Time - Man of the Year/Time_Man_of_the_Year_Compact_Publishing_3YX-Disc-1_Compact_Publishing_1993.iso/moy/moyfiles/1985moy.001

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                                                                                January 6, 1986

Man of the Year

Deng Xiaoping



Deng Xiaoping leads a far-reaching, audacious but Risky Second
Revolution


"Marx sits up in heaven, and he is very powerful.  He sees what
we are doing, and he doesn't like it.  So he has punished me by
making me deaf."

--Deng Xiaoping, 1985


The leader of 1 billion Chinese was joking, of course; he lost
part of the hearing in one ear long before he launched the
world's most populous nation on an audacious effort to create
what amounts almost to a new form of society.  But, as might be
expected from the diminutive (4 ft. 11 in.), steel-hard Deng,
81, it was a joke with a sharp point.  If in his more solemn
moments he still attempts to justify what he often calls his
"second revolution" in the name of that patron saint of
Communist revolution, Karl Marx, Deng is well aware that the
system he is evolving in China either ignores or defies many of
the precepts most cherished by traditional Marxists (especially
those running the Soviet Union).  In the Chinese spirit of
balance between yin and yang, Deng's second revolution is an
attempt on a monumental scale to blend seemingly irreconcilable
elements:  state ownership and private property, central
planning and competitive markets, political dictatorship and
limited economic and cultural freedom.  Indeed, it is almost,
or so it often seems to skeptics in both the Western and Marxist
worlds, an attempt to combine Communism and capitalism.

It is also a high-risk gamble.  The elements may prove truly
irreconcilable, and Deng's bold experiments could dissolve into
economic chaos.  It is even possible that they could give way,
though probably not until after his death, to at least a partial
restoration of the ironfisted, xenophobic rule and extreme
regimentation imposed on China by Deng's predecessor Mao
Tse-tung.  But in 1985 Deng gave fresh evidence of his
determination to push his reforms through to their conclusion,
whatever that might be.  Having essentially completed a
transformation in the countryside, where 80% of China's masses
live, by freeing peasants to grow what they wish and to start
private businesses, Deng concentrated on what may be the harder
job of bringing change to China's cities and requiring the
managers of state-owned enterprises to behave like
profit-hungry, innovative capitalists.

Whether this second state of the second revolution can fulfill
Deng's dream of hauling China out of its still desperate
backwardness into the 20th century by the time the century ends
is anyone's guess.  It got off to a somewhat rocky start, and
is encountering more opposition than the first, rural stage did.
 But if it should succeed, the transformation would have
profound and enormous consequences throughout the world.

The Soviet Union, which has historically feared the Chinese
masses on its southeastern border, would face a neighbor
considerably strengthened by a triumphant heresy.  Communists
everywhere, notably in the Third World, would see an alternative
to the failures of Soviet-style Marxism.  Many of China's
neighbors in the Far East, including Taiwan and South Korea,
would find that a political foe had been tamed into a trading
partner, while an economic weakling had become a mighty
competitor.  Most important, perhaps, the U.S. and other Western
countries would see the crusading faith that has made the
Marxist third of the world an enemy converted into a system
that the West could live with and in some respects, though
certainly not all, applaud.

Already Deng has changed the daily lives of his nation's
citizens to a greater extent than any other world leader.
Foreigners revisiting China after a lapse of only a few years
can scarcely believe that they are in the same country:  the
free and well-stocked food markets, the neat little homes and
humming village industries springing up throughout the
countryside, the openness to foreign influences ranging from
computer technology to rock music are like nothing they or their
hosts have seen before.  Neither is the willingness of
intellectuals, like Deng impatient with ideology, to discuss how
much of it can be dumped in the interest of still faster growth.
 It is primarily because his continuing reform of China and
Marxism holds more promise for changing the course of history
than anything else that occurred during 1985 that Deng Xiaoping
is TIME's Man of the Year.

To be sure, other personalities and events dominated the
day-to-day headlines.  After the deaths of three infirm leaders
in four years, the Kremlin finally chose a chief, Mikhail
Gorbachev, who at 54 is young enough to give the U.S.S.R.
vigorous leadership for the rest of the century.  Gorbachev
moved quickly to consolidate his power, firing old-line
bureaucrats by the score and wooing popular support by touring
Soviet farms and factories in the manner of a handshaking,
baby-kissing Western politician.  He broke the long, frozen
silence between the nuclear superpowers by agreeing to meet
President Ronald Reagan in Geneva for the first Soviet-American
summit in six years. Their November talks in front of a cozy
fire moved none of the substantive issues closer to solution.
 On the paramount question of arms control, though both have
proposed a 50% cut in offensive nuclear weapons, agreement is
still being blocked primarily by Reagan's insistence on
continuing his Strategic Defense Initiative and Gorbachev's
vehement demand that it be abandoned.  It was notable, however,
that despite Gorbachev's pre-summit threat that nothing else
could be accomplished unless this demand was met, he chose to
present himself as moderately satisfied with the summit and to
continue the dialogue--leading most observers to award Reagan
a summit "victory."

