Industrial Real Estate Park Revitalization in Major Rust Belts
Author: Jia Xiaobing, Commercial Real Estate Series Article “Introduction to Park Industrial Real Estate” Episode 89
1. Major Rust Belts in the World“Rust Belt”
The Rust Belt originally referred to the areas around the Great Lakes in the northeastern United States, where traditional industries have declined. It now broadly refers to regions experiencing industrial decline. According to Collins Dictionary, the Rust Belt refers to “a region which used to have a lot of manufacturing industry, but whose economy is now in difficulty.” The term “Rust” evokes images of rusted and abandoned factories, symbolizing deindustrialization and representing economic decline, population loss, and urban decay caused by industrial shrinkage. In Chinese, this term is often translated as “锈带” or “铁锈地带”. From the late 19th century to the early 20th century, the Midwest of the United States became a center for heavy industry due to its convenient water transport and rich mineral resources. Industries such as steel, glass, chemicals, lumber, mining, and railways thrived. Industrial cities such as Pittsburgh, Youngstown, Milwaukee, Dayton, Cleveland, Chicago, Harrisburg, Bethlehem, Buffalo, and Cincinnati were once quite developed. However, since the U.S. transitioned to a service-led economy, heavy industries in these regions have declined. Many factories have been abandoned, and the machines inside them gradually became covered in rust, hence the term Rust Belt or simply “锈带”. Notable Rust Belt cities include the “Motor City” Detroit, “Steel City” Pittsburgh, Cleveland, and Chicago. Due to abundant resources, the thriving manufacturing sector once supported America’s glory in the 20th century. However, since the mid-20th century, with the decline of the coal and steel industries and increased automation, many factories shut down, workers became unemployed, and crime rates rose, leaving this area “rusting” and its former glory lost. The main reasons for the Rust Belt’s decline include a single production structure, primarily focused on coal, steel, electricity, machinery, and chemicals. The decline of coal as an energy source, the widespread application of oil and natural gas, and new energy sources contributed to global steel overcapacity. The impact of the technological revolution made traditional production and organizational forms unsuitable for the demands of the times. Land use became tight, environmental pollution worsened, and resource shortages became evident. The decline of the Rust Belt occurred earlier than most people think. Most financial media consider the decline to have started during the Reagan (peak of US-Japan trade friction) and Clinton (when US industry chains moved to Mexico and East Asia) eras. However, signs of this decline appeared after World War II—by the 1960s, industrial jobs in cities like Chicago and Cleveland had decreased, leading to idleness among impoverished Black residents and frequent racial riots. Today, the term Rust Belt is commonly used to refer to certain industrial decline areas in various countries. For example, the Great Lakes region in the U.S., the old industrial base in northeast China, the Ruhr area in Germany, and the industrial areas in London. In the 1970s, former industrial bases in some developed countries, after experiencing prosperity during the heavy industrialization period, began to decline, with numerous factories closing down, leaving behind idle factories and rusting equipment. As a result, these former industrial bases, such as the Ural Mountains in Russia and Ohio in the United States, have been collectively referred to as the “Rust Belt”. In terms of timing, the U.S. completed its industrialization goals in 1950, the UK in 1955, Japan in 1975, and Germany in 1980, entering the “post-industrial” era, which led to the emergence of the “old industrial region problem” (i.e., the “old industrial base” problem), such as the Rust Belt region in the Midwest of the United States, the Ruhr area in Germany, the northeast region of China, the Lorraine region in France, and the Kitakyushu region in Japan. In the U.S., today’s Rust Belt, apart from a few successful transformed cities, still has a large white working-class population that dominates the political direction of these states. For example, Pittsburgh and Cleveland have successfully transformed into emerging cities focused on healthcare, technology, and education, heralding a new era. In the 2016 election, by advocating “make America great again,” supporting the return of manufacturing, trade protectionism, and cracking down on illegal immigration, Trump won all the swing states in the Rust Belt, which contributed to his previous term. However, four years later, the trade war negatively impacted swing states like Pennsylvania and Ohio, which have a large agricultural base, limiting agricultural exports and failing to fulfill the promised return of manufacturing. Detroit is located at the center of the northeastern Great Lakes industrial area. The automotive manufacturing industry is the core sector of the city’s industry, accounting for about 1/4 of the national annual production; nearly 200,000 employees, accounting for over 40% of the city’s total workforce. It is home to the headquarters of the four largest American automotive manufacturers: Ford, General Motors, Chrysler, and American. Detroit was once the fifth largest metropolitan area in the U.S. and a world-renowned international business and industrial center, especially known for automotive manufacturing and engineering technology. The number of cars produced in Detroit ranked first globally and was once a symbol of the “American Dream.” However, the wave of industrialization receded so rapidly that not only did the glory vanish but also it left behind ruins.
