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  • Will the pressing ahead with the policy for the revitalization of Northeast China act as an accelerator?

Will the pressing ahead with the policy for the revitalization of Northeast China act as an accelerator?

|China

1. ‘Five Points and One Line’ – Liaoning Province’s new strategy of opening up to the outside world

‘Five Points and One Line’ – a new strategy for opening up to the outside world, which Liaoning Province has set forth as a key project of the 11th Five-Year Plan. In the first part of April, a delegation from Liaoning Province, with the Deputy Governor at its head, will visit Japan, and push the ‘Five Points and One Line’ strategy, with plans to vigorously develop activities to attract investment to those coastal areas designated for development.

What kind of strategy for opening up to the outside world is ‘Five Points and One Line’?

The ‘Five Points’ are ‘Dalian Changxing Island Harbor Industrial Zone’, ‘Liaoning (Yingkou) Coastal Industry Base’ and ‘Western Liaoning Jinzhou Bay Coastal Economic Zone’ (Jinzhou Xihai Industrial Zone and Huludao North Port Industrial Zone) on the Bohai Sea, and ‘Liaoning Dandong Industrial Park’ and ‘Dalian Huayuankou Industrial Zone in Zhuanghe City’ on the Yellow Sea coast. The area planned for development in the five development districts is 374.33 km2. A long-term development plan has been elaborated for the next twenty years, with an initial development phase of five years, followed by step by step furthering of development.

‘One Line’ refers to the construction of a 1,443 km coastal road (the Binhai Road) to link the five key coastal development areas. It will connect six cities, seven county-level cities, four counties, 21 districts, 25 harbors of varying sizes, 228 industrial parks and 133 tourist spots. A total of 5.9 billion yuan has been invested, with opening aimed for 2008.

In Liaoning Province, ‘Five Points and One Line’ has been given the role of ‘accelerator’ for the pressing ahead with the policy for the revitalization of the Northeast old industrial base, and the role of ‘key’ for the expansion of opening up to the outside world.

Liaoning Province’s greatest strengths are its long coastline and that the greater part of the imports and exports of the three Northeast provinces are carried by the ports of Dalian, Yingkou, Dandong, etc. Moreover, along the coast are many areas of sand dunes and desolate saltpans, which have been left untouched, and it is anticipated that in the future these may be transformed into ‘international industrial relocation sites’ and ‘new-style industrial zones’. Presently, land management in China is intense, and arable land cannot be used for industrial sites. The local government leaders of the ‘Five Points’ express confidence that the ‘national policy won’t be contravened in the case of saltpans and sand dunes’. There are also the selling points of low labor costs, compared with southern China, and a surplus of electricity.

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Another thing envisioned in this strategy is the ‘unified economic development of the coastal and inland areas’. The economic sphere of Liaoning Province can be divided into three broad areas: the ‘Central Liaoning City Cluster’i, centered on Shenyang, the ‘Liaodong Peninsula Coastal Economic Zone’, centered on Dalian and including Dandong and Yingkou which flank it, and the ‘Western Liaoning Coastal Economic Zone’ on the Bohai Sea, with Jinzhou at its center.

‘Yingkou’ is the nearest seaport for the ‘Central Liaoning City Cluster’, and ‘Changxing Island’ and the ‘Dalian Huayuankou Industrial Zone in Zhuanghe City’ are new hubs for opening to the outside world on the Bohai Sea and the Yellow Sea, respectively, and have the potential to take the degree of opening of the Liaodong peninsula to a new level. Both Dandong and Jinzhou have the potential to fulfill the role of boosting the economy of the respective areas which lie inland (i.e. western Liaoning, a section of Liaoning Province still lagging behind in economic development, as well as Inner Mongolia situated still further inland.) This accords with the Chinese government’s policy which calls for ‘a balanced development of the economy and society.’ If the transport infrastructure, namely the coastal road, is put into place, it will also contribute to distribution and tourism.

