Liu Shijin

The issue of the old industrial bases in northeast China was put forward as early as the 1980s and some work concernedhasbeen done since then. Under the new circumstances, it has become a significant strategic move to speed up the development of China’s economy in a robust and sustained way and to accelerate readjustment, transformation and revitalization of the old industrial bases in northeast China. With a great deal of complicated problems to be solved, it is an onerous task to readjust, transform and revitalize the old industrial base in the region. But the most important thing is to obtain a clear and overall understanding of the issue. If the understanding of the issue is correct, we can get twice the result with half the effort and make a good start for solving the problem; if not, we may end in failure just as before.

I. How to Understand the Essence of the Issue of Readjustment, Transformation and Revitalization of the Old Industrial Bases in Northeast China

Under the new circumstances, readjustment, transformation and revitalization of the old industrial bases in northeast China are not only to solve the popular problems existing in large state-owned enterprises, nor only to revitalize the equipment industry, but also to boost further development of the economy in the region. This should be a basic standpoint for looking into and analyzing this issue. Considering this respect, the first task is to sum up the related experiences and lessons obtained during these years, look into which measures succeeded and which were not successful or ended in failure and hunt out the related reasons. We can obtain more profound knowledge about the basic issue of readjustment, transformation and revitalization of the old industrial bases in northeast China through summing up and analysis.

Firstly, it is necessary for readjustment, transformation and revitalization of the old industrial bases in northeast China to solve the popular problems of the state-owned enterprises, and to develop non-state-owned sector of the economy and the economy mixing the state-owned sector and non-state-owned sector with great efforts as well. With a great deal of large state-owned enterprises, the state-owned sector makes up a big part of the economy in the old industrial bases in northeast China, which is the basic fact. Obviously, the first task of readjustment, transformation and revitalization is to face and solve the wide variety of problems existing in state-owned enterprises. On the other hand, when we look forward with a view of developing the market-oriented economy and think on the basis of the experience of the developed coastal areas in the southeastern parts of the country, we can come to a conclusion that without vigorous development of non-state-owned sector of the economy, the market economy environment can hardly be cultivated and the climate for reform of state-owned enterprises can hardly be improved. The development of non-state-owned sector of the economy enables the sector to become an important part of the market economy and on the other hand, to create job opportunities for those workers laid off as a result of transformation of state-owned enterprises, to create new investors and to provide substituting fiscal revenues (when fiscal revenues from state-owned enterprises decreased). When it comes to the transformation of state-owned enterprises, non-state-owned sector of the economy does not constitute the opposite and repulsive factor against state-owned enterprises. The economy mixing state-owned and non-state-owned sectors should be the main target of economic development. Especially in those industries full of competition, if the situation in which those state-owned enterprises without substantive transformation take the predominant position continue to remain, there will be no hope of revitalization. The experiences of the old industrial bases in northeast China also tell us that reform only within the scope of state-owned enterprises is doomed to failure.

Secondly, the central government and local governments ought to make necessary investment, and the governments’ investment should be used mainly in transforming mechanism and improvement of the environment. Enterprises ought to turn to market for funds necessary for development. The old industrial bases in northeast China had ever made significant contributions to our country. As a universal reality, however, equipment is old, technological level is low and personnel burden on enterprises is heavy. Therefore, the governments ought to increase investment in technological innovation and embark on some new projects so as to ease the burden on enterprises and enhance the competitiveness of enterprises. Following this trend of thought, the governments had made considerable investment in the past, but the result (yielding no expected fruits) is widely known. The ultimate reason lies in the fact that under the conditions of planned economy system and shortage of supply, the governments increased investment in enterprises could take certain effect; after the environment changes as a result of establishment of market economy, what the state-owned enterprises lack is not money, but a new system and mechanism. The readjustment, transformation and revitalization of the old industrial bases under the new circumstances are also a process of transforming governments’ function and change of system and mechanism of enterprises. Without change of system and mechanism, even if the governments make more investment, the existing difficulties will not be solved and what is more, the increased investment will constitute a new burden, forming an unhealthy circle of "adding water when there is too much flour; adding flour when there is too much water". Under the changed circumstances, it is not that the governments are not willing to undertake responsibility or make investment, but that they are planning to spend money in releasing state-owned enterprises from the heavy burdens resulting from historical reasons, in paying for the costs of reform and in creating conditions for transformation of enterprises. In recent years, trial projects on the reform of social security system, diversion of laid-off workers, separating social functions from enterprises and liquidation of enterprises without competitiveness were carried out in Liaoning Province, which was a significant progress made on the basis of this trend of thought. The fund necessary for restructuring and development of enterprises ought to be obtained through introducing new investors and other financing channels. Therefore, the central governments and local governments ought to spend the money on the improvement of mechanism and the fund necessary for development of enterprise ought to be obtained from markets. These two issues should be treated separately.

