Once nicknamed China’s industrial heartland, the northeast region has been in economic decline. In an attempt to develop this region on a par with the country’s economic success, a plan was proposed in 2003 to revitalize and reform the region’s economic structure and upgrade its technology. While challenges such as reallocation of laid-off workers remain, the region has reported an increase in foreign investment.
In 2003 Wen Jiabao, premier of China’s State Council, announced a plan to revitalize the three northeastern provinces of Heilongjiang, Jilin, and Liaoning. Wen Jiabao confirmed that the central government would support the three provinces in their efforts to reform their economic structure and to upgrade technology. China aims to convert the northeast region into a national and even a world-class industrial base for equipment manufacturing and the extraction and processing of raw materials.
Since establishment of the People’s Republic of China in 1949, the manufacturing structure of the northeast region has been based on heavy industry: the production of steel, machine tools, locomotives, and airplanes. But over time the economic efficiency of many companies in the area has deteriorated, since most of them are state-owned enterprises (SOEs). As these companies have become less competitive, the Chinese economy has been growing rapidly and opening more and more to overseas investment. The recent economic success of China is associated with Chinese Communist Party leader Deng Xiaoping’s reforms that started in 1978–1979. The reforms encouraged entrepreneurship, introduced market elements into economic relations, triggered modern industrialization, and opened the door to foreign direct investment (FDI).
Northeast China faces many challenges: injection of new investment, restructuring of state-owned enterprises, improvement of the social security network, reform of the financial system, improvement of the investment environment, and strengthening of the infrastructure. Once China’s industrial heartland, the northeast region has declined into a “rust belt.” The northeast revitalization plan is the second such plan launched by the Chinese government in recent years, following the Develop the West project that started in 2000. The goal of these plans is to minimize economic discrepancies across the regions of China. The plan to revive the northeast was inspired by the economic success of China’s coastal areas such as the Yangzi (Chang) River delta and the Pearl River delta.
A key challenge to the northeast revitalization plan is the reallocation of laid-off workers. The region suffered massive layoffs of state-owned enterprise employees—nearly 10 million workers. The unemployed are engaged in constant protesting, which creates an element of political instability. The unemployment rate in the northeast is 10–15 percent. Russia, China’s neighbor in the north, has consistently expressed concerns about illegal cross-border immigration.
In the early 1990s the United Nations Development Programme (UNDP) created a plan to revitalize northeast China and to promote regional cooperation in northeast t.
Jilin Province is home to China’s first automobile maker, the First Automobile Works (FAW), which has a longstanding joint venture with Volkswagen. The province attracted more than $1.19 billion in contractual foreign investment in 2004. In Jilin Province foreign investors are encouraged to buy into state-owned firms. Wang Min, acting governor of Jilin, announced that his province intends to revitalize through the development of new industries and a focus on education, science, and environmental improvement. However, Jilin Province is still struggling as the worst-performing and poorest province in the northeast. The province lacks a coastline, oil reserves, and a developed private sector. In Changchun, Jilin Province, nearly 80 percent of economic output is generated by just one giant state-owned enterprise: the First Automobile Works.
Shenyang, capital of Liaoning Province, brought in more than $1.47 billion in foreign investment in 2004—52.9 percent more than in the previous year, according to the city government statistical bureau. To draw more foreign investment, Heilongjiang and Liaoning provinces named 2004 the “Year of Improving Investment Environment” and the “Year of Investment and Construction.” Zhang Wenyue, governor of Liaoning, announced that his province aims to maintain sustainable economic growth and to strive for a per capita gross domestic product (GDP) of $3,000 by 2010.
The inflow of foreign investment to the three northeastern provinces totaled a record high of $3.4 billion in the first half of 2004. Foreign investment goes to such sectors as equipment manufacturing, raw materials, chemicals, electromechanical products, modern agriculture, high tech, and automobiles.
China hopes to make the northeast region part of the country’s economic success story. Although the government talks about creating jobs in the private sector, state officials continue to focus on rescuing northeastern state-owned, capital-intensive, heavy industries from bankruptcy. Critics of the current government efforts argue that what the northeast needs is diversification of its industrial base and creation of labor-intensive jobs in the private sector. But since 2003 the region has attracted a large volume of foreign direct investment.
Miller, T. (2005, September 15). Reviving northeast China. Asia Times Online.. Retrieved October 16, 2008, from http://www.atimes.com/atimes/China/GI14Ad03.html
Source: Aervitz, Irina. (2009). Northeast Region, Revival of. In Linsun Cheng, et al. (Eds.), Berkshire Encyclopedia of China, pp. 1624#x2013;1625. Great Barrington, MA: Berkshire Publishing.