Aggressive Pilot to Transform 12 Industrial Cities

By Xin Wang, Qin Beibei
Published: 2008-07-11

From Nation, page 15, issue 374, June 30, 2008
Translated by Zuo Maohong
Original article:

In response to a State Council order for cities heavily reliant on natural resources to improve sustainable use of them, China has recently unveiled a list of 12 industrial cities that are running out of resources. As the first targets for an urban transformation pilot, the 12 cities will receive special funds from the central government to improve public services, including social security, education, health care, environmental protection, and public utilities.

The EO talked about the issue with Song Xiaowu, former deputy chairman of the State Council's Coordinating Body for Northeast China Development. With rich mineral and forestry resources, the northeast region has long been an industrial hub in China.

Government Intervention
The EO: You have engaged in initiating drafts of both the 2007 no. 38 document (the above-mentioned State Council order) and the latest list. How do you see these changes?

Song Xiaowu: Sustainable development of cities reliant on natural resources is an inevitable problem as China industrializes. Energy and mineral resources that we are greatly depending on at present are not reproducible. What if all these resources were exhausted? Western countries have already met this problem before. Germany's Ruhr area and France's Reims and Lorraine are examples.

We can't keep mining and leaving the place once there's nothing left, like what was done in the early days of industrialization in sparsely populated areas of South Africa, New Zealand and Australia. This won't work in China. Cities that depend on natural resources need to consider how they can continue developing and how their residents make a living after the resources run out. Given the experience of other countries, relying on the market for the change takes too much time and isn't effective. That's why we need the government to intervene.

The EO: Since when did other countries start transforming their resource-reliant cities? How does their experience enlighten us?

Song Xiaowu: It has been 50 years since Germany and France set up specific organizations to handle this problem, and they still don't think they have completed their mission yet. This is a historic task that needs lasting efforts. In western countries with a mature market economy, governments have a major impact on this issue. They provide preferential policies and financial support to employment, social security, reemployment training, prevention and cure of occupational diseases, housing for miners, new projects, etc.

These countries not only give special government support, but also take full advantage of the market. We are slower in realizing the sustainability problem of resource-reliant cities because our industrialization started later too. It wasn't added to the central government's list of priorities until the beginning of this century.

Syndrome of Resource-exhausted Cities
The EO: It was around 2001 when the phrase "four mining problems" (referring to the mining sector, mines themselves, miners, and mining cities) was adopted. Now it's been put at the top of the agenda. Does this mean that resource-exhausted cities are facing more acute problems?

Song Xiaowu: Yes. Many incidents that involve the masses happen in such cities today. They share a simple economic structure, acute unemployment, harsh living conditions, severe social conflicts, bad pollution, risk of geological disasters in certain mining areas, talent shortages, and poor education. This could be called the "syndrome of resource-exhausted cities".

According to my investigation in many resource-reliant cities in Northeast China in 2004, the fundamental question for these cities is the same one for those in the West: What do we do when there's no coal or oil? But we have our own systems, and this is where the difference lies.

First, our businesses and governments were mixed together. Most of the big miners today are still state-owned, and some even rank higher than the local government. There are also mayors who head such companies in some resource-reliant cities. Western countries have state-owned companies too, but most are private.

Second, under a planned economy, our natural resources were priced by the government. During the transition to the market economy, we tried a mixed-mechanism system—natural resource products were sold at the government's fixed prices, but equipment and daily living necessities were mostly bought at market prices. There were great losses during this process.

The EO: So it's easier for foreign resource-reliant cities to change?

Song Xiaowu: They have their own problems, but they've been very professional after many successes and failures. During my visit to France, an experienced expert on industrial transformation told me that France had a professional team for this task. All team members are required to have knowledge in three aspects—A, employment and social security; B, industrial projects; C, regional economy. Why is it? He said the top concern in changing a resource-reliant city was employment and people's living conditions. Necessary social securities were provided to ensure the original level of living, or Reims and Lorraine miners would have protested in Paris, he said.

When putting forth urban transformation projects, what we consider first are new industrial projects and financial support from the top. Is this wrong? You can't really say so because projects themselves create employment opportunities. But with this in mind, labor-intensive projects should be preferred.

Six Policies Pushing Cities to Change

The EO: What special policies are there for those resource-reliant cities? How will they function?

Song Xiaowu: There are six policies for these cities. There will be funds from the central government, and reform of taxes on resources. A sustainable development reserve fund will be established, and policy banks will be encouraged to set up special loans for sustainable investment in these places. We will also set aside part of the capital from treasury bonds and the basic construction fund of the central budget for projects that can effectively absorb labor. Last, more financial support will be given to split public service functions and redundant subsidiaries from businesses*.

The EO: How should these policies be effectively used? What do you think is the most urgent task for resource-reliant cities at present?

Song Xiaowu: What these cities are faced with is a reflection of the whole country's concern today, that is, resource shortages, pollution, and income gaps. All these problems have emerged in resource-reliant regions, though different cities began mining at different times. Given the current situation, I think we should give top priority to people's livelihood and ecological conservation. Without a stable society and normal ecology, how can we attract foreign capital, or launch new projects?

*Note: In the planned economy, Chinese businesses engaged in public services such as health care and education. Many also had subsidiaries to guarantee employment of their staff's family members.