Other long-festering dangers kept the world in turmoil.
Terrorist murders and kidnapings became more brazen:  the
hijackings of TWA Flight 847 in June, an Egypt Air jetliner in
November and the Italian cruise ship Achille Lauro in October
were only the most spectacular incidents.  Though governments
did finally begin to fight back, their efforts illustrated the
complexities and perils of antiterrorist action:  the U.S.
capture of the Achille Lauro hijackers strained relations with
Egypt and Italy, while 60 passengers on the Egypt Air jet were
dead after Egyptian commandos stormed the grounded plan in
Malta.  But in Argentina the elected civilian government of
President Raul Alfonsin sentenced to long prison terms five
members of the former military junta who were convicted of
practicing what might be called state terrorism:  the kidnaping,
torture and killing of innocent citizens.

There was no such progress in other familiar trouble spots.
South Africa was torn by unremitting violence as blacks demanded
abolition of apartheid and whites were willing to accept only
gradual change. Guerrilla wars in Central America raged
unchecked, and the so-called peace process in the Middle East
made no discernible headway.  Nature joined politics in
contributing to human misery as earthquakes in Mexico City, a
volcano eruption in Columbia and a cyclone in Bangladesh claimed
tens of thousands of victims.  In the U.S., Reagan became the
first President to confer the full powers of his office
voluntarily on his Vice President, George Bush, though only for
eight hours, while surgeons removed a cancerous growth from
Reagan's colon. The President recovered quickly and apparently
completely, but apart from the summit his political momentum
seemed to wane.  Reagan's success in pushing a tax-reform bill
through the House at year's end demonstrated that he is hardly
a lame duck yet.  Nonetheless, whether he can win a final bill
at all close to his desires--or indeed any bill--is one of the
major questions of 1986.  Spy scandals, headed by the exposure
of the Walker-family espionage ring, proliferated as rarely, if
ever, before.  The scare of the year was medical:  the spread
of AIDS touched off public anxiety and hysteria far beyond
anything warranted by the facts, though the facts were surely
grim enough.  Of 15,775 people who had caught the disease, 8,122
were known to have died.

Of all these turbulent and momentous events and phenomena,
however, only the ascension of Gorbachev to the Soviet
leadership could eventually rival for long-range importance to
the world the sweeping changes Deng is pushing through in China.
 But for all the panache he displayed on taking power and all
the headlines and television time he and Reagan commanded at the
summit, Gorbachev's impact on history by year's end was still
far more potential than actual.  The freshness and vigor of his
personal style far outweighed the importance of any changes he
had made in Soviet foreign or domestic policy.  Indeed, though
Gorbachev, like Deng, has made pepping up his country's economy
and improving the material lives of its citizens his top
priority, the caution of Gorbachev's opening moves only
highlights by contrast the far more radical and fundamental
nature of the reforms Deng has already carried out in China.
Says Richard Holbrooke, who was U.S. Assistant Secretary of
State for East Asian Affairs when Washington restored full
diplomatic relations with China in 1979:  "There is no other
leader in the world who is doing anything even remotely in
Deng's league."

Gorbachev, Deng and the heads of almost every Marxist country
face the same fundamental problem.  In a 1984 interview with the
Italian Communist daily L'Unita, Hu Yaobang, General Secretary
of the Chinese Communist Party, phrased it this way:  "since the
October Revolution [of 1917, which enthroned Soviet Marxism],
more than 60 years have passed.  How is it that many socialist
countries have not been able to overtake capitalists ones in
terms of development?  What was it that did not work?"

That something has failed, and failed badly, is no longer
seriously disputed, even by many Marxist experts.  Before Deng,
the failure was more starkly obvious in China.  The average
peasant or city worker was little better off, if at all, when
Mao died in 1976 than he or she had been in the 1950s.  But even
the Soviet Union has long since had to forget Nikita
Khrushchev's hollow boast that it would inevitably "bury" the
U.S. by surpassing the American standard of living.  Quite the
opposite:  the U.S.S.R.'s economic growth rate has slipped to
about half the pace of the 1960s, and its citizens still have
to stand in long lines for such minor amenities of life as
toilet paper and detergent powder.  On the most basic level,
Moscow must import huge tonnages of grain from the capitalist
world to keep the Soviet populace properly fed.

Gorbachev has been unsparing in his criticisms of Soviet
economic performance.  "You squander countless resources in
every industry," he told party workers in Leningrad last May.
 But so far he has been unwilling to modify in any essential way
the system of centralized state control of every aspect of
economic life fashioned by Joseph Stalin; he has been trying
only to make it work better.  While promising to "restructure"
the economy, Gorbachev pointedly avoids using the word reform,
apparently because it implies a more drastic change than any he
is ready to contemplate.

In practice, Gorbachev's program so far consists largely of
public scolding of inefficient industry managers and incessant
calls for "discipline" and "imaginative, honest and
conscientious work from every individual, from worker to
minister."  His most striking measure to improve productivity
has been to crack down on alcoholism by restricting production
and consumption of vodka and other spirits.

Gorbachev is extending experiments to give selected industrial
and farm managers slightly greater freedom in pricing and
production decisions.  His closest economic adviser, Abel
Aganbegyan, has called for a reallocation of investments to
modernize factories rather than build new ones and to improve
the quality of products.  But this rechanneling is to be carried
out by the central planners.  So, as Gorbachev suggested in his
August interview with TIME, his program rather contradictorily
appears to call for a loosening of state control in some areas
and a tightening in others--at the same time.

