Peking congress tries to rein back big rise in prices

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RAPID economic reform is taking second place to the Chinese government's desperation to maintain political stability. The annual meeting of China's parliament, the National People's Congress, closed yesterday with inflation running at twice this year's target and many reforms postponed until the economy is brought under control.

Dissatisfaction over the handling of the economy was in evidence inside and outside the Great Hall of the People. When the 3,000-odd delegates to the rubber-stamp parliament voted on the proposed 1994 budget 337 voted against. The official People's Daily said yesterday that 12,352 letters and telegrams had been sent to the congress, many expressing concerns about the economy, especially inflation, the burdens on farmers and retired people, and corruption.

The government has now backtracked on a number of issues, especially those concerned with inflation and jobs. In contrast to the liberalisation of price controls, the prices of 20 key commodities and services have now been listed 'for monitoring and supervision' and local mayors will be held responsible for a 'basket' of prices. Ailing state enterprises, while being exhorted to face up to market forces, will be exempt from certain central government levies. Meanwhile, a rearguard action by the provinces to stop central government laying claim to a greater share of their tax revenues has succeeded this year.

Inflation, a key cause of support for the 1989 pro-democracy movement, remains the greatest worry for the government. Peking's talk of stability is often synonymous with the need to protect people's livelihoods against price rises. Figures released yesterday showed a 20 per cent jump in retail prices.

This is twice the 1994 target, passed yesterday by the congress. Prices in the big cities were up 23.3 per cent in January and the State Statistical Bureau is not yet releasing the figure for last month. 'It was too high and we fear that the people cannot accept it,' an official told Reuters.

Over the past couple of years there has been a debate within the Chinese Communist Party about the speed of economic growth and pace of economic reform. Li Peng, the Prime Minister, last night said that for the first time an 'unprecedented consensus' had been reached on how to balance reform with the need for social stability. That consensus appears to include a slower timetable for structural reform of the economy.

A number of expected bills were not voted on during the congress session and have been deferred until later in the year. These include legislation on financial securities, banking and trade. Nor did the government solve its own cash crisis. After strong opposition from the provinces the base for the new tax-sharing agreement has been changed so this year's central government coffers will see little benefit despite a ballooning budget deficit.