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Deep-rooted problems haunt industrial heartland

Zhao Yinan
Updated: Apr 10,2015 9:16 PM     China Daily

China Daily reporter’s log on her observation of Premier Li’s tour to the country’s northeastern rust belt of heavy industry.

The black clouds passing overhead added to the bleak atmosphere as I arrived at Changchun, China’s Detroit, in the country’s northeastern rust belt in the early spring.

Advertising boards lining the airport highway displayed automobiles and high-quality ginseng, the city’s traditional strengths. Eight million residents prospered in the era of China’s planned economy and extravagant spending before the national campaign to fight graft.

Premier Li Keqiang’s visit to Jilin, one of three provinces in the Northeast known for heavy industry, took place a week before the world’s second-largest economy is due to report what is expected to be the slowest quarterly growth rate since the first three months of 2009.

Li’s tour did not include the country’s first, and one of its largest, automobile manufacturing enterprises, FAW Group Corp, nor any companies with strong business ties to it. This was despite the fact that the revenues generated by the automaker account for half of Jilin’s total industrial profits and have bolstered its ambitious goal to build a national auto-industry base.

The carefully planned schedule is understandable, if one recalls last month’s sudden announcement that Xu Jianyi, the corporation’s chairman, was being investigated for abuse of power. The announcement was made by the Party’s anti-corruption watchdog, the Central Commission for Discipline Inspection.

Jilin Governor Jiang Chaoliang visited the automaker on April 7 to reassure employees. He told them that government support for the corporation will increase because its development “matters to everyone in the province”.

The governor’s words were genuine and straightforward, but he failed to mention the institutional problems that are deep-rooted in the auto company and other super-large enterprises born during the planned economy era.

The development model of concentrating all the resources in a few enterprises creates businesses that are not flexible enough to change rapidly — or too big to fail.

Northeast China, along with the country’s resource-rich provinces, should leverage the development experience of some Middle East countries, where total reliance on the energy sector has created both an economic miracle and badly structured economies.

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