Northeast region charts new course to revitalization

At a recent major business event in Yabuli, Heilongjiang province, the total value of investment contracts signed was lower than a year ago — an indication not of fading interest, but of a change in development direction, experts said.

Most of the 125 projects covered by the contracts are in emerging sectors such as the digital economy, biotechnology, the ice and snow industry, new energy, high-end equipment, aerospace and new materials.

The makeup of these contracts underscores the region's determination to capitalize on the ongoing new technology evolution, as the decline in its old industrial base has not been totally reversed.

Local governments' initiatives include reviving the substantial State-owned economy, addressing challenges created by the depletion of natural resources, stopping the brain drain, and dealing with a rapidly aging and dwindling population. All these initiatives need to be done while managing local government debt. None of these tasks is simple, particularly as they are interconnected.

Against this backdrop, the central authorities have vowed to renew their efforts to revitalize Northeast China — a commitment that began in 2003. The region, covering approximately 1.52 million square kilometers, includes Heilongjiang, Jilin and Liaoning provinces, as well as the eastern part of the Inner Mongolia autonomous region.

The China-Russia Expo and Subregional Cooperation Forum convened in Heilongjiang's capital, Harbin, on Friday and was attended by visiting Russian President Vladimir Putin. His attendance indicated the significance the Russian side attaches to deepening economic and trade cooperation with China through Heilongjiang, as well as the border province's potential to further open up.

This year marks the 21st anniversary of the launch of the Northeast China Revitalization Strategy. Between 2003 and 2022, the central government's total transfer payments to the region reached nearly 12 trillion yuan ($1.66 trillion), according to a China Business Network report. Although these funds were vital for sustaining local government operations, they were insufficient to fully reinvigorate the local economy.

The region accounts for one-sixth of the country's area and in the 1990s, during its population peak, it made up 9 percent of the national population. By 2022, however, it accounted for 4.8 percent of China's total economy, down from 8.5 percent in 2003.

The continuous contraction of the economy is reflected in the population decline caused by a brain drain, a low birthrate, and an aging society.

According to data from the seventh national census released in 2021, the permanent population of the three northeastern provinces was 98.51 million, a decrease of 11.01 million from the sixth national census in 2010. The provinces' proportion of the national population has also dropped from 8.18 percent in 2010 to 6.98 percent last year.

Nevertheless, the central government's contributions have been indispensable in promoting agricultural industrialization, rescuing some State-owned enterprises from bankruptcy, improving the livelihoods of laid-off workers, and mitigating the decline of resource-depleted cities and industrial and mining areas.

Now, the bailout policy of the central government is focused not only on transfer payments but also on helping the region develop internally generated impetus. This involves encouraging local governments to streamline and reform their administrative systems related to industry, business, and society, which were established during the era of the planned economy.

Institutional reform

Because State-owned enterprises account for a much larger share of the economy in Northeast China, the region has retained an administrative system that calls for reforms. The private economy sector is still not developed, and the social sector revolves around the cradle-to-tomb welfare system of SOEs.

Although most residents understand that their hometowns will continue to decline if institutional reforms are delayed, the social and economic challenges have made private investors hesitant to invest in Northeast China, despite its resources, institutions, talent, and convenient logistics.

Local governments are being urged to draw lessons from the experience of the Ruhr area in Germany and the revitalization of Pittsburgh in the United States to seize the opportunities of the new technology revolution and transform the region's resource and talent advantages into development advantages.

However, due to the lack of supporting industries related to information, artificial intelligence, and green technology, this remains only a vision for the majority of locals.

Security importance

According to the central government's latest policy, the region is a key player in safeguarding the country's national security, food security, ecological security, energy security, and industrial security.

After more than 20 years of exploring ideas, the central leadership's requirements for the revitalization of the region have become much clearer. The central government's meeting on the implementation of the latest Northeast China Revitalization Strategy at the end of last year identified the directions local efforts should focus on. For example, the region should actively promote industrial innovation through technological innovation and accelerate the construction of a modern industrial system with local characteristics and advantages.

"For the revitalization of Northeast China, the real economy should lay the foundation, technological innovation should serve as the crux, and industrial upgrading represent the direction of relevant work," said a statement from the meeting.

Industrial upgrading is not about starting new industries from scratch, but rather building on the existing industrial strengths of the region to leverage new technologies and management models to accelerate the development of new quality productive forces, it said.

For instance, based on local conditions, Northeast China can focus more on developing emerging industries with local characteristic, such as the ice and snow economy, and the marine economy.

Chi Fulin, president of and a senior researcher with the China Institute for Reform and Development, said that efforts to promote regional economic integration need to coordinate industrial layout, opening-up policies, and the nurturing of a unified market.

"To enhance the overall competitiveness of local industries, the region must promote the multifaceted integration of regional planning, infrastructure construction, industrial development, regional markets, and ecological and environmental protection," Chi said.