* Features of the coastal key development districts, the ‘Five Points’

Dalian Changxing Island Harbor Industrial Zone Development of 129.7 km2 within 15 years. Area initially planned for development is 50 km2. Development plan geared to the construction plan for the ‘Dalian Northeast Asia Major Shipping Center’ on the same island. Lies close to the Shenyang-Dalian highway and the Harbin-Dalian railway line. Deep-water port. Plan for construction of equipment manufacturing industry, shipbuilding, petrochemical industry base, etc. Construction of a nuclear power plant on the same island also planned.
Liaoning (Yingkou) Coastal Industrial Base Total area for development is 120 km2. Area initially planned for development is 20 km2. Emphasis on development of harbor construction and modern service industry. Expansion of Yingkou port planned. Share of private enterprises highest in province. Strong in magnesium, textiles, garment manufacture, musical instruments, etc. Situated 160 km from Shenyang and Dalian.
Western Liaoning Jinzhou Bay Coastal Economic Zone (Jinzhou Xihai Industrial Zone and Huludao North Port Industrial Zone) Jinzhou Xihai Industrial Zone is 22.76 km2 in area, with an area initially planned for development of 20 km2. Huludao North Port Industrial Zone is 21.87 km2 in area, with an area initially planned for development of 16.87 km2. Plans for a warehousing and distribution park adjacent to the shipbuilding development zone and the port, a general industrial zone and the Dongshan light industrial park. Construction of successor industry base to the petrochemical industry chain, and expected stimulation of the economy in the western Liaoning region.
Liaoning Dandong Industrial Park Total area for development is 30 km2. Area initially planned for development is 18.6 km2.
Dalian Huayuankou Industrial Zone in Zhuanghe City Total area for development is 50 km2. Area initially planned for development is 15 km2.

2. Background to the drawing up of ‘Five Points and One Line’

The ‘policy for the revitalization of the Northeast’ is naturally behind the drawing up of the ‘Five Points and One Line’ strategy in Liaoning Province. After the issue in October 2003 of ‘Opinions on a number of policies concerning the implementation of the strategy for the revitalization of the Northeast and other old industrial bases’ (or Document No. 11), which sets forth the basic direction of the policy for the revitalization of the Northeast, Liaoning Province drew up a new promotion strategy titled ‘One Center, Two Big Bases, Three Big Industries.’ii Specified early on, within this, was the idea of the construction of the ‘Dalian Northeast Asia Major Shipping Center’ being the priming powder for the priority development of the Bohai Sea coastal district, and resulting in the construction of a Bohai Sea peripheral coast road.

This year is the third since the policy for the revitalization of the Northeast was drawn up, yet to date there hasn’t been the anticipated amount of investment from foreign-funded enterprises into inland Northeast China, and in June 2005 the State Council General Office handed down the ‘Opinions on implementation concerning the spurring of further expansion of opening to the outside world in the Northeast old industrial base’ (or Document No. 36.)

Liaoning Province took this and carried out much research, and in February 2006 set out its ‘Opinions on a number of policies concerning the stimulation of increasing opening to the outside world of those coastal areas where development is being prioritized by the People’s Government of Liaoning Province’, within which it specified ‘the five key coastal development areas’ and the ’12 preferential measures’iii.

Incorporated into the ’12 preferential measures’ are the reduction of and exemption from public taxes, public financing, control over the development zones, and backup-measures for the development of inland areas (to increase the degree of opening to the outside world.) The intent of Liaoning Province to realize the attraction of both domestic and foreign investment in the short term is strongly reflected in this preferential policy, and the province is pushing it as a new preferential policy valid for two years from 1st January 2006.

At the beginning of March of this year, a China Development Bank inspection group observed the situation on the ground of the ‘Five Points and One Line’, and according to its report, the bank indicated its intention to provide 30-40 billion yuan in funding for use under the strategy for construction of the ‘Five Points and One Line’, and 200 million yuan in funding for technical support.

* The sequence of policies up to the drawing up of ‘Five Points and One Line’

Oct. 2003 ‘Opinions on a number of policies concerning the implementation of the strategy for the revitalization of the Northeast and other old industrial bases’ (or Document No. 11)
June 2005 ‘Opinions on implementation concerning the spurring of further expansion of opening to the outside world in the Northeast old industrial base’ (or Document No. 36)
July 2005 (Liaoning Province province-wide meeting on work to open up to the outside world)
Feb. 2006 ‘Opinions on a number of policies concerning the stimulation of increasing opening to the outside world of those coastal areas where development is being prioritized by the People’s Government of Liaoning Province’ (People’s Government of Liaoning Province – Document No.3, 2006)

3. Perceptions at the sites of ‘Five Points and One Line’

At present in Liaoning Province, the selling of ‘Five Points and One Line’ is critical. They are placing great expectation on being an industrial relocation site for businesses from neighboring Japan and the ROK, in particular. At the end of March, at the Liaoning Provincial Economic Committee, they arranged an inspection tour of the sites of ‘Five Points and One Line’, lasting three days and two nights, bearing the name ‘Manufacturing Development Inspection Group’ and was aimed at foreign government organizations and major overseas-funded businesses in Shenyang and Dalian. It is said to be the provincial government’s first attempt at putting together a tour of the sites for the new policy aimed at foreign entities. The author also took part, and visited part of the ‘Five Points and One Line’ (Yingkou and Dalian Changxing Island.)

