farming will be released right

away, if all the documents are available. When documents are incomplete, goods can be released first based

on a guarantee letter. The applicant may supply the

necessary documents later. Fresh and live products will

be inspected and released as soon as they arrive.

The customhouses in various localities also make use of

their well-informed resources and their good knowledge

on the policy and regulations to play their advisory role

well in support of agricultural development.

Nanjing Customs Department Improves Agricultural

Trade

93CE0506G Beijing ZHONGGUO NONGJIHUA BAO

in Chinese 17 Apr 93 p 1

[Article by Special Correspondent Shen Guangshu:

"Nanjing Customs Department Adopts Measures in

Support of Agriculture"]

[Text] Proceeding from its own actual conditions, the

Nanjing customs department has adopted a 10-item

policy measure in support of agricultural development.
40 ECONOMIC JPRS-CAR-93-043

28 June 1993

It will make things easy to import and export agricultural

supplies including farm machinery and to provide preferential treatments of tax reduction and tax exemption.

Now these measures are already being implemented in

going through the procedure of importing and exporting

agricultural supplies through the Nanjing Customs.

These measures can be mainly summarized as follows:

All imported or exported supplies that involve agriculture will be handled as something important. Procedures

will be simplified and accelerated to check and receive

agricultural supplies. Priority will be given to processing

imported agricultural supplies so that farm work can be

done in the right season. Fresh and live products will be

processed as soon as they arrive. Overdue payments and

inspection fees will be reduced or exempted within the

jurisdiction of the Nanjing customs in order to lighten

peasants' burden. Seeds, seedlings, fodder, drugs for the

protection of animals and plants, machinery for tillage,

crop farming, plant cultivation and processing farm

products and other necessary technical equipment

needed to process export-oriented farm products will be

exempted from import duties and product (value added)

tax, based on the certificate of approval from the office

in charge of the task of carrying out the open-up policy

under the provincial government. Necessary machinery

and freight cars imported for the development of agriculture with foreign capital and necessary materials

imported to build factories (farms) and reinforce

machinery installations will be exempted from import

duties and product (value added) tax. Necessary instruments, meters and accessories imported for the development of scientific research projects in agriculture by

provincial-level agricultural research institutes or those

institutes which are assigned to develop ministerial or

provincial-level scientific research projects will be

exempted from import duties and product (value added)

tax- Materials or semi-finished products and production

facilities imported by rural enterprises and state farms to

do trade of processing with customers' materials and

compensatory trade will be kept in a bonded warehouse

and given priority to go through the procedure of being

registered and put on record. Materials contributed by

overseas Chinese and compatriots from Hong Kong,

Macao and Taiwan in direct support of agricultural

production will be exempted from import duties and

product (value added) tax.

State Farms Corporation Profits Show Large Increase

93CE0506H Beijing JINGJIRIBAO in Chinese

23 Apr 93 p 5

[Article by Yang Shaohua and Zhang Zhong: "Revenue

of Land Reclamation Corporation Exceeds One Billion

Yuan"]

[Text] The revenue of the China Land Reclamation

Corporation exceeded one billion yuan in 1992. It

turned over 37.04 million yuan ofprofits and taxes to the

state, up 102.5 percent over 1991.

The China Land Reclamation Corporation is the largest

state-owned enterprise. Since last year, it has placed

emphasis on the word "reform." It has changed its

traditional concept in management into a concept of

efficiency; turned pure services into services in business

operations; paid attention to reforming the management

system; and delegated the power to the various enterprises under its direct administration in improving its

internal structure, handling personnel affairs and

adjusting wages. In terms of management, the corporation only takes care of contracts, planning and turning

over part of profits to the state treasury. Various enterprises under the direct administration ofthe corporation

have further improved the contract system for enterprise

management, and become market-oriented in carrying

out barter trading with foreign countries and in developing tertiary industry and major construction projects.

The China Land Reclamation Corporation made a

breakthrough in developing foreign trade last year. Its

total annual value ofimports and exports reached US$88

million; and its profits from imports and exports

exceeded US$15 million, making up over 45 percent of

the total profits made by the corporation. It earned

US$10.44 million of foreign exchange, an increase of

160 percent over the previous year.

Peasants Worry About Entering Market Economy

93CE0506I Beijing NONGMIN RIBAO in Chinese

26 Apr 93 p 3

[Article by Liu Degui and Mao Lachun ofChangde City

Commodity Price Bureau in Hunan Province: "Peasants

Have Three Worries in Entering Market Economy"]

[Text] How can we guide peasants to enter market

economy? From our recent interview with some peasants

in the two counties and three townships in the Dongting

Lake area, we understand that right now, peasants were

perplexed by some worries and that various departments

must create a fine external environment for the development of market economy.

1. Fear about exaggerated income of peasants. Over the

past several years, peasants have become richer, thanks

to the party's policy to help people become well-to-do.

However, only a limited number of peasants are

"exceedingly rich." According to statistics compiled in

10 of our villages here, only 13 households are 10,000

yuan families. In average, there is slightly over one such

household in each village. The average per capita income

ofmost ofthe peasants is approximately 500 yuan, while

10 percent of the households have no surplus grain.

However, at the end of each year, the leadership at the

village and township levels have juggled their reports on

economic affairs. The 1990 per capita net income in a

certain village was actually 530 yuan, but it was reported
JPRS-CAR-93-043

28 June 1993 ECONOMIC 41

as 735 yuan; that of 1991 net income was actually 750

yuan, but it was reported as 950 yuan; and that of 1992

net income was actually 600 yuan, but it was reported as

850 yuan. This village had filed false reports and inflated

the average per capita net income of peasants for a

period of three years, totalling 655 yuan—an amount

equivalent to the village's annual per capita net income.

It was this village where 11 households had no grain

crops after paying what they need to pay to the state last

year. One deputy secretary ofthe county CPC committee

set up an office in rural areas. On eight occasions, he

rejected the report on economic affairs from the village

where his office was located. He accepted the ninth

report, only after the village authorities increased the per

capita income by 200 yuan in the report.