Deng, shortly after emerging from his third period of disgrace
and returning to power in 1978, faced squarely the heretical
thought that the system of state control was itself the problem.
 He set about to replace it with a hybrid not quite like
anything seen before.  The Chinese system is still so new that
it does not have an agreed name. Outside analysts often call it
"market socialism," and some Chinese speak of creating a
"commodity economy."  Dent's formulation is a rather uninspiring
"socialism with Chinese characteristics."  But then Deng, a
thoroughgoing pragmatist, has never been much for labels.  His
most celebrated saying is a homely metaphor to the effect that
it does not matter whether a cat is black or white so long as
it catches mice.

The animating spirit of Deng's reforms has been to liberate the
productive energies of the individual, a daring concept not just
for a Marxist but for a Chinese (the concept of individualism
has a negative connotation in Chinese society).  He began,
appropriately, with agriculture, which had been collectivized
by Mao to a degree extreme even for the Communist world.  The
land was worked by communes that grew what the state directed
and turned over all food produced to the state for distribution.
 Pay was based on a system of "work points" that bore little
relation to production:  a peasant would accumulate a certain
number of work points for planting rice seedlings, for example,
but he or she would fare no better if the eventual crop was
large than if it was small.

Deng's reforms abolished the communes and replaced them with a
contract system.  Though the state continues to own all land,
it leases plots, mostly to individual families.  Rent is paid
by delivery of a set quantity of rice, wheat or whatever to the
state at a fixed price.  But once that obligation is met,
families can grow anything else they wish and sell it in free
markets for whatever price they can get (though the state does
set limits on how much some prices can fluctuate).

Most of the first leases were for two or three years, but they
are now being extended, usually for 15 years and as long as 30
years on grazing land.  Under a 1985 law the leases can be
inherited. Peasants own their draft animals, and those who
prosper can buy machinery; ownership of tractors has burgeoned
from 90,000 to 290,000 in the past two years.  Though the state
retains the power to cancel a peasant family's lease and award
it to someone else, that power is rarely exercised.  Farm
families are increasingly regarding the good earth as theirs and
using it about the way the would if they owned it outright.

Farmers are allowed, indeed encouraged, to build privately
owned houses on their state-owned land.  Roads all over rural
China have been narrowed by piles of bricks dumped along the
shoulders to be picked up by peasants who are erecting homes or
even paying others to do it for them.  Compared with the days
of Mao, when many peasants were required to live in dormitories
and eat in communal mess halls, the change in life-style alone
is almost revolutionary.

The results have been phenomenal.  Freed to prosper by hard
work, Chinese farmers have increased food production around 8%
in each year since 1978, about 2 1/2 times the rate in the
preceding 26 years. Variety has increased along with quantity;
besides rice and wheat, the Chinese are growing and eating more
poultry and pork (China has the world's largest pig population,
though many are scrawny beasts quite unlike the corn-fattened
hogs of Iowa or Nebraska).  The biggest payoff of all:  Vaclav
Smil, a Canadian geographer, calculates that in China, "today's
diets appear to supply, on the average enough energy and protein
for normal growth and healthy life."  In a country that has been
racked by periodic famines throughout four millenniums of
recorded history, the average citizen has, finally, enough to
eat.

Private enterprise began as a king of offshoot of the
agricultural reforms.  Mao's "people's communes," for all their
faults, at least guaranteed everyone in the rural economy a job
of sorts.  Deng and his lieutenants feared that breaking up the
communes would cause masses of jobless peasants to descend on
the cities, where there might be no work for them either.  So
beginning in the late 1970s, individual farmers and village
collectives were permitted to start sideline businesses and keep
any profits.

The first enterprises were connected with farming:  a group of
peasants would set up a roadside market to sell their crops and
perhaps buy a truck to haul their own produce as well as, for
a fee, food grown by other peasants.  But private entrepreneurs
and village collectives have now expanded to all kinds of other
businesses--inns, restaurants, stores, tailor shops, beauty
parlors and light manufacturing like assembly of TV sets--often
in competition with government-owned businesses.  Some
entrepreneurs have even opened services in major cities to
recruit maids and other household help for busy urban families.
 Businessmen can hire workers privately, a practice that
conventional Marxists regard as inherently exploitative.
Legally, not private entrepreneur is supposed to employ more
than 15 hired hands, but local Communist Party officials often
ignore that limit.

However, private and collective enterprises, though they are
growing rapidly, are still a relatively minor force.  At last
count, 10.6 million registered private businesses with sales of
$8 billion employed 15 million workers, or 4.5% of China's
nonfarm work force. Roughly 1.7 million collectives employ an
additional 100 million workers; in several provinces they have
become the dominant form of business.  Nationwide, though, more
than 85,000 state-owned enterprises account for a heavy majority
of jobs and four-fifths of China's industrial output.  Until
very recently they operated under a system that Mao had copied
from Stalin:  ministries in Peking assigned all raw materials
and dictated all investments, told every factory manager what
and how much to produce and where to sell it and at what price,
set wages and assigned jobs, took all profits and subsidized any
losses.  As late as 1984, one factory manager in Shanghai says,
he had a discretionary fund of only $33 that he could spend
without getting permission.

Early on, Deng's government began revising this system too.  In
1979, it halted a Stalin-style Five-Year Plan that emphasized
heavy industry, like steel mills, and redirected much investment
into consumer goods:  refrigerators, washing machines, TV sets.
 Some of the controls have been progressively loosened.  In 1982
Peking stopped dictating all garment styles and freed the city's
factories to adopt their own designs.  Result:  though perhaps
80% of any randomly assorted crowd are still dressed in baggy
Mao suits, there is a generous sprinkling of blue jeans,
Western-style business suits and coats, skirts and knee-high
leather boots.

