After a decade of rising prosperity China is confronted by one of the toughest crises it has faced under Communist rule.
Panic buying, galloping inflation and rampant corruption are reminiscent of the last months of the Nationalist government overthrown by the Communists in 1949.It was in December 1978 that the Communist Party under Deng Xiaoping abandoned the Stalinist model economy and started to experiment with capitalist-style measures.
Even if Chinese statistics are not all what they seem, the achievements in the last 10 years are impressive.
Foreign trade has increased tenfold, industrial output has nearly tripled, grain output is up one third, rural incomes have more than tripled and urban incomes have more than doubled.
Rudimentary stock markets have opened in several cities and Chinese institutions make profits from speculating on foreign exchanges.
Television sets - owned only by an elite group in 1978 but now common in urban households - feature seductive commercials offering a wide choice of goods.
Billions of dollars have been invested in China by foreigners. Tourists pour into modern hotels that now dot Beijing's skyline. Many Chinese have been able to go abroad.
But in 1987, things started to go wrong.
Banks issued too much money, firms put up too many buildings and factories produced too fast, worsening existing shortages of power, raw materials and transport.
Inflation, which planners had kept in check despite many radical reforms, started to rise dramatically. A quarter of China's 200 million city people were worse off.
Corruption became widespread. Nationwide panic buying and bank runs erupted in August this year.
These scenes, reminiscent of the period before the Communists took power almost 40 years ago, forced Premier Li Peng in September to announce an austerity program and two years of consolidation.
People's support for the reforms has fallen during the last two years," said Yuan Mu, spokesman for the State Council (cabinet), in November.
If China cannot halt price rises, the achievements of 10 years of reform could be lost and the trust and enthusiasm of both party members and the public would be seriously harmed," Mr. Yuan told a meeting of entrepreneurs.
A Western banker said Beijing had completed the easy reforms that were popular and brought quick results - breaking up communes and renting land to farm families, allowing markets and devolving much of its economic power to
It has left to the end the most intractable - how to make state firms efficient, reforming ownership so that people and companies become accountable and whether it can allow unemployment," he said.
Providing a job for everyone . . . remains a sacred cow for socialist countries, including China," he added.
A Chinese journalist said the reforms had gone as far as they could under the present structure.
Why not privatize land? That is what farmers want. Why not privatize state firms? That is the only way the government will raise the capital it needs to modernize China," he said.
Huang Yuncheng, an economist at the Economic System Reform Institute, said privatization of land was not feasible but farmers could have leases of dozens of years.
Privatization of state firms is impossible, but turning them into joint stock companies is possible," he said.
China did not have the social welfare system in place to allow large- scale unemployment, and the authorities were worried about public order, the economist said.
China is attempting to change a centrally planned economy into one that can compete with the capitalist West, and the obstacles are formidable.
The economy has become a chaotic mixture of the old, centralized system and the new market-oriented one the reforms envisage. Firms and speculators ruthlessly exploit the confusion to their own advantage.
Regions do not follow orders from Beijing as they once did. New tools used by the central planners - such as interest rates, taxes and enforced bankruptcy - do not work effectively.
The gap is widening between the rich east coast, which has grown rapidly in the last 10 years, and the backward interior. While many Canton people live in modern apartments, their comrades in Gansu live in caves and mud-brick homes.
Despite strict controls, the population is growing faster than Beijing wants, meaning millions more mouths to feed each year on ever-diminishin g arable land.
But economist Mr. Huang said that despite the many problems, he had confidence over the long term.