2. Dissatisfaction with the excessive imposition of arbitrary fees on peasants. In one locality, the period of

fulfilling the task of doing earth work for a river embankment has been shortened from three to two years. When

the task cannot be fulfilled in two years, people have

been asked to contribute money or grain in order to

finish the work on time. Only for the purpose offinishing

a winter water conservancy project, some households

need to pay as much as 300 yuan each. Some veterinarian stations make a flat charge of five yuan for each

member of the family, and refused to give free immunization shots to fowls and domestic animals. Some insurance departments force families to buy property insurance. Public welfare departments impose arbitrary fees

of all description on people and raise funds at random.

There are also arbitrary fees for education. People have

to pay fees to the township after paying the village. Some

of payments are in the name of "loans," but they are

actually arbitrary charges. Some of fees are dozens of

yuan, while others can be as high as hundreds ofyuan per

student. Originally educational surcharges are to be

raised by each township, but the township imposes

arbitrary fees on the students. Last year, a small village

near Highway 319 paid all fees totaling 20,550 yuan to

the township according to a contract, but it had to ask

each person in the village to take out extra 20 yuan out of

his or her pocket. An old peasant who signs a contract to

farm on a lake-side lot said that he and his wife grew 4.5

mu of lotus seeds and 6.5 mu of paddy rice with a total

output value of 2,645 yuan last year. After deducting

1,100 production costs and the average of 120 yuan per

mu miscellaneous charges, they only had 225 yuan cash

left. A family of nine in a grain-producing district grew

crops on 8.9 mu of land on a contractual basis. The

family used half of the land to grow grain crops, while

growing cotton on the other half. The family had a total

income of 3,027 yuan last year. The production costs

were only 676 yuan. However, the family's per capita net

income was only 580 yuan, even if its sideline income

was taken into consideration, because it had to pay a

total of 1,230 yuan miscellaneous fees with a per capital

share of 307.5 yuan (including the fee for the repair of

water conservancy facilities in winter). The head of this

family whose miscellaneous payments were about

average pointed out that the net income had not

increased much, but expenses were on the rise each year.

He paid 100 yuan more in 1991 than what he did in

1990, and 300 yuan more in 1992 than he did in 1991.

3. Worry about sharp increases and decreases of market

price. Peasants in rural areas are enduring the labor

pains when they first enter the market economy. Some of

them said that market economy is a riddle. Peasants

want to see and distinguish right from wrong, but they

are not allowed to do so. There are many ways to make

money, but they themselves are not making money.

Others said, peasants grow more and sow more, but they

cannot keep up with sharp price increases and decreases

on the market. At the beginning of last year, the higher

authorities encouraged peasantsto grow cotton and grain

crops. At the end, peasants encountered difficulties

selling their farm products, and even if they did sell the

products, what they got were "white IOU slips." Now,

even if peasants are able to cash most ofthe "white IOU

slips" with the help of the government, some of the

peasants need to pay what they owe with the money they

cash in. Peasants work hard for a year, but end up with

nothing. One family offour who lives in a comparatively

affluent lake-side township signed a contract to do

farming on 11.2 mu of land. They suffered a loss in

growing water melons in 1992, and the price of the

mulberry trees they grew was low. They wanted to grow

something better, but the sowing season was already

over. They now grow some grain crops and sell them at

lower price. The per-capita net income of this family is

474.6 yuan. With great difficulty, they succeed in cashing

their "white IOU slips," but their per capita arbitrary

miscellaneous fees total 255.5 yuan. It is reported that

the area of fish ponds is already more than one third of

the arable land in some lake-side townships. Peasants

who are trying to turn their paddy field into fish ponds

now worry about the continuous price increases of

chemical fertilizer, pesticide, seeds and other means of

production in farming and that peasants will be unable

to meet their expenses with their income after working

hard for a whole year. They worry about the revival of

the "white IOU slips." They worry that "when they raise

fish, the rice sells well; when they grow cotton, the hemp

sells well. When they grow paddy rice and cotton, and

raise fish at the same time, the market becomes sluggish." The peasants' voices about their terrible sufferings

have aroused the attention of the party committees and

governments at all levels. Peasants hope thatthe series of

support-agriculture policies, the "provisions" of the

State Council and the "emergency circular" of the "two

offices" recently issued will be implemented at the

grassroots level and that they would be able to draw

benefit from the practice of developing agriculture

according to market regulations as soon as possible. For

this, we suggest the following measures:

1. We must stop the practice of inflating figures and

making false reports. Many people over-estimate peasants' affluence, and try to impose arbitrary fees on

peasants from all angles. We must realize that peasants

have just reached the level of having enough to eat and
42 ECONOMIC JPRS-CAR-93-043

28 June 1993

wear. We must avoid showing eagerness for quick success and instant benefits and doing things unrealistically.

We must rectify the work style ofreporting only the good

news, not the bad, and ofloving to hear about increases,

not decreases and to make overestimates.

2. We must develop a supervisory mechanism. The state

must enact special laws on expenses which peasants need

to pay. Fund retention for miscellaneous expenses and

fund raising should be approved by the people's congress

at and above the township level, and funds should be

raised by the township once a year in an overall manner.

It is necessary to regard the assessment of reasonable

charges on peasants as an index for rural responsibility to

be evaluated along with indices such as net income so

that they would be recognized as a part of achievements

in one's official career. The village must periodically

make public the accounts on the funds retained for

official use and the amount of funds raised, while the

price, auditing and supervisory departments must keep

track ofthe funds and provide the necessary supervision.

3. We must gradually improve services for the rural

market. A pressing matter ofthe moment is to improve our

services in quoting market price, providing information on

market supply and demand and technical consultation,

and to help peasants raise their abilities in keeping up with

market changes and develop agricultural economy when

we pursue the policy favoring the superior over the inferior, increase investments in agriculture, and support the

development of township enterprises.

Fairly High Grain Prices Foreseen for 1993

93CE0524B Beijing JINGJIRIBAO in Chinese

10 May 93 p 6

[Article: "Trend of Grain Prices on the Basis of Three

Major Grain Markets, Rice Brisk, Corn Doing Well

Wheat Stable"]

[Text] The authorities in charge ofthree major wholesale

grain markets in China recently forecast the trend of

market grain prices for 1993. They concluded that the

price of wheat will remain steady, that the price of rice

will change from flat to brisk, and the price of corn will

continue fairly high.

