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National Agenda : China Frets Over Inflation : Leaders trumpet their concern but seem powerless to halt the rising prices.


BEIJING — They were unlikely protesters--not idealistic students nor brooding intellectuals nor angry young workers, simply unhappy pensioners whose incomes were not keeping up with inflation.

The retired steel mill employees who staged a sit-in outside a factory gate in the central Chinese city of Wuhan this spring were hardly the sort of people who could bring down a government.

Perhaps for that reason, rather than face arrest, they won: The factory agreed to boost their pensions from 250 yuan (about $30) a month to a bit more than 300 yuan (about $36). But these days in China--amid an economic boom that is benefiting most people but leaving hundreds of millions of others behind--that isn't enough to live on.

"We basically use our entire pensions on food because we can't afford to buy anything else," said one beneficiary of the protest, a retired steelworker named Zhang. "We can't really live with our available money. We have a nephew who earns more, and he gives us spending money every month to help us get by."

Five years after the People's Liberation Army crushed pro-democracy protests fueled partly by outrage over rising prices, the specter of inflation is again at the top of China's public concerns. Not since summer, 1988--when panic-buying of consumer items such as refrigerators and televisions swept shelves bare in cities across this nation--has the problem been so severe.

Inflation alone seems unlikely to lead to an explosion of social unrest, given the Communist Party's continuing ability to impose police-state controls or call upon the army to crush any disturbances.

But with 90-year-old senior leader Deng Xiaoping in gradually failing health, China could, at any time, face a destabilizing succession crisis. Serious inflation would add to the uncertainties in any post-Deng power struggle.

Top leaders of China's successor generation are trumpeting their concern about inflation but seem incapable of taking any measures to control it.

"Prices are rising fast and inflationary pressure is still too big," Premier Li Peng admitted in a recent speech, published on the front page of the official People's Daily. "A considerable number of state-owned enterprises are in difficulty, and at some inefficient firms the real income of workers is falling. Parts of the country are plagued by crime and social disorder. . . . The living standards of hundreds of millions of peasants has a direct impact on the entire nation's economic development and social stability."

Thus, controlling inflation must be the government's "most important task . . . during the second half of this year," Li said.

The fears of Chinese rulers have been stoked by statistics showing that annual inflation in major cities is running at 27%. Urban food prices this summer were up 32% from a year earlier, while grain prices soared 58%.

Last year, for example, half a kilogram of eggs--10 large eggs or a dozen smaller ones--sold for 2.40 yuan (28 cents) in Beijing; now they cost 3.30 yuan (39 cents). Broccoli has jumped to 3.18 yuan (37 cents) a pound from 2.27 yuan (27 cents) a pound.

Since the beginning of this year, pork, the most important meat in the Chinese diet, has jumped to 7.28 yuan (86 cents) a pound, up from 4.55 yuan (54 cents).

Concern about the social impact of price increases is chilling plans to force state-owned industries to face fiercer market competition, though squeezing greater efficiency out of poorly run factories would be a key step toward solving underlying problems. Authorities seem to be afraid that inflation and industrial restructuring make too volatile a mix.

"For a lot of workers . . . life is very very hard, especially now, when a lot of enterprises are closing down or reforming and they are laying off a lot of people," said Zhang, the onetime steelworker who moved to Beijing from Wuhan after retiring. "I think the government should be very careful about what they do to the workers of China."

After the bloody 1989 crackdown on the student-led Tian An Men Square protests, the government "covered it up pretty well, and they scared them" into silence, Zhang said. "But if they infuriate the workers, there will be no stopping them."

But many others in Beijing believe that however angry people may get over price increases, there is nothing they can do. Most people's incomes are also growing a bit faster than inflation, and consumers further benefit from availability of an ever-growing variety of goods.

In 1988, when similar rates of inflation caused a panic, China was emerging from almost four decades of stable prices. But now people are accustomed to seeing both wages and prices go up. And for ordinary people in Beijing, the key lesson of Tian An Men Square seems to be that challenging the government on anything is a dangerous exercise in futility.


"If you try to defend your rights--in this case, consumer rights--you may be branded an ultra-leftist, an ultra-rightist, or something else extreme," a 30-year-old tour guide said.

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