Now Deng and his lieutenants think the time has come to take a
much longer step toward a full-fledged market system.  Under a
plan that went into effect in late 1984, state industry is also
run under a contract system.  Central planners still set broad
production goals, but they directly assign only a portion of raw
materials and distribute at fixed prices only a set quota of a
factory's output. Managers otherwise are allowed and even
required to line up their own suppliers, decide for themselves
what to make beyond the goods that must be sold to the state and
find buyers for the merchandise at prices that can fluctuate.
 They pay a 55% corporate income tax and keep the rest of their
profits to use for reinvestment, bonuses and social welfare such
as housing, medical care and recreation.  Most investment
capital is still supplied by state-owned banks.  But managers
have to compete for loans, and pay interest of 5% (up from 1%
as recently as the late 1970s).

The avowed goal is to replace "administrative planning"--that
is, direct orders on what and how much to produce--with a looser
system of "guidance planning."  Central planning, explains Huan
Xiang, director general of Peking's Center for International
Studies, "seriously hampered the initiative and creativity of
enterprises and workers and to a great extend emasculated what
would otherwise have been a vigorous economy.  The more
centralized, the more rigid; the more rigid, the lazier the
people; the lazier the people, the poorer they are."  Managers
now are supposed to hustle in response to the same
signals--interest rates, market demand, prices, profit--that
guide Western businessmen.  And just as the state will no
longer take all profits, it will eventually stop subsidizing
losses.  Deng's planners bluntly assert that they are prepared
to let inefficient state enterprises go bust.

This ambitious scheme has got off to a somewhat stumbling and
chaotic start.  State bankers at the end of 1984 overused their
new authority and went on such a wild lending spree that the
People's Bank of China, the country's central bank, had to tell
them to stop.  Factory bosses, in contrast, widely complain that
they are still waiting for confirmation from local party and
government officials that they can begin exercising the new
freedoms they supposedly were granted at the start of 1985.  For
the first time, Deng is proposing to crimp seriously the powers
and privileges of tens of thousands of national, provincial and
local party bosses who are accustomed to exerting life-and-death
authority over the economy.  Ominously but not surprisingly,
many seem to be dragging their feet, if not blocking the reforms
outright.

Some popular opposition is developing.  To give the nascent
market system a chance to work, Peking abolished some subsidies
for food, clothing and utility production and gradually freed
some industrial prices.  One result was a whiff of that old
capitalist evil, inflation:  in some cities, food prices jumped
35% in early 1985. The blow was softened by a continuation of
wage increases begun immediately after Mao's death.  Nonetheless
the price boosts stirred widespread grumbling, particularly
among older Chinese who retain bitter memories of the
hyper-inflation that preceded the Communist takeover in 1949.

Actually the price reforms have much further to go.  China at
the moment has a two-tier system of state-set and market
prices, sometimes on the same goods.  Vice Premier Li Peng
estimates that Peking still fixes prices on 70% of the products
sold by state industries.  there are other reminders of the
heavy presence of the state.  At Zhongshan University in Canton,
30% of the graduates are assigned to their first jobs by the
State Labor Ministry in Peking. The remaining 70% are placed by
university authorities after consultation with state industries
and agencies; the graduates' wishes are considered but do not
always prevail.  That is a marked improvement over a few years
ago when the state made all assignments, but it underscores an
important point:  whatever the Chinese system might be called,
it is a long way from anything that could be termed capitalism.

But it is at least a system that can cooperate with real,
full-blown capitalism to a greater degree than any other in the
Communist world. In the centuries-old Chinese debate between
those who are eager to learn from the more modern world outside
and those who shun it, Mao came down completely on the side of
xenophobia and cut China off almost totally from foreign goods,
money and culture.  Deng has opened the country to imports of
everything from machinery to the ubiquitous tape recorders and
portable stereos.  He has proclaimed an "open-door policy"
toward foreign investment--unperturbed by the reminiscences the
phrase evokes of an era early in the century when foreigners
enjoyed extra-territorial privileges bitterly resented by many
Chinese.

The door certainly is not that far open yet; Deng's policy might
be better described as an air lock through which China lets in
carefully selected foreign investments.  Still, more than 2,000
foreign business had put some money into China by the end of
1984.  Most were owned by the overseas Chinese, who have
prospered throughout Asia, but the total includes 70 U.S., 67
Japanese and 42 British, West German or French  companies.  A
burgeoning trend is toward ventures jointly owned by Chinese
state enterprises and foreign firms; 687 were registered in the
first half of 1985 alone, or almost as many as in all of 1984.
 Peking has even allowed 94 factories wholly owned by foreigners
to be built.  They include 3M China Ltd., a fully owned
subsidiary of Minnesota Mining and Manufacturing Corp., which
has set up a factory near Shanghai to make insulation tapes and
other products.

The stated reason is to speed China's modernization by
welcoming foreign capital, technology and management methods.
 To that end, China has set up four "special economic zones"
where foreign investors get unusual privileges to import raw
materials and semifinished goods and, to a certain degree, hire
workers.  But many other foreign investments are simply
introducing the Chinese to some amenities, real or alleged, of
live elsewhere:  fast food, Coca-Cola, Pierre Cardin fashion
shows, golf courses, amusement parks, even a Peking branch of
Paris' famed Maxim's restaurant.

