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.

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’

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 1^st 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’

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.

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

(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]

[Translated by ERINA]

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