Reform guidelines include partial privatisation of state-owned enterprise sector, which employs millions of people.
Qiqihar, China – The Zhongtian Textile Company once employed nearly 13,000 workers across the four floors of a white, Soviet-style building in this old industrial city, about 1,500 kilometres north of the capital Beijing.
But today, the whole complex, housed in a beautiful 120,000 square metre lush park, lies completely derelict: heating pipes are covered with rust, and lights turned off permanently. No investors are willing to take over the 1965-built factory after it shut down in 2008.
On a recent visit, an elegant 60-year-old man – who joined the company when he was only 19 – stood by the entrance, chatting with former colleagues.
“Things first turned sour in the 1990s, when the workforce was cut to 2,000 people. Today only 28 of us are left on the payroll. We handle the most basic administrative tasks,” said Zhang, who, like many Chinese wary of official reprisals, asked that his real name not be published.
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“Transport costs were just too high to ship our fabrics all the way down to southern China where they would be cut and stitched into consumer goods like clothing. Gradually we became less and less competitive,” he told Al Jazeera.
Stories of abandoned factories are aplenty in Qiqihar, the second-biggest city of China’s northernmost province of Heilongjiang, which borders Russia.
This agglomeration, home to less than one million people in the metro area, offers a telling picture of China’s economic slowdown.
According to data posted on the city’s official website, Qiqihar’s gross domestic product grew by 5.3 percent in the first half of this year, more than 13 percentage points down from 2010 and well below the national average of seven percent.
“The government has been trying to tweak things here for the past 20 years,” said Michael Meyer, an American journalist who spent three years in northeastern China to write his latest book about the region’s transformation, In Manchuria.
“Frankly I don’t know what’s the solution there. Maybe the solution is just to do the capitalistic thing and let these industries die out,” Meyer said.
Many of China’s state-owned enterprises such as Zhongtian Textile have already been scrapped during the first big wave of reforms carried out in the late 1990s by Zhu Rongji, then China’s prime minister. Thousands were privatised or liquidated and close to 40 million people, government data show, were laid off in this painful process.
Now as China shifts its economy away from exports and investments and towards private entrepreneurship and domestic consumption, countless cities across the country must again find new drivers of growth.
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But nowhere is this need more pressing as here in the three northeastern provinces – Liaoning, Jilin and Heilongjiang – that make up China’s rust belt, the heartland of heavy industry since the 1950s.
According to the Chinese government, about 110 million people live in this area roughly the size of Turkey.
Xinhua, China’s official news agency, has reported these three provinces were among the four with the weakest economic expansion in the first half of 2015.
Among them, Heilongjiang performed particularly bad, with a GDP declining by 4.2 percent in the second quarter of this year, the second-biggest drop among China’s 31 provinces, according to the National Bureau of Statistics. Beijing’s GDP, by contrast, rose 8.3 percent over the same period.
As China tries to revamp its growth model, attention has shifted to the country’s rust belt, where vestiges of the socialist-planned economy are hampering progress made elsewhere.
For decades, Qiqihar workers in state-owned factories have enjoyed life-long jobs and free housing, a package commonly known as the “iron rice bowl”.
Now, with many factories plagued by inefficiency, China’s central government is going at great lengths to revive this once-thriving powerhouse – with little impact so far.
In August last year, Prime Minister Li Keqiang unveiled new policy measures for northeastern China, including investment in infrastructure – railways, highways, airports, power grids – and more support for new industries such as robotics and turbines.
He personally made a two-day trip to Jilin province in April this year, as did President Xi Jinping in July.
Fading entrepreneurial spirit
Meanwhile, private entrepreneurs are also finding it more difficult to operate.
Zhou, 40, who also didn’t want his real name published, owns a company that produces stucco and decorative elements made from polystyrene or glass fibre that are glued to the facades of high-end condominiums and Western-style private villas.
He told Al Jazeera he once made roughly $16mn in sales, but the decline of Qiqihar’s real estate market shifted his fortunes overnight.
His factory here runs at one-third of its capacity and a smaller plant in neighbouring Liaoning province was closed earlier this year.
“In Qiqihar, people once used to queue up to buy apartments. Now this is over,” Zhou said from the front seat of his car on the muddy road leading to his new factory.
“I had only two choices: cut down the cost of my products or step up the quality. Lowering costs would have killed me so I went for the second option instead.”
Last year, his company invested about $6mn to relocate the ageing downtown plant to a new site in the suburbs of Qiqihar. The new locale, a former soybean oil factory, spans across 100,000 square metres.
The entrepreneur also bought new machines to cut down labour costs. Now his polystyrene blocks are sculpted according to patterns designed electronically. He also upgraded his products with anti-inflammable components in a bid to beat the competition.
But the key problem is transportation.
Despite being an industry leader in northeastern China, Zhou said he only supplies Heilongjiang and neighbouring areas because shipping his products to better-performing provinces in western and southern China is just too costly.
Weather conditions are another challenge. He has to stop production every year from November to March, when frigid temperatures make it impossible to work in these huge, unheated barracks built decades ago by the Soviet Union.
“But workers’ paychecks are still paid throughout winter,” he said proudly while showing off his facilities. “And I keep myself busy looking out for new clients.”