MERGERS MAY BE THE RAGE IN the United States; but in China, the party line is much different: small enterprises are beautiful. This policy, representing a change in thinking, could soon benefit small U.S. companies interested in doing business in the People's Republic.

China's powerful State Economic Commission has launched a major effort to attract small enterprises from the West. The new program reflects growing dissatisfaction with large companies, particularly those from Japan, that sell videocassette recorders and other consumer products that do little to advance China's backward economy.

What China needs, says Wu Qian, who directs the program, is an exchange of technological know-how and small-business management skills that can aid the country's long-term development. The Economic Commission plans to link foreign entrepreneurs with small Chinese companies that are outside the mainstream of Canton, Shanghai, and Beijing. "Until now," says Wu, "this would have been difficult to accomplish." The Chinese will provide help in coping with the language problems, high rents, and Byzantine regulations that trouble executives visiting the country.

China is assigning more importance to its estimated 383,000 small, local enterprises. Frequently owned by collectives or regional governments, these businesses grew 30% faster in 1984 than their larger counterparts controlled by Beijing. These small businesses could play a major role in preventing the sort of mass urban migration that plagues many other developing countries, according to the Economic Commission.

"Small and midsize enterprises have less levels of management and are closet to the peoples' needs," says Wu. "We are definitely seeing these small enterprises as more important in the future for our economic development."