Another typical example is Foxconn, which once promised to invest 10 billion dollars in Wisconsin to establish a panel factory, providing hundreds of thousands of jobs, but now reportedly only provides 600 jobs, and the beautiful vision of returning manufacturing has not been realized as expected. I am not sure if these factors are the main reasons for the Republican Party’s loss in the Rust Belt this year, but for the Rust Belt, which has high expectations for agricultural exports and the return of manufacturing, this will undoubtedly become some important factors in their political swing. Looking at the U.S., as early as 1950, the development of the automotive industry led to a population boom in Detroit, reaching 1.8 million. However, by 2000, Detroit’s prosperity became a thing of the past. Detroit became the first city in the U.S. to see its population drop below one million, and between 1950 and 2008, Detroit’s population fell by over 1 million, accounting for 58% of its total population. Currently, the population of Detroit is 700,000, ranking 18th in the U.S. 83% of the population is African American, and 1/3 of Detroit residents live in poverty. The median annual income for Detroit households is 33,000 dollars, about half the national average. In 2009, Detroit’s unemployment rate soared to 25%, which was 2.5 times higher than the national average. In 2008, Detroit had the highest suicide rate in the U.S., more than 10 times higher than that of New York City. People flee Detroit not only to escape the severe impacts of the economic crisis but also because of the deteriorating urban security, with frequent occurrences of robbery, theft, carjacking, and gun violence. The significant population decrease leads to a sluggish real estate market, and total consumer spending decreases, causing the city to gradually become a “wasteland.”What are the reasons that caused the once-glorious Motor City to fall to such depths?1. Overly Simple Industrial Structure: Detroit’s80% of its economy relies on the automotive industry, and this single industry reliance creates a single source of fiscal revenue, which is a significant risk. When the relied-upon industry is booming, fiscal revenues rise sharply, but when the industry encounters difficulties, the fiscal impact is also particularly severe.2. Deindustrialization Leading to Industrial Relocation: After the late 1960s, Detroit began deindustrialization, with the three major companies gradually relocating, first to the suburbs, then to the more land-abundant and non-unionized sunny areas (the South and Southwest), and then overseas (by the early 1970s, one dollar of every three dollars invested by the three major companies was spent overseas). Now, not only has the era of General Motors long passed, but two of the three automotive giants have also been taken over by the government, and only one Chrysler assembly line remains within the city limits (although the GM headquarters is still in Detroit). Thus, Detroit has declined.3. Declining Competitiveness of the U.S. Automotive Industry: Detroit was once a world-renowned automotive city. However, with the rise of Japanese and European cars, the competitiveness of the U.S. automotive industry has continued to decline, and its global market share has also decreased, making Detroit’s decline an irreversible fact.4. Tax Revenue Loss from Population Exodus: Detroit was once the fifth largest city in the U.S.; in 1950, its population reached 1.8 million. Due to racial tensions triggered by the civil rights movement and the occurrence of highly destructive riots, both white and middle-class residents fled to the suburbs, reducing the city’s tax base. Failure to Adapt to New Technological Impacts: Detroit was once the birthplace of the U.S. automotive industry, but due to increased factory automation or outsourcing, coupled with Asian competitors capturing market share, major employers had to lay off workers in waves. “Success breeds failure,” as can be seen from the analysis above, Detroit’s current decline is closely related to the rise and fall of the U.S. automotive industry. It prospered because of the automotive industry, but it also sank due to the decline of the automotive industry. In the evolution of industrialization, there are also places that have escaped the rust belt through industrial real estate park development. For instance, Chicago, which is also located in the Great Lakes region and was once known for manufacturing, has had a completely different outcome. Relying solely on a single industry often carries significant risks; once an economic crisis or resource depletion occurs, it can change the fate of the entire city, which should