Recently, the Communist Party of China’s Changchun Municipal Committee publicly admitted that the city’s economy is facing unprecedented difficulties and challenges, while also declaring the failure of the “national-level strategy” to revitalize the Northeast that has been in place for 20 years. This is not an isolated case, as a review of key economic data such as finances, GDP, and population reveals that there are many cities in China facing similar situations to Changchun.
Changchun Municipal Committee recently held a meeting to report the overall economic situation of the city in the first half of the year, stating that “the current economic development of Changchun is facing unprecedented difficulties and challenges.”
Changchun is the capital city of Jilin Province. In June, the official article from Changchun city authorities unusually called out the continuous decline in production and sales of the First Automobile Works Group (FAW), which is considered a pillar of the economy in Changchun, and is now facing restructuring pressures.
So, how difficult is the economic situation in Changchun? It can be described with one word: collapse.
Industrial collapse, with the revenue of industrial enterprises with annual sales over 20 million yuan (RMB) dropping from 7.9% to -2.1%, a decrease of 10 percentage points in a year, with profits plummeting by 20.1%; automotive industry collapse, with FAW’s sales continuing to decline in the first half of the year, causing the sudden collapse of Changchun’s largest economic pillar; investment collapse, with fixed asset investment dropping by 16.5% in a year, and manufacturing investment also falling by 12.2%; fiscal collapse, with Changchun city government’s fiscal revenue at 42.4 billion yuan, expenditure at 114.5 billion yuan. Government fund revenues down by 15.2%, real estate investment, land transfers, and related tax revenues facing pressures simultaneously; population collapse, with 33,000 births and 77,600 deaths in a year, where deaths are more than twice the births, resulting in a natural decrease of 44,300 people.
Overall, Changchun’s economic growth model has collapsed, with the automotive (industrial), real estate, and government investment engines all stalling simultaneously.
Changchun’s primacy in the region in terms of economics, population, and resources is high, what happens in Changchun affects Jilin Province.
Looking at the neighboring provinces of Heilongjiang and Liaoning in Jilin Province, their situations are quite similar.
Liaoning, as the largest economy in the Northeast, admitted widespread data falsification in 2016 resulting in a rare negative GDP (-2.5%) that year. Jilin and Heilongjiang similarly face issues of data falsification, which is a national phenomenon.
A classmate of the author, who is in charge of an audit department in a vice-provincial city, once revealed that starting from the town level to the city and provincial level, each layer manipulates data, with all kinds of data not being real, “cheating at each level, all the way up to the State Council”. Unable to understand the true economic situation as an auditing department, they can only roughly reduce a portion of data based on a percentage, the so-called “water-squeezing”, before reporting to the central government.
The plight of the Northeast region also signifies the failure of the Communist Party’s “revitalize the Northeast” strategy.
In September 2003, the Communist Party’s Politburo and the State Council Executive Meeting separately declared “revitalizing the Northeast” as a major strategic task and issued a document at the central level in October of the same year. In 2006, the Communist government designated “revitalizing the Northeast” as a state policy, attempting to develop the Northeast as the third large economic hub in China, alongside the Yangtze River Delta and the Pearl River Delta.
After 10 years of development, the economic growth rates of the three provinces of Liaoning, Heilongjiang, and Jilin were among the bottom five in the country. On April 26, 2016, a new central-level document was released, renamed as “Comprehensively Revitalizing the Northeast”, but with no substantial change, and now after another 10 years, the shortcomings are even more pronounced.
The three northeastern provinces are generally facing contradictions between dwindling tax revenues and massive rigid expenditures, with local finances fundamentally unable to sustain themselves. By the end of 2021, Hegang City in Heilongjiang, due to extreme financial difficulties, became the first prefecture-level city in the country to undergo financial restructuring due to bankruptcy, forced to halt public servant recruitment, significantly cut expenses, exposing the extreme vulnerability of grassroots finances.
Population serves as a barometer for the economy, and the Northeast region is facing the most severe population structure crisis in the country. According to the seventh national population census and subsequent data, the population in the three northeastern provinces has decreased by over 10 million in a decade. Due to severe aging, Heilongjiang became the first province in the country to deplete its pension funds. The distribution of pensions in Heilongjiang and Jilin has long been in a state of insolvency, relying on nationwide enterprise employees’ basic old-age insurance fund for transfer payments to sustain payment.
The root cause of the failure of the “revitalize the Northeast” lies in systemic and mechanistic issues, with serious bureaucratic thinking among government officials in the Northeast, where the saying “investment stops at Shanhai Pass” has long been circulating in the Chinese business community. The proportion of state-owned economy is excessively high, the economic operation mechanism is hindered by state-owned enterprises, and policies and credit resources are biased towards state-owned enterprises. Private economic development is severely insufficient, diminishing employment absorption capacity, leading to university graduates wanting to become civil servants within the system.
Changchun’s economy is a microcosm of economies across China. In today’s increasingly evident K-shaped differentiation of the Chinese economy, the number of cities situated on the lower arm of the K greatly exceeds those on the upper arm. Apart from promoting AI (Artificial Intelligence) and technological “leaps”, the Communist Party is powerless in facing the grim reality of financial stagnation, economic decline, and shrinking consumer markets in many regions.
Nationwide cities similar to Changchun, like Shiyan and Xiangyang in Hubei, Wanzhou, Fuling in Chongqing, and Liuzhou in Guangxi, around 20 cities with single-industry structures and shrinking automotive industries; Datong in Shanxi, Fushun, Fuxin in Liaoning, Zaozhuang in Shandong, Jiaozuo in Henan, 69 cities recognized by officials as facing resource depletion.
These cities have completely lost growth momentum and are all ensnared in a dual financial and social crisis of dwindling tax revenues, population outflow, high elderly dependency ratios, and long-term declining property prices.
Some had once imagined that the Communist Party would undergo self-reform, but the reality has repeatedly shown that as long as the Party’s rule remains unaltered, so-called economic plans and development strategies ultimately become a farce.
From the “Western development” to “revitalizing the Northeast”, from the “Central Rise” plan to the “millennial plan” of the Xiong’an New Area, from the “integration of Beijing-Tianjin-Hebei” to the “Shanghai Free Trade Zone”, and to “integration of the Yangtze River Delta” and “Greater Bay Area” initiatives, as well as the “Hainan Free Trade Port”, these grand projects and plans have been launched one after another.
These projects lack scientific and reasonable planning and decision-making, let alone effective supervision and management, pouring in massive funds, manpower, and resources. However, these projects either lack follow-up or are plagued with corruption, becoming a series of “unfinished” works.