Thirdly, while we put the emphasis on the development of equipment industry, we should also develop other industries with advantages through selection of the market. The equipment industry constitutes the important sector in the old industrial bases in northeast China and it is an industry with relatively higher technological factor among many industries in the region. Over the years in the past, some relevant departments and organizations have been calling for the revitalization of the equipment industry. An important consideration is to boost the transformation and revitalization through this means. In the next phase of the development of the old industrial bases in northeast China, the equipment industry will remain to be a promising industry with better basis which is worth making great efforts. Meanwhile, we must attach enough importance to the new characteristics of China’s industrial transformation. Over a certain period, there has been a phenomenon that some industries developed vigorously while industrial centers were transferred. Taking the textile industry for instance, its production centers used to be located mainly in Shanghai, Qingdao and Tianjin. Since the reform and opening up, the situation of those state-owned textile enterprises located in many textile industrial centers in these regions as well as in the country’s hinterlands were deteriorated, and a considerable number of them have gone bankrupt. Instead, those new burgeoning textile enterprises located in Jiangsu, Zhejiang, Guangdong and other provinces boosted the development of the country’s textile industry rapidly, enabling China to become the world’s largest textile exporter. There were many factors leading to the transfer of the industries. An increasingly significant factor is industrial cluster, that is, those powerhouse manufacturers of the same type of products, manufacturers of related parts and accessories for those powerhouse manufacturers and the enterprises providing services for their assembly are concentrated in one region so as to cut manufacturing and business costs. The modern equipment industry has a fastidious demand for specialized cooperation, and with the intensification of division of work day by day, enterprise will rely much more on its down-stream industry chain. The enterprises in the old industrial bases have all necessary workshops for production of related parts, regardless of scale. Seemingly, a large number of enterprises of the same industry assemble in one region, but the division of work was at a low level among them. The situation is only an assembly of enterprises, not "industrial cluster". Time has become ripe for China’s equipment industry to develop in full swing, but it remains an uncertainty whether the old industrial bases in northeast China can take full advantage of the opportunity and whether the industrial centers will move. It depends on whether the industrial bases in the region can accelerate the paces of reform and opening up and create favorable climate for industrial cluster as soon as possible. On the other hand, we should notice that the industrial layout of the old bases in the region took shape during the period of the planned economy, and as the industries formed under the enforcement of the planned economy may not certainly represent the local favorable characteristics, the industrial layout may not be rational. What’s more, over the two decades of development after the reform and opening up, the production elements in and out of the region have undergone great changes and the former industrial structure ought to or completely can be readjusted. So, we can say apart from the traditional equipment industry and other heavy industries, there is a large space existing for the development of other industries. In brief, we should attach importance to the equipment industry, but we should not put all our eggs in this industry. Then which new industry should we develop? The governments always cannot tell it precisely and the question still has to be answered by the market. The experiences of some regions in northeast China have demonstrated that some industries formerly neglected or despised by governments can unexpectedly develop vigorously. The key is to cultivate the market and let it play an important role.

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