DESPITE ALL THE talk of China's immunity to the global economic downturn, Beijing's leaders are now being forced to postpone key parts of their reform programme for at least a year. The impact of recession abroad is being compared with the Asian financial crisis which hobbled Premier Zhu Rongji's economic programme and smashed hopes of political reforms raised before the 15th Communist Party Congress in 1997.
Liberals within the party had been preparing the ground for putting political reforms back on the agenda for the 16th Party Congress scheduled for next year. Plenty of ideas have been circulating among theorists at the party's central school, who have been busy questioning visitors from Europe on how socialist-democratic parties in Europe operate. They have gleaned ideas which the party could adopt or at least adapt, but it is now doubtful if these will get a hearing.
With optimists in America not forecasting a recovery until the second half of next year, it is possible the outlook in China will not improve either before the end of 2002.
'This means they are less willing to play around with political reforms. Maintaining social stability will remain the priority,' said Pu Yonghao, senior economist at Nomura International.
China's economic growth will drop next year to its lowest level since 1992 - about 6.5 per cent, according to the World Bank. Many of the problems supposed to have been overcome since Mr Zhu took office are re-emerging. China's state-owned enterprises (SOEs) are believed to be operating in the red again after last year's record profits, and deflation is back, at nearly three per cent in September.
Some experts such as Shawn Xu, head of research at China International Capital Corporation Ltd, doubt that deflation ever went away and suggest it was obscured by higher prices for services such as banking. This means there is still too much over-capacity in domestic industry and that large-scale closures and layoffs in sectors such as steel, coal and textiles are still ahead. 'We have to see more consolidation in industry,' Mr Xu said.