Zhengzhou Retail Grain Market director Li Jingmou

believes that the price of wheat, barley and oats during

1993 will remain as steady as it has been since 1992.

During the winter of 1992, 240 million mu of wheat was

sown in the country's 11 summer grain growing areas,

and another 197 million mu was sown in south China.

This was substantially the same amount as in 1992.

Thanks to a bumper wheat harvest in China during 1992,

a considerable amount of wheat remains in storage

today. Judging from the recent buying and selling of

Zhengzhou market member units, a large amount of

wheat will continue to be offered for sale, but procurement will be slight. The main theme in the wheat market

will remain vigorous attempts to spur sales. Zhou

Yongmo, deputy director ofthe Hubei Provincial Retail

Grain Market, believes that 1992 continued to be a

recession year for the rice market. He predicts a reduction in the long-grain rice growing area in 1993 This, plus

the depression of prices in order to sell more long-grain

rice during 1992, will draw down national reserves

markedly. On the other hand, the amount ofrice needed

for the increased number of peasants coming into cities

to work and for other purposes will increase. This will

sustain a fairly strong demand for regular grades of

long-grain rice. Therefore, on the one hand, premium

grain rice will continue to sell well, while at the same

time the ordinary long-grain rice market will become

brisk. The slump in the rice market will come to an end.

Xu Zhongnian, director ofthe Jilin Retail Corn Market,

believes that the 1993 sale price of corn (i.e., the growing

area price) will be slightly higher than in 1992. Corn

market prices will very likely stabilize at a relative high

level, the reason being a reduction in American corn

exports to the international market, and an increase in

Japan's and South Korea's imports from China, as well

as an increase in the amount ofChina's border trade and

the amount of local government corn exports. This will

mean less corn will be available at negotiated prices in

Jilin's corn markets. For the domestic market as a whole,

the demand for corn for livestock feed has increased, and

the amount of grain used in light industry and in the

pharmaceutical and food products industries has also

increased. This, plus the transportation shortage, will

mean a high sale price for corn.

Summer Grain Crop Prospects Good

93CE0524C Beijing JINGJI RIBAO in Chinese

2 May 93 p 1

[Article by Correspondent Lu Yongjian (7773 3057

1696): "Overall Rural Economic Situation Good; Some

Problems Require Close Attention"]

[Text] Xinhuashe Beijing 1 May Information from the

State Statistical Bureau says that during this year when

China is advancing across the board to a market

economy, a fine situation exists in development of both

agricultural production and the rural economy. The

summer grain crop is growing better than in 1992; the

farm crop mix has been adjusted in the direction of high

yields, premium quality, and high returns; the livestock

industry has maintained steady growth during the first

quarter; township and town enterprises have made

higher economic returns simultaneous with high speed

growth; and peasant cash income is higher than in 1992.

Whether the rural economy can meet needs for the

development of a market economy has become a matter

about which people are concerned, and the State Statistical Bureau has conducted a statistical analysis of the

state of the rural economy during the first quarter.

In farming, the summer grain crop is growing well. In

most areas the young wheat is growing better than in

1992. In most places, the percentage of first rate and
JPRS-CAR-93-043

28 June 1993 ECONOMIC 43

second rate seedlings has increased, and the percentage

of third rate seedlings is markedly less. Provided there

are no major natural disasters during the next two

months and wheat fields in all areas receive good late

stage care, preliminary forecasts call for a summer grain

output close to that of 1992 despite a reduction in the

growing area.

The livestock industry is continuing steady growth.

Output ofpork, beef, and mutton during the first quarter

totaled 8.57 million tons, Up 6.3 percentage points over

the same period in 1992. Furthermore, the livestock

industry's reserve strength for development is fairly

ample.

For that locomotive that powers rural industrialization

and urbanization—the township and town enterprises

throughout the country—preliminary forecasts call for a

first quarter output value that is more than 60 percent

greater than during the same period in 1992. In Jiangsu,

Zhejiang, Shandong, Fujian, and Liaoning provinces, the

increase will be more than 80 percent greater, and the

growth of township and town enterprises m the central

and western parts of the country will also accelerate

markedly.

Economic development will bring about continued

increase in peasant income. During the first quarter, the

income of rural residents was approximately 240 yuan

per capita. After deduction for price increases, it was

approximately 5.4 percentage points higher than during

the same period in 1992. This is mostly attributable to

the development of township and town enterprises.

Economic experts believe that some problems meriting

attention also exist in the operation of the rural

economy. Inputs into agricultural production are less

than in former years; the area planted to some farm

products has decreased too much; and the gap between

one area and another in the development of township

and town enterprises has continued to widen. They point

to the need for diligent and painstaking implementation

across the board of a series of CPC and State Council

rural policies to consolidate and develop a fine situation

in agriculture and the rural economy. Right now, attention must be given to good field care ofthe summer grain

crop, every effort made to obtain a fine harvest. A policy

for high yield, premium quality, high return agriculture

must be fully implemented, firm attention given to the

extent to which structural readjustments are made. It is

necessary to mindful of the possibility of market fluctuations for some farm products in 1993, actions taken at

once to protect the peasants interests. In the development of township and town enterprises, simultaneous

with close attention to the speed of development, attention must also be given to optimizing the make-up of

such enterprises and improving returns. In addition,

continued support in the form of capital and technology

must be provided for the development of township and

town enterprises in central and western China.
44 SOCIAL JPRS-CAR-93-043

28 June 1993

Article Views Controversial Writer Xu Gang

Xu Gang's Return to China

93CM0302A Hong Kong MING PAO YUE-KAN [MING

PAO MONTHLY] in Chinese No 4, Apr 93 56-57

[Article by Liu Shao-ming: "Spring Dream in Paris"]

[Text] How much help did Xu Gang receive after the 4

June Incident to make it possible that today he can

"dream about Paris"?

On February 24, WORLD JOURNAL, a newspaper in

North America, carried a news report by Tseng Hui-yen.