draw our attention. It is perhaps normal that Detroit did not transform, as its automotive industry was so dominant that it created an illusion—people believed that the automotive industry would continue to thrive, and no one considered that it would decline. This is the biggest difference between the people of Detroit and those of Chicago: Chicagoans proactively sought change while still in a good situation in manufacturing, daring to take risks in urban transformation and resolutely developing a diversified economy. In contrast, Detroit was more rigid, and by the time the crisis appeared, it was already too late to turn back. Looking at the broader situation, industrial hollowing out is a common phenomenon. Since the 1970s, many former industrial revolution strongholds in Europe have declined. Rust belts around the world are in decline, and the former Soviet Union and Eastern Europe are no exception. Northeast China has a similar development experience; this region, rich in natural resources such as coal and iron ore, once had bustling factories, power plants, mining, and lumber activities, and since the founding of the country, it has strongly supported national construction, earning the title of “the first son of the republic.” However, now, natural resources are depleting, GDP is declining, and commercial prospects are nearly nonexistent. Joshua B. Freeman’s “Behemoth: A History of the Factory and the Modern World” details the development of giant factories in the West since the industrial revolution. This book provides insight into how the northeastern Great Lakes region’s old industrial base—once the world’s factory in the 19th century—has experienced glory and decline, becoming today’s Rust Belt. Currently, many major “Rust Belt” regions worldwide are developing new products, expanding new markets, and enhancing service industries and the tertiary sector through industrial real estate park development, strengthening foreign trade exchanges, improving rapid transportation—logistics, and developing emerging industries.
2. Industrial Real Estate Park Development in China’s Rust Belt
From the historical perspective of global economic development, expanding the view to a comparative analysis of the industrialization history of different countries, such as examining the northeastern region of China, which has also experienced early industrialization prosperity and later decline during the post-industrialization period, we can find similarities with the U.S. Rust Belt. Both were once centers of heavy industrial production, faced large-scale unemployment issues, and lacked follow-up development momentum, which is why the northeast is referred to by some researchers as China’s “Rust Belt.” On the other hand, China’s socialist system has led to significant differences in the mechanisms behind the emergence of the northeast problem compared to the U.S. “Rust Belt” issue formed under a consistent market economy background. Using industrial real estate parks to reconstruct the industrial ecosystem and concentrate resources can help revive the northeast from the “Rust Belt” and reinvigorate its economic vitality. The northeast region is an important industrial and agricultural base in China, playing a crucial strategic role in maintaining national defense security, food security, ecological security, energy security, and industrial security. It is also a well-known Rust Belt. The development of the real economy is lagging, and leading enterprises have weak driving capabilities; the degree of marketization is low, and the market system is underdeveloped; technological innovation capabilities are weak, and the innovation system is not perfect; import and export trade volume is low, and there are shortcomings in open cooperation; talent loss is still quite evident, and population aging is becoming increasingly prominent. The industrialization of the northeast region was based on Japanese management practices and implemented the Soviet-style “First Five-Year Plan.” During the “First Five-Year Plan” period, the Soviet Union assisted with 156 projects, of which 150 were implemented, with 56 in the northeast, accounting for 44.3% of the total investment. The northeast became the center of industrialization in New China. In the 1950s, important industrial bases were established here, generating more than half of the country’s electricity and over one-third of national steel production. The region also has the highest railway density in the country. From the 1950s to the 1980s, the northeast’s regional population accounted for about 7% to 9% of the national total, while its regional total output value accounted for 12% to 14% of the national GDP.