In particular, advanced equipment manufacturing, logistics, modern agriculture, tourism, the green economy, and the digital economy should be major focuses of local governments, enterprises, and investors, he said.

They should work together to accelerate the transformation and upgrading of the traditional manufacturing industry toward digitalization, networking, and intelligence by strengthening the in-depth integration of industry, academia, and research led by enterprises, he added.

Meanwhile, subregional coordination among the three provinces and local cities should also be strengthened to avoid competition and protectionism.

Several large cities including Harbin, Shenyang, Changchun, and Dalian, can provide solid foundations for the integrated development of different sectors. These cities should lead the efforts to reform institutions, improve the business environment, promote innovation, and attract talents, setting a good example for the rest of the region.

Modern agriculture

Northeast China accounts for more than one-fifth of the country's grain output, and Heilongjiang should serve as a "ballast" to ensure national food security, the central government stressed.

The province has been urged to prioritize developing modern agriculture and lead the modernization of agricultural equipment, science and technology, as well as operations and management.

Research and application of digital technology and biotechnology should be reinforced, and agriculture-related science and technology should be given greater prominence. More efforts should be made to create new types of agricultural operations, forge industrial clusters, and accelerate rural revitalization to ensure modern production and living conditions are accessible to rural residents.

Heilongjiang, as well as the rest of the region, must adhere to green development and establish a sound economic system that facilitates green, low-carbon, and circular development.

Local governments should vigorously develop tourism with distinctive cultural features and foster the winter economy as a new source of growth, promoting the overall development of sports, culture, equipment, and tourism related to ice and snow.

Talent is key

Northeast China boasts dozens of prestigious universities, institutes, and research laboratories, including the Harbin Institute of Technology, Jilin University, Harbin Engineering University, and Dalian University of Technology. The central government has significantly increased its investment in these institutions in recent years. They have been encouraged to take advantage of this opportunity to further strengthen the construction of first-class academic disciplines and create national talent centers, science and technology centers, and innovation hubs to make greater contributions to the revitalization of Northeast China and the rest of the country.

During his inspection tour of Harbin Engineering University in September last year, President Xi Jinping underscored the importance of education, science and technology, and talent, and called for more accomplishments in transforming China into a leading nation in these areas.

Xi noted that sci-tech innovation should lead the overall industrial revitalization, and urged concrete efforts to promote the high-quality development of advanced manufacturing, accelerate the upgrading of traditional manufacturing, and improve primary, secondary, and tertiary industries in all respects.

Sci-tech innovation resources should be integrated to spearhead strategic emerging industries and future industries, Xi added, stating that the province should enhance the core competitiveness of State-owned enterprises and guide the sound development of private enterprises.

Northeast China should leverage its strengths to create new development momentum and strengthen itself as an important national commodity grain production base, a heavy equipment manufacturing base, a vital energy and raw material supplier, a crucial guardian of ecological security in China's north, and a pivotal gateway for the nation's northward opening-up, Xi said.

The region was also encouraged to improve its talent policies, promote the deep integration of talents and industry, focus on national strategic needs, and adapt to the direction of industrial transformation and upgrading.

Guo Hai, Party chief of Northeastern University China, said the revitalization of higher education in the region requires new ideas and greater input. He said universities in the region should focus more on national strategic needs, strengthen advantageous disciplines, and optimize the structure of disciplines to improve their ability to support the high-quality development of the region and the country.

Opportunities next door

Analysts have urged local governments to seize the strategic window of the next three to five years and use border ports as an important platform to open up to Northeast Asia.

The region should promote integration of its transportation network with regional neighbors, and deepen its industrial cooperation with Russia, Japan, and the Republic of Korea, especially in fields related to national security, they said.

Da Zhigang, a researcher on regional development with the Heilongjiang Academy of Social Sciences, said the region should be involved in the strategic cooperation between China and Russia. It should also promote mutually beneficial cooperation in the Far East, open up land, sea, and air channels for Northeast Asia, and consolidate connections both domestically and internationally.

Da said the region can utilize the Regional Comprehensive Economic Partnership to replicate implementation of Southeast Asia's free trade mechanisms in Northeast Asia. In addition, it should explore new opportunities for institutional cooperation between China and Russia, and conduct pilot programs in expanding service trade and producer services, Da said.

The region should develop new subregional models of cooperation between Chinese cities and foreign cities, as well as provincial-level regions, expand connections and cooperation among them, increase cooperation in green and low-carbon fields and expand cooperation between sister cities, he said.

For instance, energy cooperation between China and Russia should be a source of impetus for Heilongjiang's economy, Da added. Thanks to its refineries and transportation facilities in Daqing, the province has the potential to seek a resurgence in the reserve, logistics, and processing industries in the oil and gas sector.