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Rust to Riches

Changchun, China’s Detroit in the country’s northeast rust belt, is regaining its economic momentum. What can it teach other cities in the region?

By Xu Tian Updated Dec.17

Changchun, the capital of China’s northeastern Jilin Province and the cradle of the nation’s automobile industry, might have remained at the back of the public mind if not for the vaccine scandal revealed in July that triggered nationwide anger. But now there is better news.  

According to Changchun’s municipal statistics bureau, in the first half of 2018, the city’s GDP reached year-on-year growth of 7.4 percent, maintaining its record of higher than national average growth since the first half of 2016. Three other major cities in the area, Shenyang, Dalian and Harbin, all still lag behind the average.  

The old northeast industrial base thrived during the period of the country’s planned economy, but began to falter after market-oriented reforms accelerated through the 1990s. There has been widespread concern and controversy in recent years as to how the region can catch up by improving its business environment. This is why Changchun’s revival is regarded as a possible solution that its peers in the region may follow to find their way out of the woods.  

Industrial Restructure 
In 2015, Changchun faced immense challenges, with all its flagship enterprises, including the State-run First Automotive Works Group (FAW) and the Hong Kong-listed biochemical giant Dacheng Industrial Group both failing. The city’s industrial output went backwards for several months. Che Renyi, vice director of Changchun’s Industry and Information Industry Bureau, told NewsChina that the city decided to rejuvenate itself with technology-oriented innovation and industrial restructuring and upgrading on the basis of its existing strength.  

For example, traditional oil-fueled cars might be at the end of the road, but the prospects for new energy and smart vehicles are promising. To achieve the upgrade, the city has been trying to move up the value chain toward a world-class base for its existing major pillar industries, including auto-making, agricultural processing and equipment manufacturing. 

Meanwhile, emerging industries, such as photoelectric information technology, biology, medicine, new energy, new materials and big data, are expected to be built on the city’s existing resources and boost the upgrade of the traditional pillar industries.  

New energy will power autos while big data will make the manufacturing sector smart. Changchun is also home to China’s first optical research institute. All this makes it possible for the city to develop a fully-fledged, innovative supply chain.  

To attract private tech-savvy enterprises to realize the potential, in 2017, Changchun set a goal of having 200 Little Giant Enterprises and 140 National High-tech Enterprises, two headline campaigns launched by the Chinese government in recent years to encourage the growth of high-tech companies. The Little Giant program recognizes small and medium sized companies that gain core competitiveness through innovation in technology, management and services, while the National High-tech program, which has higher standards, involves companies that possess intellectual property for technologies that play a core role in their products or services.  

It was thought a mission impossible at first. In 2014, there were only about 60 Little Giants in the city, as Zhang Yongchao, an official at Changchun’s Bureau of Science and Technology, told NewsChina.“At that time, we didn’t even know where to find these enterprises,” Zhang said.  

Government officials were required to seek enterprises with the potential to become a national high-tech enterprise or a “Little Giant.” Shortlisted candidates were provided with technical help in calibrating with the national standards, and successful ones were awarded with more opportunities in winning bids in the city.  

In 2017, 197 companies became National High-tech Enterprises, 2.7 times the growth in 2016. And 261 companies have become new Little Giant Enterprises, 3.9 times the number in 2016. In 2018, there are already 329 companies applying to be National High-tech Enterprises, 103 more than in 2017.  

Meanwhile, partnerships between enterprises and research institutions and universities have been encouraged to build more innovation-oriented business startups. Furthermore, an online platform is available where financial institutions provide capital for tech companies with good business prospects. Thanks to this service, Yongli, which produces laser tubes, has grown to take 20 percent of the domestic market and now exports overseas.  

Improving the Soft Environment 
According to Changchun’s bureau of statistics, from 2015 to 2017, Changchun’s turnover of technology contracts, which involve services in developing, trading and consulting on technology, grew from 2.4 billion yuan (US$352.5m) to 20.8 billion yuan (US$3b).  

Between January and May 2018, the industrial output value of enterprises with an annual sales revenue of more than 20 million yuan (US$2.9m) recorded an increase of eight percent over the same period for last year, with the automobile and parts and agricultural processing sectors contributing over three-quarters of the total revenue. Emerging industries did their part too.  

The output value of biological pharmaceutical enterprises reported a year-on-year increase of 12.6 percent while opto-eletronic and information companies achieved a year-on-year growth of 10 percent.  

Part of the results are thanks to Changchun’s progress on improving its “soft environment” for investment. This refers to government policy and regulations, administrative efficiency, cultural atmosphere, services and the quality of the personnel investors have to deal with.  

Changchun started by changing the officials’ mindset in 2016. “When you feel you are slow and backward, you will be more motivated to catch up and explore more possibilities,” Song Zhangzhe, vice director of the Changchun Development and Reform Mission, told NewsChina.  

As a stimulus, the appointment and promotion of officials is performance-oriented. For example, in the past, officials were not tasked with attracting investment. Now the assessment of relevant departments and the promotion of officials is linked to their achievements in this field.  Changchun renewed its soft environment office in 2016. How the soft environment goes, as supervised and assessed by the office, is part of the performance assessment for local officials.  

A mechanism has also been established to promote the smooth landing of projects. For big projects, related officials are assigned to help go through the formalities, financing, and other services. If the projects fail to land smoothly, it will affect the promotion of the officials in charge. Administrative procedures for enterprises have been unified and largely streamlined in the city. Now the actual time for opening a company has decreased from 15 previously to three working days.   

According to He Jun, director of Changchun’s soft environment office, now all the civil servants in Changchun feel pressure to improve their behavior and provide a better soft environment for businesses, the top priority on the government agenda.   

Changchun’s take-off in the market-oriented economy may provide good lessons for the whole region.