But behind the arrests, trials and appeals to revolutionary orthodoxy, no less a Communist Party standard-bearer than President Jiang Zemin is said to be poring over potentially the most subversive text in Beijing today: A special study on democracy.

Far from contradictory, the two approaches show that after years of delay, China's leadership is thinking about reforming the authoritarian political structure but is nervous over how to proceed.

Senior party officials know they must lead or be led. With an economy transformed by nearly two decades of capitalist-style reforms, fewer Chinese work for agencies or industries controlled by the government. Free markets, not fiats from Beijing, increasingly hold sway.

Ensuring the success of government policies has become more critical as the once-booming economy slowsand divisions between the newly better-off and newly left-out sharpen. Money-losing state enterprises forced to cope with capitalism are laying off millions of workers who face dim job prospects.``Fast economic growth over the past nine years has been the single most important factor in social stability. This has concealed the stagnation in political reform,'' said Fang Jue, a former government economic planner and now a private businessman who has lobbied for democratic reforms.

``If there is an economic crisis, then there will be social turmoil.''A growing if quiet debate among academics about the need for political change seemed to pick up this summer, as word spread that the government-run Chinese academy of social sciences was preparing in secret an extensive study on democratic systems worldwide.

Jiang, who also heads China's communist party, himself ordered what some have dubbed ``the democracy project,'' and the recently completed manuscript is now in his hands, according to sources who took partin or are familiar with the study. Because of the work's sensitivity, they spoke on condition of anonymity.

Although the study takes in socialist forms of democracy, its centrepiece is an examination of western, particularly US, democracy with emphasis on constitutional government and a multiparty system, the sources said.An even more secretive study is being conducted by Wang Huning, a Shanghai political scientist who heads Jiang's policy research office. Wang is drafting a blueprint that could guide China from its one-party Communist political monopoly to a two-party system or direct presidential elections, the sources said. Jiang has kept his plans from all but a few of his closest advisers even his colleagues on the party's ruling politburo are said to have been left in the dark.

Speculation focuses on survival the party's and Jiang's. With the political system less able to control the diverse economy, the 58 million-member party's authority is threatened. Under current practices, Jiang, 71, will beunder pressure in less than 5 years to give up his jobs as president and party general secretary.

Jiang's flirtation with democracy has seemed to grow with the rapprochement he began engineering with Washington last year. At the end of US President Bill Clinton's nine-day tour of China this month, he supported Jiang as a visionary.

American backing, however, cuts both ways. Clinton called on Jiang to grant more personal freedoms to guarantee social stability. Jiang promised to sign a key UN treaty on political and human rights.

Into the breach stepped China's persistent dissident community. On the day of Clinton's arrival, a group of democracy campaigners announced the founding of the China Democracy Party, a political opposition group to challenge the Communists' monopoly. They claimed to be seeking rights already granted in China's Constitution but seldom respected.

A week after Clinton left, the retrenchment began. Police have so far detained 21 dissidents, 12 of them in connection with the Chinademocracy party.

The state-run propaganda apparatus launched a nationwide campaign to study the works of Deng Xiaoping, Jiang's late mentor. ``This sent people a signal: Now is not the time,'' said Pan Wei, a politics professor at Peking University. ``Because layoffs are having a destabilising effect on society, they don't want to stir up any new pressure on public opinion.''