Shining example for China's rust belt

Updated: 2016-05-20 08:21

By Ed Zhang(China Daily Europe)

  Comments() Print Mail Large Medium  Small

While Detroit is often considered the prototype of postindustrial cities, Pittsburgh points to an entirely different future

Revitalizing business in an area losing ground to outside competition is an important skill for government. But the importance is hardly reflected in existing textbooks about politics or economics. In China, officials learn on their own.

That is why it is so interesting to watch how different Chinese local governments are coping with the economy's slowdown. Giving money to enterprises to produce more of the same products, as it turns out, is the least intelligent policy.

So the stimulus package (mainly easy credit for state-owned enterprises) that the central government used to sustain the country's GDP growth after the 2008 financial crisis is now viewed by some economists as almost a dose of poison. It was described as the price of buying time for necessary reform. But it obviously failed because up to now not much reform that people have talked about has materialized.

Shining example for China's rust belt

In a large state system, what a lack of leadership in real changes may create is room for more local initiatives. But one complication is that, amid the economy's changing conditions, all the old games of development that local officials used to play with ease are no longer sustainable, such as using revenue from land auctions to finance local public projects. There are already many cities that have incurred heavy debts in their development attempts in the past few years.

But good lessons, positive as well as negative, do exist in the world.

There are cities that have remained in recession for two or three decades, while other cities have succeeded in upgrading themselves to a higher stage of development. It is only that those lessons are not very well documented in textbooks.

And wherever the lessons come from, whether China or the United States, they seem to bear out the same principles:

A local government can do a lot to help local business, by doing things that corporations cannot do single-handedly.

A local government can design an action plan to benefit local business by taking advantage of macroeconomic policies or preferences of the national government.

A local government can help local business leverage many resources of local society, economic and noneconomic. And the more noneconomic resources local business uses, the more competitive it is likely to become, especially in a time when the service sector is to be the leader of regional economic growth.

In any city with a sizable population and some economic and cultural tradition, there are many things that can be turned into incentives for business development.

When people talk about the old industrial cities in the United States, the first city many think of is Detroit, as if its lingering pain represents the norm for all cities that have passed their most glorious times of industrial progress.

But Pittsburgh, according to Rich Lesser, president and CEO of Boston Consulting Group, himself from the city, can be seen as a case in contrast.

Pittsburgh managed in roughly four decades to rebuild itself from a center of a declining and polluting steel industry into a city known for medical services, sports, art and culture, and a good retirement environment, with a still strong business base. The Pittsburgh experience should be carefully studied by local officials in some of the old industrial towns in northern and particularly northeastern China if they really want to take responsibility for renewing their cities without simply waiting for the central government's bailout money.

Like their American counterparts in the 1970s, those Chinese cities are plagued by outdated and excess capacity in mining and big smoke-stack operations, and face increasing competition from outside.

There was a time, as Lesser recalled, when people in Pittsburgh were saddened by seeing factories close down, jobs decrease and population shrink because many young people moved to other places.

The shutdown of Pittsburgh's steel mills came at the time when the expression "rust belt" was coined - just as the expression is now being recycled by the Chinese media to describe the country's northeastern cluster of old industrial cities.

However, Pittsburgh reacted more quickly in adapting to the change and rebuilding its new economic niche. As the market economy rewarded people for their entrepreneurship, the local government did play a role in providing a business-friendly urban environment, Lesser said.

It tried hard to retain corporate headquarters in the city.

It leveraged the local education system, most importantly two well-known universities, to attract young people to the city and to generate new services.

It helped sustain high quality in the city's medical services.

It helped retain the city's attractiveness through art and cultural and sports activities.

These are all conceivable for cities like Harbin in Heilongjiang province, Shenyang and Dalian in Liaoning province, and Baoding in Hebei province.

And as for all Chinese cities in a business slump, one more key point should be added. That is using a well-disciplined police force to protect, rather than to exploit, local private businesses.

The author is editor-at-large of China Daily. Contact the writer at edzhang@chinadaily.com.cn

0