As China’s old industrial base, the northeast region occupies an important position in the national industry, but the status of industrial stock is showing a downward trend. In 1978, Liaoning Province was the second largest provincial economy in the country, known as the “first son of the republic,” with a GDP only lower than that of Jiangsu Province, which has a much larger population, exceeding Guangdong Province by 23%. By 2017, Liaoning’s GDP ranked only 12th among provincial economies, less than one-third of Jiangsu and Guangdong (which were 28% and 27%, respectively). Since 2015, the economic plight of the northeast region has once again attracted domestic and international attention, as the GDP growth rates of the three provinces in 2015 were all below 2%, with Liaoning even experiencing negative growth in 2016. According to Porter’s correlation between economic growth modes and economic development stages, the corresponding industrial development factors in the early, mid, late industrialization, and post-industrial society are factor-driven, investment-driven, innovation-driven, and wealth-driven, respectively. Therefore, the northeast region, overall in the late industrialization stage, is transitioning from investment-driven to technology innovation-driven industrial development. Against the backdrop of China’s economic miracle, the northeast region has become a “failed case,” a rust area in the Far East. It lacks the bottom-up entrepreneurial spirit prevalent in Zhejiang and has not managed to upgrade its industry in the context of globalization like the Pearl River Delta. In summary, within the context of socialist China, the northeast region exhibits similarities with the U.S. “Rust Belt” while differing from other regions in China. The industrial park economic model is a significant policy tool for the transformation and development of the northeast Rust Belt. Industrial parks serve as important gateways for implementing revitalization policies for old industrial bases, as well as the forefront of urban reform and opening up, and are testing grounds for innovative urban land planning and resource development models. Additionally, they are the main carriers for demonstrating integrated development between industry and cities in the new era of the northeast Rust Belt. Innovating and refining existing industrial park models is a crucial path for achieving the transformation and development of the northeast Rust Belt. Since 1992, the industrial park model has evolved, increasingly highlighting its role in the transformation and development of the northeast Rust Belt by leading and demonstrating coordinated urban economic and social development. Currently, efforts should focus on coordinating industrial park planning, innovating the administrative management system of industrial parks, improving the soft and hard environments of industrial parks, enhancing the openness of industrial parks, and promoting harmonious development between industry, cities, and people. The northeast region of China has many resource-based cities, widely distributed, serving as important strategic bases for energy resources and old industrial bases. After experiencing development and prosperity in the last century, the transition of the economic system and the relative decrease in national investment have greatly impacted the resource-dependent development model in the northeast region, leading to stagnation or decline in the economic and social development of most resource-based cities.
The theme of transformation and revitalization has been the era’s development theme for the northeast Rust Belt since the end of the last century. During this period, the industrial park model, as the main policy tool for the transformation of the northeast Rust Belt, has witnessed the evolution of the transformation path and its impact. In fact, the industrial park model is an important strategic deployment and measure for deepening reform and opening up in China. Whether it is high-tech industrial parks, border economic cooperation zones, or economic industrial parks, during the economic and social development process of the northeast Rust Belt, it initially promoted the transformation of resource-based cities, but was not directly aligned with the industrial-city transformation upgrade strategy. Since the implementation of the national border opening strategy in 1992, the establishment of national-level border economic cooperation zones such as Heihe, Hunchun, and Manzhouli, as well as the Manzhouli Sino-Russian mutual market trade zone, the Sino-Russian Dongning-Poltavka mutual market trade zone, and the high-tech industrial parks in Anshan and Daqing, the industrial park model has become an important strategy for the transformation and development of the northeast Rust Belt under the national strategic background. Its focus is to re-integrate its own resources and geographical advantages, re-position the direction of urban development, and explore and experiment towards the goal of maximizing development and openness. By 2000, the establishment of the Jilin Hunchun Export Processing Zone formally established the outward-oriented development model of industrial parks, making the industrial park model one of the main paths for the transformation of resource-based cities. However, the outward-oriented economic model of the northeast Rust Belt primarily relies on exporting agricultural products, small goods, and light industrial products to Russia while importing energy and raw materials. The local area lacks relevant production and processing enterprises, the industry scale is small, and economic efficiency is low. The proportion of resource-based industries in the national economy remains high, coupled with the shift of Russia’s foreign economy towards Europe and the U.S. around 2000, and subsequent Russian economic crises, which have severely hindered the exploration of this outward-oriented industrial park model for resource-based city transformation. In contrast, the high-tech zones in Anshan and Daqing have injected significant vitality into urban development. Under the pressure of being outpaced by emerging cities, they have led the transformation of new industrialization cities, fully leveraging regional resource advantages and high-tech zone technology integration advantages to explore a direction for the transformation of resource-based cities led by high-tech industries. From the evolution of