Shenyang, once a major industrial hub, is a test case for government-led initiatives aimed at revitalising the now troubled local economy.
Shenyang started to fall on hard times with the slowdown in China’s growth, which brought its formerly vibrant manufacturing sector nearly to a halt. Factories fell into decline or disuse, endangering the communities that rely on them. And Shenyang is not alone. The city exemplifies a broader problem of failing factories in industrial regions across China. The need for Beijing to intervene is growing, and in Shenyang, it is taking action. Much is riding on the effort, as the city and its environs, along with similar regions, could weigh down the entire Chinese economy.
Shenyang begs comparison to many towns in America’s “Rust Belt”, where major industries have dried up. During China’s sustained era of rapid growth, the city’s heavy industry flourished. But in 2016, the economy of the north-eastern province Liaoning, of which Shenyang is the capital, shrank 2.5%.
The entire northeast, where much heavy industry is concentrated, is at risk, leaving Beijing with a problem all too familiar to Washington: trying to revive depressed industrial zones. In China, the government is taking a characteristically hands-on approach, offering generous incentives, including corporate tax cuts and bonuses, to attract investment to Shenyang.
One example of relatively recent investment in Shenyang is the China-Germany Equipment Manufacturing Industrial Park. Intended as a platform for the government’s Made in China 2025 strategy, it was opened in late 2015 to try to bring advanced production in robotics, automotive components and other industrial sectors to the city. Since its opening, says the park’s deputy director, Zhang Yanzan, more than 140 factories have opened or are underway.
However, Shenyang is far from being the only city in China with attractive incentive programs on offer. Other major cities have far surpassed it in developing high-tech and service companies. Residents of Phoenix Valley, an incubator in Shenyang, bemoan a scarcity of venture capital and talent, much of which is flooding into hot spots like Beijing and Hangzhou.
“Every province and city in China has policies to encourage investment and start-ups”, said Zhao Xijun, Deputy Dean of the School of Finance at Beijing’s Renmin University. “If northeast cities just do the same, they won’t be able to compete with those who are already ahead of them.” As a result, the New York Times reports, “China may find reviving its troubled industrial towns every bit as challenging as Western countries like the United States do.”