This report of about a thousand characters did not

appear in a prominent place and was entitled, "Poet Liu

Gang Returns to the Mainland and Discloses the Route,

Getting All His Friends Into Trouble."

According to what Tseng Hui-yen learned from Liu

Zaifu, after the 4 June Incident, Xu Gang fled to France

via the "underground corridor" which passed through

Hong Kong with the help of Fan Zeng and others.

Toward the end of July last year, using the excuse that

his wife, living in Beijing, had cancer and needed care, he

reached an "agreement" with the relevant authorities of

the PRC, and returned to his home country.

Tseng Hui-yen quoted Liu Zaifu as saying: "Perhaps

because Xu Gang has adopted a cooperative attitude

toward the CPC, he has now become the new darling of

the Union of Chinese Writers. The next issue of

RENMIN WENXUE will feature Xu Gang's report,

'Dream in Paris,' and even a short story written by the

journal's chief editor Liu Baiyu, famous for his leftist

views, has had to give way. This shows how important

the relevant authorities deem Xu Gang to be."

What is the value of this news? Different peoole, I

believe, will have different views on that. For Xu Gang is

not an old hand, and people may not have heard ofhim.

According to Zhongguo Wenxue Da Cidian [A Comprehensive Dictionary ofChinese Literature], he was born in

1945 and was from Chongming County, Shanghai

Municipality. He joined the People's Liberation Army in

1962. His first literary work was a short poem, "In Front

of a Martyr's Tomb." In 1970, he went to Beijing

University to study literary creation at the Department

ofChinese. Among his representative works are the long

poems "Lu Xun" (1977) and "A Song of Mao Zedong"

(1978).

A reader who does not know what kind of god Xu Gang

is may not think much of his experiences after reading

the story of his life told above. For there are too many

such poets and intellectuals in a country as large as our

China.

Liu Zaifu, Baidao and many other exiled writers have all

"expressed, with one voice, contempt for—and indignation at—Xu Gang's seeking personal advancement by

betraying friends.'"

Their strong reactions show that although they grew up

in the new society, they hold rather traditional views:

"Money and wealth are but dung and dirt, while benevolence and righteousness are worth a thousand ounces of

gold." How much help did Xu Gang receive from many

anonymous heros after the 4 June Incident to make it

possible that he can now "dream about Paris"?

However, being ungrateful, unrighteous and trying to

further one's career by betraying friends are nothing

really new. Liu Zaifu said: "I have never believed that

people could be so bad." It was because Xu Gang had

been a good friend of his that he would feel so hurt. We

are outsiders. We surely despise Xu for what he did. But,

perhaps because I am old, I don't feel surprised.

After the 4 June Incident, Xu Gang had the opportunity

to get his wife out, but he did not use it. He got another

woman out through the "underground corridor." All this

shows that he is totally free from the burden of traditions. He is a member of the new human race.

Ifhe would dream about Paris, then why did he leave the

flower capital? Did he feel that he had not done the right

thing? Perhaps. In short, the reasons must have been

very complicated, so how can other people know the

reasons? But, from a common sense perspective, the

action must have been related to the feeling about the

huge differences: "A worm in Paris, but a dragon in

Beijing."

In this respect, it might be helpful for us to look at the

"Xu Gang incident" at another angle. Mao Zedong's

philosophy is: Take what the enemy discards. This time

RENMIN WENXUE can be said to have applied Mao's

philosophy creatively, featuring a work by an author who

is an "traitor" in the eyes of the enemy.

Nevertheless, in terms ofwriting things on a subject like

that of "Dream in Paris," there will not be much

difference whether the writing is done by a loyalist of a

past dynasty or a traitor. It is things such as "the Liang

Garden is nice but not a place to stay a long time" that

are most likely to be written, isn't it?

What traitors cannot write would only be works such as

"A Song of Righteousness" which expresses one's determination to achieve his goals.

Can a tragedy like the Cultural Revolution repeat itself?

Probably not. Look at China. Do any of the top leaders

have the prestige that Chairman Mao had in those years?

Even if Mao Runzhi should come back to life, he would

find that today's youths would not follow his orders

unquestioningly. "I am bored; don't bother me."

The master is no longer there, so the red boys have each

found their own leaders. Even ifXu Gang should want to

make some waves in order to curry favor with today's

power holders, the necessary objective conditions are

absent. He will, I believe, feel so lonesome in the years to
JPRS-CAR-93-043

28 June 1993 SOCIAL 45

come that he will "dream about Paris" again, providing

an outlet for his thinking about Paris by dreaming about

Paris.

From the standpoint of the CPC leadership, the "Xu

Gang" incident produced a hot potato. If the poet was

able to successfully return home only by making such

kind of "deals," then the exiled intellectuals who have

had any ties with the pro-democracy movement would

have to continue to live abroad in order to maintain their

good reputations. This may not have been what the CPC

really wanted.

Xu Gang, for his own sake and for the CPC's sake,

should have kept quiet. But, as the author of "A Song of

Mao Zedong," it may be very difficult for him to lead a

quiet life.

Now I have finally come to understand why Wang

Shuo's hooligan literature is in fashion on the mainland.

Review of 'Dream in Paris'

93CM0302B Hong Kong KAIFANG [OPEN

MAGAZINE] in Chinese No 4, 18 Apr 93 101-102

[Article by Fo Su-lan: "Waking Up From a Dream in

Paris—A Review of 'Dream in Paris' by Xu Gang"]

[Text] Everyone can come back to China, and those who

regret are the weak-minded, said Xu Gang, after returning

to Beijing. Xu Gang is happy that he did not stay in Paris,

turning into a drunkard or swindler. He will reform and

become a new person.

"Paris would first make you lazy, and then turn you into a

drunkard. After sobering up, you would strive to become a

robber or swindler by overcoming all obstacles."

"Paris makes those who are leading a serious life become

even more serious and those who are leading a frivolous

life even more frivolous."

"Those Chinese who are exiles in a foreign land will

either struggle amidst loneliness or perish amidst loneliness."

