(Source: www.forbes.com)

Dongbei holds a special place in modern China. Made up of the three provinces Liaoning, Jilin and Heilongjiang, Dongbei was both the military launching point for the communist takeover of the country beginning in late 1948, as well as the industrial base of Maoist China. Thanks to comprehensive infrastructural development during the 14-year Japanese occupation beginning in 1931, Dongbei’s industrial sector was well primed when the communists took power in 1949. Rich in oil, coal and iron ore, and armed with an infrastructure ready to process them, Dongbei quickly developed its heavy industries and became the model of industrialization for the rest of the country.

But since 1978, when capitalist market reforms began bringing China in line with the global economy, Dongbei’s GDP as a percentage of the national total has plummeted from 14% to 6.8%. Comparatively, the coastal province of Guangdong climbed from 5.4% in 1985 to 11% in 2015. Considering that Liaoning’s provincial governor admitted in January to having inflated fiscal data by at least 20% between 2011 and 2014, there’s a good chance the regional economic situation is even worse than previously reported.

Numerous factors have contributed to the region’s decline, China’s shifting economic model among them. As the country opened its doors to the world in the 1980s, the central government focused on developing the infrastructure of the coastal provinces to boost international trade. Although Dongbei shares three international borders, they are with Mongolia, Russian Siberia and North Korea — all ailing economies. To make matters worse, the heavy industries that once made Dongbei the pride of China are today mostly stagnant, state-owned enterprises that have trouble keeping up with the flexibility of the private sector, and which have fallen on particular hard times in recent years as the world turns away from polluting industries.

The obvious parallel to the Midwestern United States has earned Dongbei the moniker “China’s Rust Belt.”

Dongbei's provinces have suffered economically in recent decades as China embraces market reforms.

Jasmine Hong/Forbes

Of course, Dongbei’s stagnation has not gone unnoticed by the central government. Since the early 2000s, talk of a great plan to “Rejuvenate the Old Dongbei Industry Base” has been appearing in party propaganda, but as of yet no significant change has occurred. And Xi Jinping’s Belt and Road Initiative — a development strategy to revive ancient trade routes and increase cooperation with neighboring countries — seems focused on developing the infrastructure of China’s western provinces, through which the majority of overland trade will pass.

Still, there are options. Zhang Yifan, a professor in Dongbei’s College of Humanities and Sciences of Northeast Normal University, shared how the regional governments could boost GDP growth: “The Belt and Road Initiative is mostly about selling out of China, about exporting or even using our capital to build up other economies so that China will benefit in the long run, but Dongbei has Heilongjiang province, which neighbors Russia.”

Russian Siberia is replete with two of China’s most sought-after resources: oil and timber. Hundreds of years of exploiting domestic timber resources, sharply accelerated during the frenzied industrialization of the Mao and reform eras, has left China severely deforested. On the petroleum front, China’s domestic fields have become unable to keep up with market demand in recent years and the country has become the world’s largest net importer of crude oil.

A second option is to expand trade with South Korea. Because of its proximity to the Korean peninsula, Dongbei is home to millions of Chinese Koreans, especially Jilin province. “The region is crowded with people who already speak the language,” Zhang said. “They go to South Korea to work, and South Koreans come here for business. There’s this connection that already exists.”

The problem of course is the recent souring of relations between the two countries. The deployment in the past year of the United States’ Terminal High Altitude Area Defense (THAAD) system in South Korea has drawn sharp criticism from China’s foreign ministry, who argued it could be used by the U.S. to spy on their own defense systems. This has prompted a backlash by Chinese consumers, who have been encouraged by state-owned media to organize boycotts against South Korean products. The central government has even gotten involved by banning tour groups to South Korea and closing legitimate Korean businesses in the mainland for alleged safety violations.

The final and perhaps most alarming threat to a stable and prosperous Dongbei is the region’s impulsive neighbor: North Korea. According to NBC, China keeps up to 250,000 troops operating in Dongbei, many of whom are stationed on the 1,400-kilometer border shared by the two countries. One reason many analysts have put forth to explain China’s continued support for North Korea is the fear of a refugee swarm into Dongbei were the Kim regime to collapse.

Of the three provinces that make up Dongbei, Liaoning is by far the wealthiest. The province’s 2,110-kilometer coastline has been earmarked for development in recent years by the central government as part of the Belt and Road Initiative. Jilin and Heilongjiang aren’t as lucky. Landlocked and heavily dependent on traditional industries, they should instead focus on reforming their cumbersome state-owned enterprises and nourishing the links they already have with Russia and South Korea. Rich in resources and infrastructure, Dongbei has the potential to reclaim its economic dynamism, but to do so it will need to forge its own development model distinct from the southern coastal powerhouses.

More Info: www.forbes.com

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