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Alternative Industries in the Spotlight

Do not be surprised if you are told that half, or even more, of a city's population is supported by a single industry - but that industry will soon become a thing of the past.


This is the situation confronting many of China's formerly resource-rich cities. In the past decades, they powered China's industrialization with billions of tons of coal, oil and hundreds of millions of cubic metres of timber.


It is not difficult to spot the legacy of this over-exploitation of these precious resources: exhausted mines, massive unemployment, and weak alternative industries. Local people said it has become a common phenomenon for young unemployed people to have to live on their parents' pensions.


How to transform cities facing the threat of running out of resources has become a major concern for the central government, and especially local governments in Northeast China where most of such cities are to be found.


The National Development and Reform Commission (NDRC) has listed the topic as a research project for China's 11th Five-Year Plan (2006-10).


"It is more a social problem than a pure economic development problem," said Ding Sibao, a researcher at the Shenzhen-based China Development Institute. Ding is responsible for conducting the research for the NDRC.


The plight of these cities has also attracted the attention of China's top political advisory body, the Chinese People's Political Consultative Conference (CPPCC).


At the recently concluded third session of the 10th CPPCC National Committee held earlier this month in Beijing, Su Liqing, vice-president of the All-China Federation of Trade Unions, called for efforts to be made to revive the future prospects of exhausted mines and the cities that depend on them.


Su said that a series of social problems have cropped up in some of these cities due to the lack of alternative industries.


China has at least 118 cities or counties depending on coal mining, according to incomplete statistics.


Out of the more than 8,000 existing coal mines, 400 have completely run out of coal and two-thirds of them are getting close to this stage, Su said.


Oilfields are facing the same dilemma. China's famous Daqing oilfield in Heilongjiang Province, which contributes about one-third of the nation's total annual oil production, now has only 30 per cent of its proven reserves left and has started to gradually cut its production.


Su also suggested that the 11th Five-Year Plan include measures, such as tax incentives, to support the development of alternative industries in these cities.


"The central government must do something," Ding told China Daily. "With the development of the heavy and petrochemical industries becoming a new trend in China's economy, more resources will be required and more cities will face this problem."




According to Ding, China is very likely to introduce measures in the 11th Five-Year Plan to help cities suffering from an exhaustion of resources.


The system will include a law on special aid, the establishment of an aid fund, and some preferential policies helping these cities to solicit external capital and develop alternative industries.


Meanwhile, evaluation standards defining the qualification of cities receiving such assistance will also be drawn up to prevent unqualified cities from receiving assistance.


"I believe the central government must take the responsibility," Ding said, blaming the problems facing such cities on China's rigid planned economy system before the 1980s, under which the cities contributed their resources according to instructions from the government but at a relatively low price.


Even in the 1990s, when southern China was in the vanguard of the nation's economic reform, resource-abundant cities in Northeast China were still required to satisfy surging energy demand in South China at low prices in order to avoid inflation.


This not only drained resources in these cities but also left in place outdated economic operation mechanisms, unbalanced industrial structures and a weak ability to develop new products and industries.


Ding said the law will define the targets and responsibilities of enterprises and governments at all levels in the drive to aid these cities. It can also specify the use of the special aid fund and how to supervise this.


The proposed fund should be used mainly to help restore and improve the environment in the mining areas, the infrastructure construction of the urban areas, and the social security system in these cities. The money can also be used to train unemployed people and help enterprises seeking new growth engines.


Preferential policies such as tax reduction and support for technological renovation can also be included in the aid package.


Ding added that regulations should also be drawn up to stipulate that other cities should also take responsibility for providing assistance.


Different approaches


The transformation of cities with exhausting resources was put under the spotlight last year after China launched the massive campaign to revitalize the old industrial bases in Northeast China.


Fuxin, a coal base in Liaoning Province, was selected by the central government to pilot these transformation efforts.


Last year, a total of 6.6 billion yuan (US$795 million) was poured into 23 transformation projects in the city, where half of its 800,000 residents worked in coal mines and over 150,000 have been laid off. Last year, the new projects created 47,000 jobs, according to figures provided from the Liaoning provincial government.


The province later selected a further four cities - Anshan, Fushun, Benxi and Panjin - to develop substitute industries.


Ding said these cities, although less appealing to investors compared with their coastal peers in southeastern China, still boast some advantages such as low land prices, cheaper labour resources, and large numbers of skilled workers.


But the key is that these different cities must adopt different approaches.


Developing alternative industries seems to be the best way out for cities like Fuxin. It has already mapped out a plan to develop processing industries for agricultural and animal husbandry products, and selected the manufacturing and service industries as alternatives.


However, a huge amount of investment will be needed to initiate such projects and there may be little chance of the city getting a foothold in the agricultural processing market where competition has already become intense.


For cities such as Daqing, the urgent task is to develop downstream oil processing industries. But the problem is that the city is too far away from the market for downstream products.


China's southeastern coastal areas gather most of the nation's consumers of petrochemical products.


Forest cities like Yichun in Heilongjiang Province have bigger opportunities to get out of their quagmire, Ding said.


Forest resources could be regenerated and forests can be used for other purposes like animal husbandry and tourism.


Ding said the problem in Yichun is that it takes decades or even longer for the forests to restore their natural production capability, while it has already become a hard task for the city to support its huge number of forestry workers and their dependents.


(China Daily March 22, 2005)


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