Depicting Humble Chinese Living in a Dark World

In "Dream in Paris," published in the February 1993

issue of RENMIN WENXUE, Xu Gang describes the

city which "even the drunkards find irresistible" as a

dark world filled with beggars, drunkards, prostitutes,

and evils. The Chinese there are leading a lowly, humble

life which is focused only on making money, devoting all

their energy to dealing with all kinds of residencepermission documents and tax forms, while suffering

from discrimination.

"Paris is very beautiful. There are the Seine, grass, dogs,

pigeons, palaces, squares, fountains, chateaux along the

Channel, snow on the Alps, cherries, wine, champagne,

and brandy. But what have they to do with those things;

they don't have the time to enjoy those things!"

The painter in front ofNotre Dame de Paris was once a

young Red Guard in his early years. He participated in

the large-scale guerilla war in Burma, but now is painting

portraits on the street. A musician, who left Laoshan of

Qingdao and went to Paris via Hong Kong to study vocal

music in 1957 has become a T-shirt vendor, because he

could not find a good job.

A Hunanese girl and a strong man from northeast

China—two self-supporting students—could not separate, after eating one meal of dumplings together, even if

they already had husband and wife respectively. The

reason was that they could not endure the loneliness and

that life was hard.

Speaking in the Shanghai dialect, the Shanghai girl,

wishing that she had been born with a straight nose and

blue eyes, would tell such lies as those ofbeing Japanese

and her husband being a rich French businessman, in

order to get money for food and the trip home from

people on the street.

A girl who had had an extravagant wedding ceremony

before going abroad, found out only after arriving in the

foreign land that her husband was a penniless poor man.

As soon as she got pregnant, he left her and married a

rich girl.

"Why have those Chinese come to France?" The answer

that the author has found is: "They are sick; they have

taken the wrong medicine."

"Many people have become more patriotic after leaving

China."

"What do you mean by French citizenship or U.S.

citizenship? I am Chinese, and am a descendent of my

Chinese ancestors. I am proud to be a Chinese! said he,

whose soul was built upon that piece of yellow land far

away which had seen highly developed civilization and

great sufferings and upon the spring grass and autumn

water on that yellow land."

In the blood vessels of Chinese "flows the Chinese blood."

"I would rather die than not be Chinese." "They only

think about one thing—China." "Those who have come to

Paris, leaving their home in China, and who have tasted

the life in a foreign land would soon affirm their Chinese

identity, claiming that they are real Chinese."

The romantic flower capital in the eyes of people at large

has become an evil city in the eyes of Xu Gang. Such

depiction, justlike Zhou Li's depiction ofNew York as a

dream-like paradise in Manhadun de Zhongguo Nuren

[Chinese Women in Manhattan], shows the prejudices

against—and extreme views on—the West that Chinese

hold.

"Dream in Paris" contains accounts of so many unfortunate things. But, in any large city in the world, there

would be filth and evil, but there would also be dragons
46 SOCIAL JPRS-CAR-93-043

28 June 1993

and tigers as well. In terms of darkness, New York has

even more drug-addicts, criminals, and homeless people

than Paris does.

A person who has one foot in Hell will surely not be able

to see the scene in paradise. Ifthe author were enjoying

a good life in Paris today, the flower capital would surely

have become a pleasantly intoxicating place.

Who Has Actually Taken the Wrong Medicine?

The life of an immigrant is difficult. This is true notjust

in the case of Chinese immigrants. Around the world,

various people are leaving their respective homelands for

various reasons. What they are seeking is a better life.

A person can feel proud of his own race, can choose the

political system he prefers, and can have cultural preferences. To emigrate is also a choice. Each individual

should be responsible for the choice he has made. If

those who have chosen to emigrate do not identify with

the society of their choice, then it will be difficult for

them to be accepted by the society where they live.

Xu Gang proudly declares: "We can go back to China at

any time. Those who regret are the weak-minded."

Certainly, those who want to go back can all go back. But

this does not mean that those who don't go back are all

sick or have taken the wrong medicine.

The author did not go to Paris because he wanted to go

there, but he was, at any rate, also one of the exiled

Chinese intellectuals who received the "political

asylum" and "economic assistance" granted by the

French Government after the 4 June pro-democracy

movement. How his life in Paris was, whether he has

returned to China, and how he views Paris are all matters

of his own concern only. Other people should not comment. But, as the author accounts how he, in front ofthe

cafe owner, raised the flag of nationalism and denounced

the shameful aggression of China carried out by the

British and French troops, stating that "history lives,"

we feel confused, puzzling over what he is really driving

Is the author trying to use nationalism to explain why he

returned to China? Or is he trying to use the darkness of

Paris to explain his difficult life in the foreign land? Or is

he trying to use patriotism to provide a self-deceptive

way of getting out of an awkward situation?

If not, the why have the ideals of democracy and

freedom that he once held enthusiastically become a

"nightmare of blindly imitating the foreigners"?

The author seems to have changed his colors and become

a new person, after waking up. He is happy that he did

not stay in Paris, turning into a lazy man, and then a

drunkard, who, after sobering up, would try to become a

robber or swindler by overcoming all obstacles.

Further on 'Dream in Paris'

93CM0302C Hong Kong KAIFANG [OPEN MAGAZINE!

in Chinese No 4, 18 Apr 93 102

[Article by Ang Ch'i: "This Beggar Is Not an Ordinary

One"] '

[Text] There was once a beggar from the Orient, walking

alone on the street in Paris. He was no other than Xu

Gang who, now living in Beijing, can "dream about

Pans," after having betrayed his friends. This beggar

would live on the handouts from France, the KMT, the

CPC, the underworld, the business world, his friends, his

male patrons and his female patrons. Who says that one

should not take handouts? As soon as handouts appear,

he would immediately extend his hands.

Don't simply think that "Dream in Paris" is only a

soul-selling work written for the purpose of ingratiating

with the new master. This work, based on despicable

ideas and filled with foul language, shows again Xu

Gang's techniques ofingratiating with people and hiding

his real intentions. He thinks he is very clever, but

anyone who can see will realize that what is involved

here is not any brilliant strategy butjust the cunningness

of a peasant from the island of Chongming and the

ruthlessness of a Red Guard.

