Premier Li Peng

Premier Li Peng, whose martial-law order for troops to clear Tian An Men Square of student protesters resulted in hundreds, perhaps thousands, of deaths, appeared publicly Thursday for the first time since the weekend massacre and briskly praised soldiers for a job well done. The government also issued a new set of martial-law regulations, that appeared to foreshadow a renewed crackdown on student dissidents--something that was borne out today when troops moved in and raided Beijing University.

Students camping out in Tian An Men Square to demand democratic reforms were sullen, confused and divided Sunday night, but protest leaders vowed not to abandon their squalid tent city, making it unlikely there will be an end soon to the protest movement that helped precipitate a major upheaval in China's leadership. Representatives of the students announced they have retracted an earlier plan to leave the square on Tuesday, the 10th day of martial law that Premier Li Peng declared May 20 to suppress pro-democracy demonstrations but that he has been so far unable to enforce.

A renewed power struggle is under way at the top levels of the Communist Party of China, with senior leader Deng Xiaoping trying to strengthen the position of those who advocate market-oriented economic reforms. In the balance is the fate of hard-line Premier Li Peng, whose commitment to reform is often questioned.

As a tense standoff between residents of Beijing and the Chinese army continued Monday, key retired generals were reported to have written a letter urging restraint and avoidance of force in suppressing massive protests. The letter, copies of which circulated widely in Beijing on Monday, was drafted by seven retired generals, including former Defense Minister Zhang Aiping and former army Chief of Staff Yang Dezhi, and appeared to be genuine, according to a number of well-placed individuals who spoke with Western reporters.

Conflicting official news reports Wednesday and early today--some painting a rosy picture of the situation in Beijing, others stressing enforcement of martial law--marked an epic battle for control of China raging through the top leadership, the media and the army. The country's three most influential news organizations--the People's Daily, the New China News Agency and the national television network--carried reports Wednesday describing Beijing as socially stable, with an upsurge of politeness between ordinary citizens.

Hu Lisheng was only 25 when she returned in 1960 from study in the Soviet Union to suddenly become, in the wake of worsening Sino-Soviet relations, a key expert at an airplane factory. "That was a very difficult time," Hu, who trained for five years in the Soviet Union as a metallurgical specialist, recalled in a recent interview. "This was a factory that Soviet experts had helped build, and they had just been withdrawn. . . . Everything depended on us, the recent college graduates, so we worked days and evenings."

For the past decade, market-oriented reforms and openness to the world have brought rapid, sometimes overheated economic growth to China, but the reform movement now faces a severe test. Economic imbalances, corruption, inflation that is the worst since 1949 and deep public unease have forced the leadership to revise its timetable. The Communist Party Central Committee recently endorsed an attack on inflation--now running at an annual rate of about 25%--as the government's top priority.

China's police put a net out for 21 pro-democracy student leaders Tuesday while the hard-line winners in the recent government power struggle promised further blows against their opponents. Early today, state-run television announced the arrest of two of the 21 "counterrevolutionaries." The others are believed to be still in hiding. The student leaders are accused of "inciting and organizing counterrevolutionary rebellion," television reports said. Photographs and brief descriptions of each student were broadcast in the manner of a most-wanted list.

Among American business leaders in Hong Kong, the ethical dilemma of doing business in China has taken the form of an unsettling riddle: The chairman of an American corporation has come to China to check on operations. While there he meets with Premier Li Peng, a key member of the Chinese leadership that ordered the bloody crackdown on pro-democracy demonstrators. What would you advise the chairman to do if he were asked to shake hands with Li Peng? "The answer is always universal silence," said Jamie Horsley, a Hong Kong-based attorney who represents IBM, Amoco, H. J. Heinz and other companies in negotiations with the Chinese.

Chinese Premier Li Peng was dropped today from a key government post overseeing the country's stalled economic reform program. State-run media said the standing committee of the National People's Congress appointed a little-known former Shanghai politician and business executive to replace Li as minister of the State Commission for Restructuring the Economy. Radio Beijing and China Central Broadcasting said Li's replacement is Chen Jinhua, 61.