There has been a reaction.  Chinese Communist purists blame
foreign influences for such trends as a revival of pornography
and prostitution.  University students have staged several
demonstrations in downtown Peking and other major cities.  While
ostensibly aimed at Japan's commercial presence, or, as was the
case last week, at China's nuclear testing program, the
demonstrations seemed to be directed more broadly at Deng's
reforms because of the corruption and nepotism that have
accompanied them.

Deng admitted recently that showcase projects like the Special
Economic Zones have yet to prove their value.  On the whole,
though, he remains committed to welcoming foreign goods and
capital.  "There are those who say we should not open our
windows, because open windows let in flies and other insects,"
he remarked in October. "They want the windows to stay closed,
so we all expire from lack of air.  But we say, 'Open the
windows, breathe the fresh air and at the same time fight the
flies and insects.'"

Politically and culturally, that fight has waxed and waned.
China is still a one-party dictatorship and Deng has no
intention of letting it become anything else.  Rights taken for
granted in the U.S., such as freedom of speech and assembly, are
strictly controlled; some limited freedom of religion has been
granted.  Even so, a revised constitution adopted in 1982 marked
a step toward making China a society governed by law rather than
the whim of party officials.

In other ways, too, the dictatorship is less oppressive.  Deng
has permitted a popular press to spring up.  Hundreds of new
publications have appeared all over China; they cannot criticize
policy, but they print lurid exposes of prostitution,
pornography, corruption and black-marketeering by party
officials (indeed, they sometimes seem to report little else).
 Culturally, Deng in 1983 permitted officials to start a
crackdown on writers and artists, in the guise of a campaign
against "spiritual pollution," probably as a gesture toward
conservatives concerned that the pace of change was too rapid.
 But Deng speedily announced that the campaign had gone too far
and called it off, leaving citizens and party officials alike
in a quandary over just what is permitted and what is not.

One example is Jin Ping Mei (The Golden Lotus), a highly erotic
literary classic form the Ming Dynasty (A.D. 1368-1644).  Mao
would let it be seen only by party officials of ministerial rank
or higher. Wei Junyi, head of the People's Literature Press,
prepared an expurgated edition for somewhat wider distribution,
put it off during the campaign against spiritual pollution, and
finally let it be printed in 1985 for distribution to writers
and scholars, who snapped up 10,000 copies immediately at $6.65
per copy.

In foreign policy, the motto under Deng seems to be:  try to
get along with everyone so that the nation's energies can be
concentrated on economic development.  China has cautiously
resumed trade and cultural exchanges with the Soviet Union.
Peking has spared little effort in trying to convince the
non-Communist nations of Asia that it intends to be a peaceful
neighbor.  It stopped aid to Communist rebels in Thailand in the
late 1970s, and today disavows any idea of helping those in
Malaysia, Indonesia or the Philippines.  The only guerrillas
China is aiding today are those battling the Soviet army in
Afghanistan and the Soviet-backed Vietnamese occupiers of
Kampuchea.

The most striking achievement of this don't-rock-any-boats
policy is a deal signed with Britain a year ago under which
Peking in 1997 will assume sovereignty over Hong Kong on a
pledge to maintain Hong Kong's wide-open, laissez-faire
capitalist system for at least 50 years after that.  Peking is
now touting an even more lenient version of this "one nation,
two systems" approach as a model for a reunification deal with
Taiwan, which it once threatened to take by force.  Peking
proposes to let Taiwan retain not only a capitalist economy but
independent armed forces.  Taiwan so far is not buying. Eager
for more trade and investment, Deng is trying to make China a
partner in the non-Communist world economic system.  In 1986
Peking expects to apply for full membership in the General
Agreement on Tariffs and Trade, the 90-nation organization that
monitors world- trade rules.

As striking as the transformation of China into a power
dedicated to stability has been, it is economic rather than
foreign policy that will determine Deng's place in history.  He
has staked everything on the success of his economic reforms,
arguing that whatever their theoretical justification or lack
of it, they will work.  And so far they generally do.

True, China is still a poor country by any measure.  Deng's goal
is to lift per capita income to $800 by the year 2000.  That
would compare with a 1980 level of $300 and would be sufficient
to admit China to the ranks of middle-income countries.  But as
recently as 1982, average incomes in China were about equal to
those in poverty- ridden Haiti.  Travelers in Sichuan province
note that many peasants still use wheelbarrows with wooden
wheels and iron rims and till the fields with wooden plows--this
in a country where museums display iron plows from the Han
dynasty 2,000 years ago.

But life is getting better, fast, for many Chinese.  Industrial
production has leaped along with food output.  Early in 1985 it
was increasing at an annual rate of 23%, a pace Deng and his
planners judged too rapid.  They ordered a slowdown to avoid
shortages and worsening inflation.  In Mao's days, Chinese
consumers dreamed of buying the "three bigs":  a bicycle, a
wristwatch and a sewing machine.  Now the three bigs are a
refrigerator, a washing machine and a TV set.  "Imagine," says
a Western diplomat.  "Some people living in the heart of Guizhou
province now see the evening news, with film from Beirut and New
York.  Three years ago, they did not know anybody lived on the
other side of the nearest hill."