Are you saying that I have cursed Paris? I have said

praises of Charles de Gaulle and Victor Hugo! Are you

saying that I despise the French? I have paid tribute to

the French police. Are you saying that I am in collusion

with the Communists? Ha! One day, in the future, this

"Dream ofParis" will be considered a call on my part for

the rehabilitation of the 4 June Incident: The poem

containing the line "I am not a beggar from the orient" is

entitled "Please Give Me a Stone, Paris." The intention

was to take a democracy stone from Paris—together with

the wakened exiled lion Xu Gang—to China, and "to

carefully put the stone at the foot ofthe reborn Statue of

Democracy." Look at the difference between his conduct

during the 1989 pro-democracy movement and his conduct now. "I, Xu Gang, will now fight the Communists

with all my power," he would say at that time. Beware,

my naive friends! As the person who, on June 2, 1989,

proposed to catch a few dozens of PLA soldiers to be

locked up inside the History Museum and to be killed

one by one at half-hour intervals with the bodies being

thrown out, so as to take revenge on the government, Xu

Gang is not an ordinary person.

Once in Paris, Xu Gang, who had been the commanderin-chief of the Red Guards on the island of Chongming

during the Cultural Revolution, still wanted to make

some waves, and once considered himself China's

Walesa. But soon such dreams were dashed. As a result,

we saw a Xu Gang who led an immoral, shameless,

hypocritic, duplicitous life in Paris, and see today's Xu

Gang who, lying in his Beijing residence, dreams about

Paris!
JPRS-CAR-93-043

28 June 1993 SOCIAL 47

'Dream in Paris,' Part I

93CM0302D Hong Kong KA1FANG [OPEN MAGAZINE]

in Chinese No 4, 18 Apr 93 103-106

[Article by Xu Gang: "Dream in Paris (A Report)"]

[Text] Editor's Note: After returning to Beijing in July

last year, Xu Gang, a mainland poet who had been in exile

since the 4 June incident, published his newly written

report, "Dream in Paris," in the February 1993 issue of

RENMIN WENXUE. According to Liu Zaifu, a scholar

now living abroad, the relevant authorities of PRC deem

the work to be of great importance, and even pushed aside

a short story by RENMIN WENXUE'S chief editor Liu

Baiyu, who is famous for his leftist views, to make room

for Xu's work. The following is the first part of "Dream in

Paris."

So many people dream about Paris; Paris is like a dream.

This is an overlapping, intersecting dream, and an

extraordinary combination ofsquares of different colors

and of lines in a free, haphazard way. Side by side, the

rich and poor, the clean and dirty, and the beautiful and

ugly walk conspicuously past the Champs Elysees, past

the white church at Montmartre, and past Notre Dame

de Paris.

The winter of Paris is too long, with endless rains but

little snow. Spring is very short. Just as winter comes as

soon as the first leave falls from the Chinese parasol at

the street corner, summer comes as soon as peach

blossoms show up.

Five Drunkards Fighting for a Woman

Only in summer can the sun be seen more often. When

there is sunshine, the homeless people become more

active.

They come out of the underground—the over 500

subway stations, abandoned subway tunnels, and those

nameless lairs. They are unemployed drifters, drunkards,

marijuana addicts, skinheads, and artists. It is reported

that those homeless people number over 7,000. They

have become a burden on Paris, but some say they are

part of the scenery of Paris.

People, especially the French, shun those homeless

people as if they were a plague. As the number of

unemployed people has reached over 3 million amid the

economic recession, the homeless people's chances of

getting some handouts have become slim. According to

some data, immigrants—who have come to France from

foreign lands—only account for less than 2 percent ofthe

homeless people. In other words, those drunkards, marijuana addicts, and beggars are mostly Frenchmen.

Some of them, especially the lonely old people, keep

quiet all the time, scavenging the few garbage cans in a

subway station, with the hope of finding some leftovers.

Some others keep talking to themselves, fully demonstrating the oratory gift ofthe French. Still others would

sit on the benches in the waiting area of a subway station,

shouting abuse at every train coming into or leaving the

station. They would even unzip and take out that thing

to urinate in front of people. When it is hot, in a subway

station, there would be a strong repulsive smell which is

a mixture of the smell of urine and the smell of lowquality perfume.

When television and newspapers touched upon them in

their news coverage and cried: "Paris is no longer the

beautiful Paris," President Mitterrand made a shocking

remark: "Without the homeless people and the drunkards, one part of the scenery of Paris would be missing.

There is no need to be alarmed about their existence."

Mitterrand was humorous and generous. But, surprisingly, the homeless people were not grateful to him.

Holding up empty liquor bottles, they shouted: Grandpa

Mitterrand, together with your wife, your mistress and

your dog as well as the champagne in the cellar, come

here and sleep beside us in the subway station!

A middle-aged woman—with short hair and several large

pustules—and a man—with an always-glowing face and

alcohol-smelling mouth—were partially embracing each

other. They moved their campsite from a subway station

to the square in front of Notre Dame de Paris on a hot,

sunshine-permeating September morning.

It so happened that I went to Boulevard St. Michel to buy

some paint by subway. While waiting for the train, I saw

five drunkards fighting for a woman. These were a bunch

of inebriated people. The only things remaining clear in

their consciousness were alcohol and women. On the

other hand, a homeless woman who was not yet senile

had to depend on a man. The drunkards, although

inebriated, still had morality: If there was a bottle of

alcohol, they would always take turns in enjoying the

alcohol, and no one would be allowed to consume all the

alcohol. According to some French friends, on this point,

they are very careful in observing the code of brotherhood However, things would be different with regard to

women. Thus, they would fight, while faltering. They

seldom hit their targets. In the eyes ofthe drunkards the

skies must be turning. Those drunkards who should be

slightly sober or younger could easily beat their opponents to the ground with a few hits.

The woman was very happy. She picked up a cigarette

butt on the ground and started to puff out smoke. She

would, from time to time, turn her head around and take

a look, to see if there was an outcome. Her fingers

holding the cigarette were grayish black. On two nails

there were still traces ofred nail polish, and the red dots

were very small. As the cigarette was about to be finished, she raised her fingers to show that she, too, had

used nail polish before.

