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Economic growth in northeast China tumbles

Reporter: Guan Yang 丨 CCTV.com

04-27-2016 15:06 BJT

Economic growth in Northeast China has tumbled in recent years. The area was once China's fastest growing region, but since 2012, it has slipped dramatically, and has one of the country's slowest GDP growth rates.

Small businesses are always a strong indicator of economic trends. 27-year- old Li Xin has been running his car wash business in Liaoning Province since 2009.

Last year was tough. Wages and bills kept going up, but he's keeEconomic growth in Northeast China has tumbled in recent years. The area was once China's fastest growing region. But since 2012, it has slipped dramatically, and has one of the country's slowest GDP growth rates.

Small businesses are always a strong indicator of economic trends. 27-year- old Li Xin has been running his car wash business in Liaoning Province since 2009.

Last year was tough. Wages and bills kept going up, but he's keeping his prices fixed, in order to keep hold of his customers.

"When people's disposal incomes fall, they don't do unnecessary things so often, like paying for car washes. Some people choose to wash their cars themselves, as we saw by the river in the summer. Even for people who have the money to buy a car, 10 or 20 yuan to get it washed is becomming a bigger deal," Li said.

The small business slowdown is just the tip of the iceberg.

Experts say the economic structure of the whole region is too reliant on steel, coal and heavy industry.... and the current problems are structural and deeply rooted.

After a difficult couple of decades, China's Northeast is poised for a renaissance by transforming state-owned enterprises into market-driven entities -- broadening the economy by cultivating new industries. Nonetheless, the recent slowdown is a sign of the region's lingering appreciation of central planning which has been exited for a long time.

For decades, China's Northeast was the heartland of the country's state run heavy manufacturing. But that was before China began its transition from a planned economy to a market economy. The old ways of doing things don't go away overnight and neither do intransigence and inefficiency. To get to the bottom of the problem, we spoke to some entrepreneurs with grand ambitions who are now heavily in debt.

"We had the world's most advanced production line for magnesium plate in 2009, and we were receiving purchasing orders from companies like Porsche and Ford. But some parts of our production line, such as the electric motors, weren't modern enough to keep up with the orders. It's too late and too costly to start over," said Zhang Haijiang, co-founder of Yingkou Yinhe Magnesium Co. Ltd.

We later found out the production line was designed and installed by a large state owned enterprise and lent to the company under a government-backed loan.

The project was directly signed off by senior provincial officials - typical in a planned economy.

"We must admit, there was a lack of pre-assessment and risk evaluation in this project. There was nothing wrong with the business idea since we're in a place that's rich in magnesium. If we were doing things under the rules of a market economy, we might be very successful by now," said Zhou Heling, founder of Yingkou Yinhe Magnesium Co. Ltd.

The northeast may yet return to being a powerhouse. But only if it can cut itself loose from the old command-economy habits.

The question is: how hard is it to let go?

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