In Yunnan province, Liang Weifeng got a state bank loan of $965
to buy a two-wheel tractor; he earned enough hauling firewood,
bricks and grain for his neighbors to pay off the loan in eight
months. Liang now clears about $1,660 a year from his business,
which his wife Su Yongchang supplements with about $230 earned
by raising rice and vegetables on a plot of a bit less than an
acre.  Su claims to know little about Deng or politics:  "I only
know that the policies now are good, so that we can get rich."

Consciously or unconsciously, she is echoing a line of argument
often voiced by Deng and his supporters.  In the name of
economic growth, they are quite deliberately fostering a growing
inequality of incomes.  Says Deng:  "Some people will become
prosperous first, and then others will become prosperous later."
 But since honoring and emulating the rich goes against the
Marxist grain, Deng and his allies have developed an elaborate
justification:  there is nothing wrong with wealth so long as
it is earned by one's own labor rather than by the exploitation
of the labor of others, which Marx condemned.  Or, in the words
of a onetime slogan that Writer Orville Schell turned into the
title of a book, "To Get Rich Is Glorious."

Such heretical thoughts are heard often enough these days to
raise an insistent question:  Can the system they are erecting
still be called Marxist?  It is far more than a matter of
semantics.  Marxism has demonstrated dramatic power to shake the
world, and thus any debate as to what it does and does not
consist of is of paramount importance.

The question, however, is far from easy to answer.  Since Marx
died in 1883, his admirers have written innumerable explanations
of his work.  They have frequently, and often fanatically,
denounced one another as revisionists or worse.  But Bertell
Ollman, a professor at New York University and an avowed
Marxist, observes that "Marx had very little to say of a
concrete nature about socialism," the transitional society that
would follow the revolution Marx preached. (In strict Marxist
terminology, "Communism" is the ideal stateless society to be
reached as an ultimate goal.)  The only way to get a definitive
opinion on the features of Marxist socialism, says Harry
Harding, senior fellow at the Brookings Institution, would be
"to bring Karl back to speak for himself."

The version of Marxist thought that eventually won out, because
it achieved power, was Marxism-Leninism, after V.I. Lenin, the
leader of the Bolshevik Revolution.  According to Lenin, Marx's
call for a "dictatorship of the proletariat" meant that a
tightly organized Communist Party was to be the exclusive
dominating force in transforming society.  Among the millions
attracted by this prescription were two young Chinese, named Mao
Tse-tung and Deng Xiaoping, who saw in it a way to change their
country from a weak, backward state pushed around by foreign
powers to a mighty modern nation.  Deng has remained a model
Leninist in the sense of countenancing no challenge to the
Communist Party's role in leading society, even when portions
of the party balk at carrying out his reforms.

In matters of economic organization, however, even Lenin was a
backslider of sorts.  In 1921, when his "war Communism" stirred
dangerously strong opposition, he shifted to the New Economic
Policy, which sounds almost like a preview of Deng's reforms.
 Under the N.E.P., the new Soviet state owned and operated only
what Lenin called the "commanding heights" of the economy, that
is, the basic industries.  Peasants could grow and sell
privately what they wished after paying a tax in produce to the
state; small-scale private enterprise was permitted; foreign
capital was invited in.

But while Deng intends his reforms to be permanent, Lenin viewed
the N.E.P. as a strategic retreat.  Stalin put an end to it and
launched the Soviet Union on a nearly total collectivization of
agriculture and nationalization of industry.  Stalin's system
became the dominant version of Marxism, if only because the
U.S.S.R for decades was the sole significant officially Marxist
state and remains its most powerful one.

One of Mao's main contributions to Marxist theory was to stress
the role of the peasants, rather than the industrial workers
exalted by Marx.  Another was the doctrine of perpetual
revolution, which reached chaotic extremes during the Great
Proletarian Cultural Revolution that began in 1966.  Party
bureaucrats and intellectuals were banished to factories and
into the countryside to "learn from the people" by working with
their hands, and teenage Red Guards rampaged through China
assaulting supposed "bourgeois rightists." One was Deng, who was
paraded through Peking with a dunce cap on his head and mocked
as a "capitalist roader."

He is not exactly that, but to the extend that he bothers with
ideology, which is not very far, he certainly tends to a
minimalist definition of Marxism.  As Deng told TIME:  "In
carrying on socialism, I think we should uphold two things.
First, public ownership should always play a dominant role in
our economy.  Second, we should try to avoid [class]
polarization and we should always keep to the road of common
prosperity."  Beyond that, he implies, pretty much anything goes
if it "will lead China to development."

Chinese intellectuals are engaged in a spirited debate about
just what can be accommodated under a Marxism stripped to its
barest essentials.  The sale of stock in a business?  Yes, says
one theoretician, as long as the shares are bought by employees,
or possibly their neighbors if an enterprise happens to be a
collective (a few of which have in fact sold shares).  An
exchange on which employees and neighbors could trade the shares
among themselves? "That is under study."  A social scientist
specializing in Marxist ideology goes so far as to suggest that
since Marxism-Leninism purports to be a science, even nonparty
people should have the right to re-examine it.  Says he:
"Science belongs to everybody."

At the minimum, the spirit of Deng's course is very different
from that of classic Marxism.  While Marx can be read as
allowing the market to coexist with socialism for a while, he
regarded the market as an exploitative device that would
eventually disappear.  It seems doubtful that he would have
approved any attempt to revive it after it had disappeared.
Most of all, Deng's version of Marxism lacks the crusading zeal
of the classic variety.  Marx preached his revolution as
history's final showdown between the forces of light and those
of darkness.  It strains the imagination to conjure what he
might have thought of a second revolution that seeks, in Deng's
words, "to adept useful things [from] the capitalist system."

