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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (940)	10/7/2003 2:39:57 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

Reinvigorating China's sleepy northeast By CNN Senior China Analyst Willy Wo-Lap Lam Tuesday, October 7, 2003 Posted: 0826 GMT ( 4:26 PM HKT) (CNN) -- Go northeast, young men! This will be a key message of a watershed Communist Party meeting to open in Beijing this weekend. The much-awaited Third Plenary Session of the party Central Committee is scheduled to pass a resolution containing a recommendation for no-holds-barred development of the three dongbei, or northeastern provinces. Whether the depressed economies of Liaoning, Heilongjiang and Jilin can be revived has attracted widespread attention for important reasons. Firstly, as the first major economic initiative of the leadership under President Hu Jintao and Premier Wen Jiabao, it will be a good gauge of their commitment to market reforms. Secondly, while former patriarchs Deng Xiaoping and Jiang Zemin are remembered for their role in spearheading the development of respectively Guangdong Province and Shanghai, the northeast could be a legacy of the Hu-Wen administration. Beijing, however, faces a formidable challenge in resuscitating the dongbei, which, partly due to the foundation laid down by the Japanese and the Soviets, was the pride of Chinese industry until the 1970s. However, because of the heavy concentration of unwieldy state-owned enterprises (SOEs), the three provinces have lagged behind the eastern coastal rim in exploiting the opportunities of the marketplace. Liaoning, once a pacesetter in industry and technology, has slipped to 11th place in terms of provincial GDP. And the entire dongbei economy is no bigger than that of super-rich Guangdong. Premier Wen, who spelled out instructions on revitalizing the northeast while visiting there in August, has made it clear that only market forces can save the depressed region. Beijing's dongbei gameplan can be summed up in one phrase: "policy only, no money." As government economist Gao Huiqing pointed out, "the central authorities will liberalize policies and introduce more market mechanisms to reactivate the dongbei." Gao added Beijing would not be repeating the experience of its go-west program, which required massive government expenditure in infrastructure. According to an economic source in Beijing, one of the Wen cabinet's recommendations is thorough-going privatization, meaning that more aggressive measures will be adopted to sell off SOEs to foreign companies -- or to private firms from other parts of China. Following usual practice, fairly strict criteria must be met before an SOE can be offloaded. "A detailed assessment of the SOE's assets has to be made -- and the purchase price must at least reflect a good part of the enterprise's 'worth'," said the source. "The purchaser must also vouch to re-hire a sizeable proportion of existing staff." "The new line is that as long as a 'white knight' can turn around an aging factory through an injection of modern technology and management, he can have it practically for free -- nor is he required to keep the workforce." Wen's advisers think that dongbei SOEs will be of particular interest to businessmen in South Korea, Japan and Russia. And thanks to the just-signed closer economic partnership arrangement with Hong Kong, Beijing is confident of luring investment from the special administrative region. Moreover, Beijing will be encouraging nouveau riche "red bosses" from coastal cities to take over ailing, dongbei-based SOEs. 'Change of mind-set' As Vice-Head of the State Development and Reform Commission Ou Xinqian put it, the infusion of private capital could foster "a highly competitive, fully energetic business environment" in the sleepy northeast. For the so-called New Dongbei Era to arrive, however, the 100-odd million residents in the northeast must, in Deng's words, "undergo a total change of mind-set." As the Guangdong paper Southern Weekend pointed out in a recent commentary, the northeast was home to a "special culture characterized by satisfaction with the status quo and lack of sensitivity toward the market." Or as Jilin University economist Song Donglin indicated, denizens of the northeast had an "anti-commercial mentality" owing to the residual influence of Soviet-style economic planning. And particularly for Jilin, which adjoins North Korea, foreign investors may be repelled by the on-going nuclear crisis in the Stalinist country. While it will take some time before the "go northeast" program can bear fruit, the Hu-Wen initiative has already upset the delicate balance among China's various regional economic blocs. While cadres and entrepreneurs in the nation's two main locomotives of growth -- the Yangtze and Pearl River Deltas -- have pronounced themselves unperturbed by competition posed by the northeast, officials in the poor western provinces have expressed anxieties about losing their special place on Beijing's priority list. Partly because both Hu and Wen had worked long years in western provinces, there are expectations that the much neglected region will finally get high-level attention -- and patronage. Wen has sought to reassure the western hinterland by saying Beijing's pursuit of a "fourth nexus of growth" is based on considerations of a more balanced regional strategy. He said recently that the dongbei strategy would provide added impetus to "interaction and synergy between the eastern and western regions." However, there is criticism that the Hu-Wen team is shifting the focus to the northeast because it sees no prospect of the western sector taking off any time soon despite the hundreds of billions of yuan already poured into railroads, ports and airports. Diplomatic analysts say the new leadership is taking a considerable gamble because if they can't make a go of the dongbei quickly, Hu and Wen may come under heavy fire -- and lose substantial support -- from both the rich coast and the impoverished heartland. edition.cnn.com