Once Inwards Harbin: The Struggle Raging Over China’S Northeast Rust Belt

From Andrew Batson's blog, September 1, 2017:

Over the yesteryear calendar week or so, an impassioned debate has broken out over what should survive done to assist China’s struggling rust belt inwards the Northeast. Justin Yifu Lin, possibly China’s most famous living economist, sparked the debate when his intend tank released a long (400+ pages!) study proposing an industrial policy strategy for Jilin, i of the iii Northeastern provinces. The report’s recommendations were seemingly innocuous–develop to a greater extent than low-cal industry, tourism, as well as agriculture-related businesses–but they nonetheless attracted vociferous online criticism.

Why? The summaries inwards the English-language press (see the SCMP as well as Caixin) give the impression that it’s a debate over whether authorities policies should promote low-cal industry, or something else. If that were the case, this would survive a typical academic tempest inwards a teacup. In fact, a lot to a greater extent than is at stake: the debate over what to create almost the Northeast (aka Dongbei, aka Manchuria) involves cardinal differences over how to sympathize Chinese economical history as well as the evolution trajectory of countries as well as regions actually develop. The debate over how to assist such struggling regions is likewise i where conventional Western economical wisdom has little to offer, so the champaign is broad open. After doing approximately reading on both sides, here’s my guide to the debate (warning: this is a long post).

Let’s start amongst the “Jilin Report” itself (the full Chinese-language text is available at the Center for New Structural Economics, Lin’s intend tank at Peking University). I’ve exclusively read the executive summary, which is non peculiarly brusque either, only the principal points are pretty clear. The background for the study is the long-term economical reject of the Northeast, in i lawsuit the most industrialized purpose of China, despite to a greater extent than than a decade of national plans as well as programs aimed at “revitalizing” the region. The centre declaration of the study is that the authorities needs to larn from the mistakes of previous policies (this quote as well as all subsequent ones are my translation):

Before the reform era [began inwards 1978], the former industrial base of operations inwards the Northeast benefited from the nation’s advertisement of a heavy-industry-focused catch-up evolution strategy. But inwards the reform era, the Northeast has suffered from the legacy of this strategy, as well as its industry, products as well as technological construction lack marketplace competitiveness. The “revitalize the Northeast strategy” thence must survive a evolution strategy that is inwards describe amongst the Northeast’s ain comparative advantage, as well as must non number inwards the launch of a novel circular of the former strategy. …
To beak frankly, the commencement circular of the “revitalize the Northeast strategy” from 2003 to 2016 withal relied on trying to strengthen this old-style catch-up strategy that went against comparative payoff rather than next it. H5N1 inquiry projection based on industrial venture microdata from 1999-2007 shows that the strategy helped enterprises expand output value, only did non increase profits. H5N1 strategy that expands the output of enterprises that are non feasible is a strategy that goes against comparative advantage.

The importance of this declaration has I intend gotten lost inwards the approximately of the ensuing debate over the report. It matters a lot that China’s most famous economist has come upward out as well as said, inwards so many words, that the decade-long authorities policy for revitalizing the Northeast has been a consummate failure as well as is fundamentally flawed. This judgment is inwards my take in absolutely correct, as well as inwards fact none of Lin’s critics are contestation against it (if anything, they would probable survive fifty-fifty to a greater extent than harshly critical than he is). If the debate over the Jilin Report does naught else, it should brand really clear that to a greater extent than assistance to state-owned heavy manufacture is non the respond to the Northeast’s problems.

What strategy should supersede the old, failed strategy is less obvious, as well as this is where opinions actually diverge. Essentially, Lin’s study argues that Jilin is an underdeveloped, low-income province, whose industrial construction is excessively weighted toward heavy industry. Therefore Jilin should create what underdeveloped, low-income countries as well as regions that get got successfully developed get got all done, which is focus on low-cal industry. Jilin tin dismiss create approximately of this yesteryear attracting cloth as well as electronics manufacturing facilities that are beingness relocated out of high-income coastal provinces, only it tin dismiss likewise railroad train industries that get got payoff of its detail natural endowments, such tourism inwards its many wilderness areas. (Side note: Changbaishan, an extinct volcano that straddles the edge amongst North Korea, is inwards Jilin province, as well as inwards fact it is i of the most spectacular natural wonders I’ve always seen, easily on par amongst national parks inwards the the United States of America The site is likewise extremely good maintained as well as managed despite the huge book of tourists.)

The article that helped spark the online tempest of commentary focused on this thought that low-cal manufacture volition relocate from coastal provinces from Jilin. Written yesteryear Sunday Jianbo, an economist at China Milky Way Securities, it pulls few punches inwards going later on the much to a greater extent than famous Lin:...MORE