Oddly, though, the guardians of Marxist purity in Moscow are
not making anything like the case against Deng that might be
expected. In private, they fear that China will become an even
greater military threat if the reforms succeed.  But in public,
Soviet journals have noted China's economic progress and
expressed only mild doctrinal qualms.  The Soviets must avoid
name calling if they want to continue smoothing political
relations with Peking.  Also, suggests an Asian diplomat in
Moscow, they "may want to keep their options open in case they
decide, five years from now, that they want to try some of
these things themselves.  They will not be inviting capitalists
into special economic zones, perhaps, but they might be
interested in a 'managed' market system."

Soviet officials scoff at the idea that there is anything the
highly industrialized U.S.S.R. could learn from agrarian China.
 But they have at least been inquisitive about Deng's reforms,
and by some indications more impressed than they like to admit.
 Dwayne Andreas, chairman of Archer Daniels Midland Co. (a giant
U.S. corporation dealing in farm produce) and a frequent visitor
to China, journeyed to Moscow in 1984 and had a two-hour private
talk with Gorbachev, who was then still in charge of Soviet
agriculture.  "He was very curious about what I told him
concerning the reforms," Andreas recalls.  "He particularly
wanted to hear how China's joint-venture system with foreign
companies worked."

Long range, though, the prospect of China's creating a modern
society by following a heretical brand of Marxism constitutes
a deadly ideological danger to the Soviets.  They are having
enough trouble as it is getting their allies, not to mention
Communist movements that have not yet come to power, to follow
their leadership.  China's example can only encourage such
countries as Yugoslavia and Hungary to continue their efforts
to blend market elements into state-dictated economies, and lead
out-of-power Marxist parties to think they do not have to copy
the Soviet line either.

Italian Communist leaders have praised the Chinese for asking
the right questions about why Soviet-style Marxism has failed
economically, and a highly sympathetic account of the Chinese
reforms appeared in East Germany's official newspaper Neues
Deutschland. Svetozar Stojanovic, a Yugoslav social scientist
now serving as a visiting scholar in the U.S., goes so far as
to say that "in the eyes of many people, the Chinese have become
the new vanguard in the Communist world."  More surprising still
are the views of Silviu Brucan, professor of sociology at the
University of Bucharest in Rumania, a nation formally allied
with Moscow in the Warsaw Pact. Writing in the American magazine
World Policy Journal, Brucan opines that if China succeeds in
building a modern economy "the Kremlin will then be confronted
with a dramatic choice:  to cling to the old ways and rely more
and more on military power to exert its influence, or to take
the bull by the horns and proceed with a radical change in both
economic policy and global strategy.  The issue of leadership
in the Communist movement will depend on that choice."

Brucan, in common with Western analysts, also believes that
successful Chinese modernization "is bound to acquire a
tremendous following, particularly in the Third World."  Many
African and Asian leaders are committed to Marxism as the
leading anticolonial ideology but suspicious of the Soviet
version.  Marxists in Africa talk about an "African socialism"
that seems to embrace just about anything that can be
accommodated with a one-party state.  China's example seems
likely to encourage them to believe that they can develop their
economies and remain theoretically Marxist without following
the U.S.S.R.

In Asia, however, there are two complicating factors.  Some
countries, notably Indonesia, fear that a strong, modern China
may eventually try to reduce them to a kind of political
vassalage.  A much more immediate consideration:  China is
already becoming a powerful economic competitor for such
industrializing pacific Rim countries as Taiwan, Thailand,
Singapore and South Korea.  Rising agricultural output has
enabled China to become a net exporter of grain.  Exports of
other goods as diverse as toys and oil are increasing too.  Low
wages enable China to compete on price with any of the
developing countries.  And China can offer its trading partners
in the industrialized world the lure of access to a potentially
gigantic market.

Nonetheless, it is very much in the U.S. interest to do
everything it can to encourage Deng's reforms by opening its own
markets to China's exports and smoothing China's entrance into
the free-world trading system.  That will not be easy, in view
of protectionist pressures in all industrialized nations,
including the U.S.  A glaring example of what not to do is the
Jenkins bill, named for Georgia's Congressman Edgar L. Jenkins.
 The bill, which calls for restrictions on textile imports from
China and other Asian nations, passed both houses of Congress,
but Reagan killed it with a veto.

All calculations of China's potential role in the world,
however, rest on two critical assumptions:  that Deng's reforms
will be continued and broadened, and that they will yield the
promised payoff in a relatively short period.  Unhappily,
neither is at all certain.

There is no reason to doubt Deng's own commitment.  "This is the
only road China can take," he told TIME.  "Other roads would
only lead to poverty and backwardness."  At a Communist Party
conference in September, Deng and his allies succeeded in
getting supporters of the reforms promoted to many high- and
mid-level positions in the government and the party.  Deng, says
a Western analyst, "has prepared not only his own succession but
the succession below that as well."

