Premier Li Peng on Wednesday lifted martial law in Beijing more than seven months after imposing it to quell pro-democracy protests. The action was largely cosmetic because strict laws banning dissent remain in force.

The announcement, which takes effect at midnight in the capital, appeared at least partly intended to ease foreign criticism and allow the resumption of loans and high-level exchanges halted after the government's bloody suppression of the reform movement in June.Li said he represented the ruling Communist Party and government in thanking the People's Liberation Army for restoring order, saying, "The people will never forget.

"China is now stable politically, economically and socially. Production and lives are in good order, commodity supplies are sufficient, people live and work in peace and contentment," he said.

His 10-minute speech, made Wednesday morning, was broadcast on national radio and television at night, a day after authorities originally planned to make the announcement.

The official radio followed Li's speech with an editorial praising the move and a program of triumphant martial music.

Li wore a dark gray Western-style suit and sat at a desk, his hands folded in front of him most of the time.

His calm manner was in sharp contrast to his agitated, arm-waving delivery when he announced the night of May 19 that the government would not permit the student-led protests to continue. The next day, he signed the order imposing martial law in central Beijing, for the first time since the People's Republic was founded 40 years ago.

When students refused to quit their occupation of central Tiananmen Square, the army shot its way to the square on June 3-4 and dispersed them, killing hundreds of unarmed civilians.

Li said Wednesday martial law could be lifted because the army had fulfilled its task, apparently trying to avoid any appearance that the government was bowing to Western pressure.

"A great victory has been won in checking the turmoil and quelling the counter-revolutionary rebellion," he said. "This shows once again that the Chinese Communist Party, the Chinese government and the Chinese people are capable of running their own affairs well."

Western diplomats linked the lifting of martial law to the December visit of U.S. national security adviser Brent Scowcroft, who sought an easing of China's hard-line political policy in exchange for normalization of bilateral relations. The move would enable President Bush to say that the controversial Scowcroft visit and Bush's easing of other sanctions against China paid off.

Several people interviewed on the street said lifting martial law would be a good move, and one said it could make it easier for students to resume protests. However, most people said it would make no difference to them.

"It won't have any effect on most people's lives," said a young woman. "Of course, they may feel more light-hearted, to know that martial law is gone. But that's all."