Currently, Dalian Changxing Island has gone the furthest in the state of development of ‘Five Points and One Line’. The moving of residents to a new residential area (housing complexes) has already been completed, and the construction of wharves is also advancing at breakneck speed. Liaoning Province has apparently gone as far as to allot eight billion yuan to the island from the province’s contracted funding with the China Development Bank. Being consistent in assigning ‘Dalian Northeast Asia Major Shipping Center’ a complementary role, efforts are being made so that its types of wharves and construction plan won’t conflict with Dalian Port and Dayaowan Port, but rather will complement these two constricted ports.

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For the Liaoning (Yingkou) Coastal Industrial Base, in a move to develop the 120 km2 of saltpans adjacent to the city center, a three-stage, 15-year development has been planned. Industrial areas (eight zones, including fine-chemicals) and commercial trading zones will be constructed by 2010. The management committee of the industrial zone is selling it thus: ‘Current land prices are going for a song at 60 yuan per square meter.’

Both Yingkou and Dalian Changxing Island have lately conducted roundtable-style explanatory meetings, and have been able to hear directly from local government leaders and planning officials about the ‘Five Points and One Line’ initiative. Furthermore, there has also been the scene of local government officials listening intently to queries and proposals from participating foreign-capital companies. The presentations by regional governments have become slick compared to the past, and it was palpable that the local governments were batting for all they were worth.

The reputation of government in the Northeast, once heavily influenced by the era of the planned economy, was that of ‘wait, depend on and ask’ (liking slogans, yet slow to act and constantly looking to authority – that is, relying on policy.) The slump in state-owned industries was profound until a few years ago, and the Northeast old industrial base has suffered from the ‘Northeast Phenomenon’, with huge debts and mass lay-offs and unemployment. There have also been corruption cases in Shenyang. Although until recently it had been difficult to discern a positive, upbeat image in the Northeast, on the tour the local government’s all-out effort and willingness to act came across. Li Keqiang, the Secretary of the Liaoning Provincial Committee of the Communist Party, takes every opportunity to proclaim ‘we will throw our effort into the construction of the Coastal Economic Belt.’

Behind this, although the ‘policy for the revitalization of the Northeast’ has been drawn up, it hasn’t led to much of a pouring in of foreign-capital investment, and Liaoning Province’s strong intention is to raise the degree of opening to the outside world in one go, by giving tax breaks to companies setting up in the coastal ‘Five Points’ and funds for the fostering of export-industries. Additionally, if the strategy of ‘Five Points and One Line’ is realized, it can be expected that there will be a ripple-effect starting from the ‘Shenyang Economic Zone’ (Central Liaoning City Cluster) out towards the interior.

In 2004 and 2005 all the three Northeast provinces showed double-digit growth in GDP, ahead of the national average (for 2005: +12.3% for Liaoning, +12.0% for Jilin, and +11.6% for Heilongjiang), but the current situation is that for the last few years the three Northeast provinces’ share of total Chinese GDP has been falling. The State Council’s Northeast Revitalization Office has also pointed this out as a future challenge for the policy for the revitalization of the Northeast.

The three Northeast provinces’ share of national GDP

2002 2003 2004 2005
11.14% 11.09% 11.08% 9.38%

(Sources: statistical yearbooks by fiscal year for Liaoning, Jilin and Heilongjiang provinces and National Bureau of Statistics of China website)

Another issue is how attractively and clearly the ‘Five Points and One Line’ strategy is promoted to the outside world as a business opportunity and whether it can be linked to the actual attraction of investment. The place-name ‘Five Points’ itself is one problem, being a practically unfamiliar one to ordinary Japanese companies. The kind of feedback received at the presentations planned for the first part of April in Japan and the ROK, will probably give an indication for forecasting future investment.