But that same party conference provided a striking indication
of the depth of the opposition Deng faces in the form of a
speech by Chen Yun, 80, a Politburo member who likens the
economy to a bird that must be kept in a cage.  "A planned
economy must remain as our primary goal; a market economy can
only be a supplementary measure for temporary adjustment," said
Chen.  More generally, he complained that "everything for money
is the decadent capitalist idea which has gradually prevailed
in our party and society."  Even if that point of view should
eventually win out, a return to full-fledged Maoism seems most
unlikely.  The sufferings of party officials and intellectuals
during the Cultural Revolution, the economic stagnation under
Mao and the rapid growth achieved during the first stage of
Deng's policy all argue against it, even to Chen and other
conservatives.  On the whole they approve of Deng's rural
reforms.

Yet it is possible to foresee a crackdown after Deng passes.
Support for greater central control of the economy could come
from party officials fearful of losing control and from ordinary
citizens envious of the new rich class.  The Chinese press
already reports many stories about this "red-eyed disease," like
one about a peasant woman who poisoned all the ducks of a
prosperous neighboring farmer.

The deciding factor undoubtedly will be the further success, or
lack of it, of the reforms.  Deng's formula for overcoming
opposition is a simple one:  leave the critics alone and let
them see for themselves that the system works and that they
would be better off if they went along.  "We will let practice
dissipate their worries and misgivings," he says.

But success cannot be taken for granted either.  Along with
growth, the reforms have produced some "evil winds," as the
Chinese call them.  The most ominous is an upsurge in bribery,
black-marketeering and other forms of corruption.  Chen Yun
reported that in the past year alone party and government
officials or their children have started 20,000 private
businesses, "a considerable number of which collaborate with
lawbreakers and unscrupulous foreign businessmen" to get rich
in ways that are decidedly not glorious.  Among the crimes he
accused them of were peddling counterfeit medicine and "the
sale of obscene videotapes."  It is widely estimated that about
half the managers of state-owned enterprises pursue profit by
cheating on corporate income taxes.  The most sensational
scandal involved a ring of party and government officials on
Hainan Island who sold $1.5 billion of goods illegally imported
through Hong Kong, including Mercedes limousines and color TV
sets, before they were caught.  It is at least possible that
conservatives can muster support for the idea that the only way
to stamp out corruption is to cut back on modernization.

The reforms could fail in other ways too.  Industry managers
have never been trained in the complex skills needed to make a
market economy work.  Indiana University's Hans Thorelli, who
served as a visiting professor of marketing in Shanghai and
Dalian in the early 1980s, recalls being asked in all
earnestness by his students, "What is a salesman?"  There is
always the threat, too, that population growth will swallow up
any production increases.

A deeper question is whether Deng can bring himself, and lower
officials, to free the market enough for it to work properly.
 Werner Gerich, 66, a West German manager who was hired to run
a state-owned diesel-engine plant in Wuhan, found his factory,
like many others in China, heavily over-staffed.  "If I fired
700 people [out of a total of 2,140], we could make the same
number of engines with better quality because we would have
money," he says.  But he quit in despair because party officials
would not let him make that and other changes he considered
essential.  Mao's tradition of "the iron rice bowl"--that is,
lifetime employment--dies hard.

One top economic official in Shanghai gives this reason for
retaining at least some production quotas:  "Of course we cannot
give each factory the right to decide what to produce.  What
would happen if all of our garment factories produced blue jeans
and none produced coats?"  The capitalist answer would be that
a free price system would prevent that.  The price of jeans
would plummet, and the price of coats would soar; many
jeansmakers would, so to speak, lose their shirts and be happy
to switch to turning out coats.  But Deng and his planner seem
unwilling to let prices fluctuate freely enough to guide
investment decisions in that manner.

The deepest dilemma is whether China can achieve even the
relatively free economy Deng is trying to create without
undermining Leninist control of politics and society.  There are
many Chinese, not all Chen Yun types, who doubt that, in the
long run, economic freedom can exist without greater political
liberty.  They are already debating what course the nation will
take if they are proved right.

One Chinese social scientist states the dilemma pithily.  Says
he: "If the party does not continue the reforms, the economic
situation will get worse.  But if the reforms continue, the
party itself will lose power" to newly rich peasants and newly
independent factory managers.  His conclusion is that the party
will cut back on, if not reverse, the reforms rather than let
that happen.  But Zhao Fusan, a senior scholar at the Chinese
Academy of Social Sciences, states flatly that "the process of
economic reforms will naturally bring about a process of
democratization, the setting up of checks and balances in
political life and the rule of law."  If so, and if the CHinese
are willing to reinterpret Lenin as well as Marx, the potential
consequences for both the Communist and non-Communist worlds
would be truly staggering.

That may be too much to hope for, at least anytime soon.  The
history of China in the 20th century has been one of repeated
upheavals, of which Deng's own career is a prime example.  But
there is at least a chance that Deng will bequeath to his nation
an economic system working well enough that his successors will
not want to reverse it, and thus that China will also gain a
measure of the political stability it has so long and so
disastrously lacked.  If so, the inventive energies of the
Chinese, which gave the world tea, paper, movable type,
gunpowder and the first functioning bureaucracy, would be freed
to carve out a unique role for the nation.  China would enter
the modern world on its own terms rather than on any dictated by
Western capitalists, Soviet Marxists or anyone else.  And Man
of the Year Deng Xiaoping would expand what he alone among
world leaders already seems to possess:  a secure place in the
history books to be written in the next century.

--By George J. Church.   Reported by David Aikman/Washington,
Richard Hornik/Peking and   James O. Jackson/Moscow