I watched them from afar. I wanted to see what was

happening. Or I felt rather close to them in terms of my

state of mind.
48 SOCIAL JPRS-CAR-93-043

28 June 1993

That drunkard went away immediately after arriving at

the door of Notre Dame de Paris. This bustling area is

full of temptations which were irresistible to drunkards.

There were bars and cafes everywhere. Under umbrellas,

tourists would pick up wine-glasses with their hands in a

leisurely manner, and then begin to enjoy famous French

wine and coffee, with strong aromas floating around.

He went to look for alcohol.

Cursing France in the Square in Front of Notre Dame

She stretched herself once, and, sitting on the cement

edge of a garden, scratched her head several times,

resulting in a shower of dandruff, scraps of paper and

cigarette ashes. Then, she squeezed a pustule on her left

cheek with her right hand, and spread the pus, in several

layers, on the green fence of the garden just as a painter

would do. After squeezing the pus out ofthe pustule, she

picked up a piece ofwaste paper on the ground, tore a bit

from the paper, licked it and covered the pustule with it.

She began to remove the only upper-body clothes on her

body. After taking an intense look at the tourists around

her, she held up her big breasts with her two hands, and

proceeded to shake and kneed them. Then, after saying

something, she began to ferret out lice and bugs in her

clothes. When she found one, she would bite it, making

a noise as if she had been eating something crispy. She

did all that in a graceful manner. The French are always

graceful.

The way to eliminate lice is largely the same in all

populations of human beings.

On the other end ofthe square in front ofNotre Dame de

Pans was the police headquarters of Paris. After she had

eliminated the last louse or bug, a policeman and policewoman, standing behind her, said politely: "Madame

please put on your clothes."

Both policemen and policewomen of Paris looked neat.

Each officer would always carry a pistol, handcuffs, and

an electric baton on the hip.

She turned her face toward the policeman, and smiled-

"You should first ask me to take a bath, and then we can

go to bed. You should know that I haven't taken a bath

since a year ago. If only I can have a good bath

everything will be good. Don't you believe that?"

The policeman said in a serious tone: "Madame, I am

performing official duties now."

"I understand. I will be waiting for you after you finish

your work. I have time, OK?"

The two police officers shrugged almost at the same

time, and each stretched out one hand, also almost at the

same time: "Please!"

"Where do you ask me to go? Say it, say it! Where do you

ask me to go? My husband went away with a little whore.

After I brought up my two sons, they now have their own

women; do you understand? They change their women

several times each year—the women who, like snakes,

would enwrap them. They will never again think about

me, their mother. I have been looking for my husband

and my children, but I have found nothing. Unemployed

and unable to pay the rent, I was evicted. I haven'ttaken

a vacation for three years. Minced goose liver and

seafood salad are really nice. Where should I go'

Subway? Living there, I got boils all over my body; do

you see that? I need sunshine. Like you, I need sunshine.

I am French; do you know that? Why cannot I enjoy

sunshine for a moment on the land of France? How

many foreign refugees have you accepted? Africans

Slavs, Albanians, Jews, and Chinese. Take a look at the

map. How large is China? How large is France? Why

have so many Chinese come to France? They have

houses to live in and bread to eat, and are running

restaurants to make money. Why do we have to live in

subway stations? And, you police, seeing a rich man's

dog, would be anxious to call it 'dear' and then lick its

ass. Don't you see? Hypocrisy envelopes France! The

Seine is now muddied! The Louvre has also been almost

eaten up, and the bellman at Notre Dame de Paris has

long been dead! Only sunshine is true. Please go away. I

want to lie down and take a sunbath. Perhaps, I will

actually take off my pants. It seems that there are a few

lice inside my pants. By the way, are there cockroaches in

your police headquarters? There were at least 30,000

cockroaches in the house where I once lived. Paris is

occupied by cockroaches. It does not matter who occupies Paris. We the French like to surrender anyway I

want to sleep now."

She went to sleep.

She actually went to sleep.

Two young French girls carefully spread out her upperbody clothes to cover her upper body.

The sunshine was nice. After many cold and rainy days,

sunshine had finally come to Paris. The French like

sunshine and art. Yes, why cannot she enjoy true sunshine?

The Causal Relation between Money and Relative

Freedom

Obviously, I cannot forget that homeless person in a

short time.

You must admit that the things she said were mostly

true. Ifthere were lice on her body, then she had to catch

them.

How much qualitative difference is there between pistolholing police officers trying to catch criminals and homeless people trying to catch lice on their own bodies?

When a person owns nothing, his protest will also be

straightforward and full ofwitty remarks. Hypocrisy and

politesse are characteristics of high society. Only a

drunkard will say: "Let me get drunk one more time, and

I am willing to die."
JPRS-CAR-93-043

28 June 1993 SOCIAL 49

Generally, the French society is rather tolerant. Even the

illegal immigrants, having entered France and having

committed no crime after the entry, are much less likely

to be deported than would be the case in the United

States or Germany. This is perhaps one of the reasons

why you will see so many Arabs, blacks and Chinese on

the streets of Paris. The tolerance of a society tends to be

in direct proportion to the degree of prosperity of the

society. In France, as the continued economic slump

over the four or five years has made the number of

unemployed people rise to over 3 million, the issue of

immigration has become a subject of discussion in the

parties' election campaigns and a real social problem.

The slogan put forward by Le Pen, leader ofthe extreme

right of France, is: France belongs to the French; get the

immigrants out of France!

Will Le Pen come to power?

It does not matter whether Le Pen will come to power or

not. Even those usually non-partisan Frenchmen have

begun to focus their attention on the Chinese. They

cannot figure out how those Chinese, penniless when

arriving at France, can acquire their own take-out restaurants, convenience stores or even a decent Chinese

restaurant with a red lantern emblazoned with the god of

wealth in three or five years. Although the French, in

their heart, loathe the Arabs the most, their actions

indicate that they find the Chinese more unfathomable.