[Translated by ERINA]

  1. Comprises Shenyang, at the center, and the surrounding six cities (Anshan, Fushun, Benxi, Yingkou, Liaoyang and Tieling.) It accounts for over 60% of the total provincial GDP. Forms the core of the Northeast and the Liaoning old industrial base. These seven cities account for more than 85% of the Northeast’s steel production and one third of Liaoning Province’s petrochemical industry.
  2. ‘One Center’ is the construction of the ‘Dalian Northeast Asia Major Shipping Center’, ‘Two Bases’ are the equipment manufacturing base and the raw materials base, and ‘Three Industries’ are ‘the high-tech industry, the agricultural produce processing industry, and the modern service industry’.
  3. Document of the People’s Government of Liaoning Province,
    People’s Government of Liaoning Province – 2006 No.3
    Opinions on a number of policies concerning increasing opening to the outside world of those coastal areas where development is being prioritized by the People’s Government of Liaoning Province.
    Within a framework of direct control by the people’s government of each city, each agency (committee) of the provincial government, and each provincial government:
    The Liaoning Provincial Communist Party Committee and the People’s Government of Liaoning Province have recently created a strategic plan to prioritize development in the coastal economic belt, and, under the slogan of ‘Five Points and One Line’, to expand opening to the outside world.
    Based on this plan, from this point on, the five areas of the province prioritized for opening to the outside world are: Changxing Island Harbor Industrial Zone in Dalian, Liaoning (Yingkou) Coastal Industry Base, Western Liaoning Jinzhou Bay Coastal Economic Zone (including Jinzhou Xihai Industrial Zone and Huludao North Port Industrial Zone), Liaoning Dandong Industrial Park, and Dalian Huayuankou Industrial Zone (hereafter abbreviated to ‘the five key districts’.) To realize the initial development of the Liaoning Coastal Economic Belt, the five key districts, for the two years from 1st January 2006, will be able to enjoy a new preferential policy, as below.
    1)Taking 2005 as the base year, the provincial finance department will refund 70% of the five key districts’ revenues from increased value tax, business tax, enterprise income tax, personal income tax, and real estate tax, and this will be allocated to aid infrastructure construction, establishment of support industries, etc.
    2)Where high-tech enterprises are established in the five key districts, income tax will be levied at 15%.
    3)For domestic-funded high-tech enterprises which are newly established in the five key districts, income tax is exempted on fiscal year earnings for two years
    4)The provincial center for credit and security for small and medium-sized businesses will preferentially guarantee bank loans, for enterprises fulfilling the conditions of the industrial park. 5)The provincial-level finance department will preferentially subsidize interest payments on fixed-period loans for technological upgrading and service industry projects in the industries of equipment manufacturing, raw materials processing, fine chemicals, agricultural products processing, textile manufacturing, medicines, etc., in the five key districts.
    6)Capital for the opening of international markets for small and medium-size businesses will be given, with special priority, where there is a need from enterprises in the foreign export trade in the five key districts for quality certification, overseas publicity and advertising of products, or participation fees for specialist international exhibitions.
    7)Assistance will be given with special priority going to enterprises in the export manufacturing base, which are established in the five key districts. Funds for the Northeast old industrial base and the promotion of export trade will be given on a preferential basis for the handling of intellectual property rights, the upgrading of export products, the research and development of new products, registration and advertising of products abroad, the development and cultivation of agricultural produce, etc
    8)Business expenses collectable by the administrative management section will be wholly exempt for all enterprises in the five key districts (including enterprises under construction and new enterprises.) The park’s management section, or the finance department of the city in which it is located, will be responsible for the administrative business expenses managed by the state. Administrative business expenses managed at the provincial-level will be exempt. During the period of this preferential policy, collection of any newly arising administrative business expenses will be implemented based on this policy.
    9)The five key districts will be given the same economic management rights as the economic and technological development zones at provincial level.
    10)A financial platform will be established, by use of such financial institutions as the China Development Bank, and key areas of financial support and a financing system will be created. The financial institutions will participate in project planning and demonstrative arguments, and will tie up technical support with financial support, link government and business confidence, and actively promote project development work in the five key districts.
    11)Jinzhou City and Huludao City may have ‘enclaves’ of fairly large size within the boundaries of Chaoyang City and Fuxin City, respectively. Enterprises established within such enclaves, along with being able to enjoy Provision One of the preferential policy, will receive a higher refund of 100%, and both cities (for ‘enclaves’, the provider city and the user city) will share this equally.
    12)The People’s Government of Dalian City, after referring to the provincial policy, will establish a firm method of implementation for those parts of the policy pertaining to that city. All other cities, after consideration of the existing local situation, will establish stimulatory policies.

[Translated by ERINA]