An interview with Deng Xiaoping

Deng Xiaoping, 81, looking fit and vigorous in a dark gray Mao suit, appeared in the east wing of Peking's Great Hall of the People to greet 60 U.S. business leaders and Time Inc. journalists traveling through Asia on a TlME-sponsored news tour. The group was led by Editor in Chief Henry Grunwald, Corporate Editor Ray Cave and Chief of Correspondents Richard Duncan. In the past seven years, Deng, who was once sent into internal exile as a "capitalist-roader," has introduced broad and dramatic economic reforms that have decentralized decision-making and placed more reliance on free-market forces. In mid-September, he consolidated political backing for his reforms with significant personnel changes in which many of China's aging leaders were retired and younger officials moved up in the power structure.

In a relaxed, wide-ranging conversation that lasted for more than an hour, China's leader offered his thoughts on economic reform in his country and how it can be sustained, the new problem of corruption, Chinese relations with the Soviet Union and next month's Reagan-Gorbachev summit meeting in Geneva. As is his custom, Deng chain-smoked throughout the meeting. Speaking in his deep, heavily Sichuan-accented voice, he was by turns tough, charming and self-effacing. Excerpts from the session:

On whether a free-market economy can co-exist with a socialist state. I think that there are no fundamental contradictions between a socialist system and a market economy. The question is what method we should use to develop the social forces of production in a more effective way. And of course, in the past the old approach was to go for a planned economy. The old method was a good method because it's good to have a plan. But according to our experience of past years, we have found that if we engage only in planning, the development of socially productive forces is delayed. So if we can combine the planning and the market economy, then I think it will help to emancipate the forces of social production and help accelerate them.

Our experience tells us that if we rely only on the past economic system forever, we will not be able to develop social production. So what we have done is adopt the useful things under the capitalist system. We have been pursuing the policy of opening up to the outside world, and we have been combining the market economy and the planned socialist economy. We have introduced a series of reforms in order to achieve this goal. Now it seems this is a correct policy. But has it violated the principles of socialism? I think not.

On preserving the socialist system. I think we should uphold two things. First, public ownership should always play the dominant role in our economy. Second, we should try to avoid polarization [of rich and poor] and always try to keep to the road of prosperity. Our policy of opening to the outside world, and the new approach introduced at home to stimulate the economy and to take more flexible measures, will not lead to polarization. As long as public ownership plays a dominant role in our country, I think the polarization can be avoided. There will be differences when the different regions and peoples become prosperous. Some people will become prosperous first, and others later. The regions that have become prosperous will help the regions that have not. That's what I mean by common prosperity.