To the French, what is the most intolerable is perhaps

the fact that the Chinese even refuse to learn French—

the noblest language in the world. Apart from a few

business terms which are always pronounced wrongly

but comprehensibly, they will never speak one more

thing in French. They make money off the French, but

live within a Chinese community. In other words, a

community composed ofjust one Chinese will still be a

small Chinese society: speaking Chinese, eating Chinese

food, hanging landscape paintings on the wall, putting up

a picture of the Chinese god of wealth on the door,

burning Chinese incense, and listening to Chinese songs

over the radio—from "Miss Liu" and "A Shining Red

Star" to "Sister, Bravely March Forward."

"Why have Chinese come to France?"

Not only are the French asking, but those Chinese are

also asking themselves.

The usual answer is: "Sick. We are all sick."

"Taken the wrong medicine!"

The younger ones believe that "France is a free country,

without those numerous constraints." Almost all Chinese, when arriving at France, would comment with

deep feelings: "France is too beautiful, too free!" But, if

you are not a passing tourist but have to stay in Paris,

have to rent an apartment, have to earn money, and have

to face the various bills that come each month, then you

will feel chilled to the bone. The pressures in life are too

heavy.

"Freedom" is really an enchanting word. It is not even

necessary to mention thatthere is no absolute freedom m

the world. Even relative freedom has, in large part, a

mutually causal relation with money.

Certainly, there is an abundance of freedom in France:

You have the freedom to buy real estates and vineyards,

if you have the money.

You can travel wherever and whenever you want. It is

easy to buy plane and train tickets. But, do you have the

money? The Nice coastal area in the south—the worldfamous blue-sea coast—is beckoning you there.

You also have the freedom to go to gambling towns, if

you wear suits and tie.

France is a world of name-brand goods—name-brand

cars, watches, clothes, and shoes. There will be advertizing about name-brand goods in every season. All the

name-brand goods smile only in front of the rich.

Of course, everyone has the freedom to breathe the air

and enjoy the sunshine. But, there are even differences

here: Ifyou go to visit Napoleon's palace at Fontainbleau

and draw a deep breath, while taking a walk in the woods

and on the grass there, the fresh air you enjoy then will be

naturally fragrant and moist, and your nose will feel the

pleasantness.

Of course, you can enjoy the sunshine in Paris; but the

French are crazy about going on vacation in summer,

even ifthey have to mortgage or sell their homes and cars

when they come back from their vacations. All this is

because they can enjoy true sunshine only on the Mediterranean beaches in the south and the beaches at the

small town of Dover close to the English Channel.

"Those Frenchmen Who Go on Vacation Are Sons of a

Bitch"

Each year, the French would generously leave the sunshine in Paris to the black street sweepers, the Arab fruit

vendors, and the Chinese working in Chinese restaurants, when August comes.

Paris becomes deserted. During this season, poor

Frenchmen, homeless people, Arabs, blacks, and Chinese are especially friendly toward each other, patting on

each other's shoulders, with thumbs up: "You and I

should treat each other nicely. Those Frenchmen who go

on vacation are sons of a bitch."

On the narrow street where I lived, there was a cafe

which also sold lottery tickets and cigarettes. The owner

had just gone to the southern beaches by car. There was

a hand-written notice on the door: On vacation for one

month. That night, three black primary-school students

scrawled several lines of words on the window with

paint: The bad cafe-owner's car will overturn on the

highway or be swept away by Mediterranean storms or

fall from Mont Blanc. Your money will be without an

owner!
50 SOCIAL JPRS-CAR-93-043

28 June 1993

I saw that tall, fat Frenchman with an aquiline nose and

blue eyes after he returned from vacation. He was

somber-faced for a whole week. And it was a black that

he hired temporarily who wiped away those several

slogans written in big characters.

I would always enter that cafe to have a cup of sweetscented, thick coffee on my way to a store to buy my

Chinese newspaper.

As I just sat down, the cafe owner—usually arrogant—

came to me and said a lot. I only understood one phrasethis street.

An overseas Chinese who once lived in Cambodia and

who came to Paris fifteen years ago was at the next table

We would usually nod to each other in the cafe, saying:

"Good morning." He hurriedly translated what was said:

"This street, the cafe owner said, was very tranquil

before, and those living here were all French, and both

rich and polite."

"What about now?" I asked.

"Now? Arabs, blacks, and you Chinese. This narrow

street is no longer tranquil."

Pointing at things outside the window, I said: "The

blacks are sweeping the street, the Arabs are vending

fruits, and the Chinese are working. All this in no way

keeps you from being a cafe owner. How about that?"

"But, someone has written slogans on the door of my

cafe to curse me. The French, you know, do not curse

each other."

I told that aquiline-nosed cafe owner that he should

report to the police and that I was not interested in

discussing the question.

"What are you interested in?"

"History. You should know that over a hundred years

ago, China was an even more tranquil country, which

was in the orient and far away from Paris. But, a joint

British-French force invaded our country, using Western

guns and cannons, occupied Beijing, killed our women

and children, and burnt the Summer Palace to the

ground. There were French soldiers in the joint force. In

your national museum, there are still, on display, our

national treasures that you looted from the Summer

Palace ofthat time. According to your captions, they are

cultural relics that the French kings collected over the

generations. Are you interested in listening to all this?" I

lighted a cigarette and waited for an answer from the cafe

owner.

First, he made a gesture to indicate that there was

nothing he could do about that: "What if you had won

that war?" He smiled, feeling pleased.

"We were the victims of aggression. We were no match

for the foreigners, and lost the war. We had to cede

territories and pay indemnities. We feel ashamed ofthis

episode. But, Sir, do you feel that France should be

proud ofthat? By the way, let me tell you an example of

a Frenchman denouncing France, that is, the case of

Victor Huge. During that barbaric aggression, only one

Frenchman—that is, the writer Victor Hugedenounced your government. He denounced the aggressors who engaged in killing and burning, describing that

episode as a shame to France."

"He has long been dead."

"But, history lives!" I stood up, and left one franc as tip;

the cafe owner hurriedly picked up the money. (Originally published in the February 1993 issue of RENMIN

WENXUE.)
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