Chinese indecision angers industrialists

Press, 28 April 1981, Page 16

Chinese indecision angers industrialists

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JONATHAN MIRSKY

in Peking

Economic turnabouts in Peking continue to keep foreign investors in the city guessing, but the long-range prospects for China’s modernisation appear dim to some of the country's keenest observers.

After a sequence of staggering January cancellations of steel and petrochemical plants, which left its Japanese and West German creditors in a multi-billion-dollar lurch, China has now not only reversed that decision but applied to Tokyo for a $4 billion loan to cover the cost of the revived orders.

“An incredible figure,” said one authority in Tokyo, where the application has been greeted with meagre enthusiasm. But the Japanese must move cautiously in an arena where neither they nor Peking know the ground. “We have absolutely no experience of this sort of thing, such cancellations, such huge •compensation,” a Japanese industrialist said in Shanghai. He knows the details of the threatened contracts, especially of the vast Bao Shan complex, designed almost to double China’s steel output by 1990. The scheme, if completed, is reported to be worth between $7 billion and $l4 billion. If the project had been cancelled, China’s still uncalculated compensation costs would have shattered its economic planning. The industrialist is aware of the allegations in Peking that Japan inveigled China into a doomed scheme. Understand-

ably, he waves this away. “They asked us. Now they blame us. The fact is they ran out of money.” Nor can he take seriously Peking’s other explanation that unnamed “Leftists” in the Central Committee drove China on to the supposedly golde road to the Four Modernisations in agriculture, industry, defence and science. Investment in heavy industry would have been the key. “It was Deng Xiao-ping,” the Japanese says, an indictment also whispered by thoughtful Chinese. “He visited Japan and told us he wanted a copy of our Kimitsu steel works. We told him that to build them in Japan, where everything is_ available, would take at least four years. But Deng wanted speed. We supplied the technology on schedule but they couldn’t meet the erection timetable.”

At first China jibbed at compensation, and agitated Japanese money-men threatened to terminate existing contracts. The Japanese say: “We calculated the damage. Now they admit it was their fault. But if they won’t pay enough our Government will cover the cost. That would be very shameful for Peking and noone would every do big business with them again.”

Cautious even about the latest Chinese turnaround, he added: “Cancellations and orders at the same time. It’s the usual bad Chinese co-ordi-nation.” Faulty linkage between skilled Chinese techni-

cians and their technologically innocent political bosses is a common topic in Peking. “Their experts are damn bright,” says a European with decades of China-trading h»hind him.” But then one requires day-to-day decisions ar r i — bang — a stonewall; no experience, no knowledge, no decision.

Until recently, he claims. Chinese authorities believed high technology to be public property. “They imagined a whole treasure-house would just open up. But then General Electric, Westinghouse, and t’S rest said ‘money first’.” Like his Japanese counterpart he holds Deng Xiao-ping to blame. “He deliberately engineered what he thought would be a boom. And when he saw all those big firms'" in the United States dying to place orders he just drooled. Now he’s blaming ‘the Cultural Revolution generation’ for letting the country down. That’s just a way of getting the old men at the top off the hook.” Unlike the Japanese, the European trader believes that, the development of heavy in-' dustry will never pay off in China. Investors will do well, he says, to buy traditional Chinese products and to help underwrite light industrial schemes, both of which continue to be profitable. Both men regard interagency factionalism as a critical Chinese obstacle to development. “We can’t even invite some ministries to the same banquet,” says the European.

I His examples of infighting verge on the grotesque. “The metallurgy ministry blokes i tried to seize all the gold in the country. The Peoples Bank said no, arid squashed it. And the .Canton authorities won’t hand over railway revenues to the I Central Government. They say: ( ‘We’re autonomous. We generated this’.”

■ Poland badly frightened the . Chinese, according to the European. China, too, lags behind in ’housing, electricity, drains and

consumer goods. “They were scared of another Gdansk. These international deals drain away all the money. You can't expect the ordinary people to be patient for too long.” For the Japanese industrialist, Maoism is “China’s swansong.” At a recent seminar, he says, some Chinese top-level managers asked him how to avoid further cancellations. “I told them to cancel Communism. They got very silent.” But for the European the

problem is more complex. “Maoism deals in certainties. And economic regeneration in China isn’t a matter of certainties. But without political ones you can’t hold the country together. The Old Man did leave them a national framework, you know. Take Sichuan province. If Sichuan 1 were a country it would be the eighth biggest in the world. And it’s 2000 miles inland. It may be backward, but it's not going to break away.” — Copyright, London Observer Service.