industrial parks in the northeast Rust Belt, it can be seen that the industrial real estate model did not play a leading role in the transformation and development of the northeast Rust Belt before 2010. Its administrative system, operational mechanisms, and the construction of leading industrial structures were still in exploratory and experimental stages, and urban transformation had not yet formed a mature and effective development path. After 2010, influenced by the new urbanization strategy, the Belt and Road Initiative, and a new round of comprehensive revitalization strategy for the northeast, the transformation and development of the northeast Rust Belt ushered in significant development opportunities. The upgrading and innovation of the industrial park model have had a significant impact on the choices of urban transformation paths. After nearly 20 years of experience in building coastal and border industrial park models, the state began to establish national-level economic industrial parks across the country. However, during this development cycle, the northeast Rust Belt further lost its policy advantages. Aside from the original national-level border economic cooperation zones, mutual trade zones, and high-tech zones, no provincial-level industrial park upgraded to national-level status. Only after 2010 did eight economic and technological industrial parks in Jilin, Daqing, and Panjin along the Liaodong Bay, as well as five high-tech zones in Yanji, Benxi, and others, and the Manzhouli Comprehensive Bonded Zone and Hunchun Border Economic Cooperation Zone upgrade to national-level industrial parks. The key to correcting and innovating the industrial park model in the northeast Rust Belt lies in strengthening the existing leading industries within the industrial parks, guiding the transformation and upgrading of the urban industrial structure system. The interactive integration relationship between industry and city should initially promote industry through the city, and then form a development logic of industry-city integration. It is necessary to fully improve the soft and hard environments of industrial parks, further enhance the autonomy of industrial parks, reduce the transaction costs between enterprises within industrial parks and the government and its dispatched agencies, and focus on optimizing the business environment. Under an efficient administrative management system, the successful transformation or cultivation of leading industries in industrial parks will lead to the emergence of stable, vibrant, and prosperous communities. With the joint efforts of the government, enterprises, residents, and think tanks, a natural trend of industry-city integration will form. From the historical lessons of the northeast Rust Belt’s decline, we need to pay more attention to the impact of industrial park industrial cycles on urban and community development. Continuous and rapid growth is not necessarily reasonable and effective in every cycle. Therefore, it is necessary to coordinate the supply levels of industrial structure, population structure, and related productive service products and public service products according to different development cycles of leading industries. Although the overall phenomenon of population outflow is common in resource-based cities, it is essential to continue implementing population growth plans, but this does not mean that future industrial parks should indefinitely increase population and accommodate economic facilities. The integration of industrial parks and industrial real estate with the overall process of urban industry-city integration needs to adhere to the concept of “smart growth,” avoiding a sprawling development model. In terms of resource allocation and government administrative efficiency, it is crucial to avoid incurring excessive development costs due to traditional extensive development and resource utilization.
3. Industrial Real Estate Park Development in the Northeast Rust Belt
With the decline of many central enterprises and state-owned enterprises, many private enterprises have also declined or even disappeared. Statistics show that the number of private enterprises in Liaoning accounts for about 85% of the market主体, but private enterprises in Liaoning are generally small in scale, have low industry concentration, poor competitiveness, and lack large groups or enterprises with certain driving power and influence on the local economy.Currently, a number of disruptive technologies are entering a widespread application era, and at the same time, the pace of industrial transformation in many countries and regions has significantly accelerated. This is a wise choice for the upcoming intelligent era and knowledge economy era, a strategic choice to seize the formation of sub-sectors and monopolistic advantages in core technologies, and a concrete measure to win time and space for the growth and layout of new industrial chains, value chains, and innovation chains. It can be anticipated that those who pay more attention to the new generation of information technology, biopharmaceutical technology, artificial intelligence technology, new materials technology, and new energy technology, carefully reserve and cultivate a group of leading enterprises and unicorn enterprises, will win in the next round of development.
The development of the real economy in the northeast Rust Belt is relatively slow, and there is a lack of leading enterprises. The economy of the northeast, based on heavy industry and manufacturing, has established leading enterprises mainly composed of central and state-owned enterprises. Since the reform and opening up, with the development of the market economy, a large number of private enterprises have emerged in the northeast, but due to the unique factors of the northeast’s industrial structure and resource environment, the newly emerged private enterprises mainly rely on large central or state-owned enterprises for their industrial chain support. This industrial model has formed a unique development mode in the northeast region, where central and state-owned enterprises serve as the “leading” enterprises driving the development of the private economy. The driving mode of Ansteel Group and FAW Group is a typical example of the northeast “leading” enterprise driving development model. The advantage of this development model is that it thrives together, while its disadvantage is that it suffers together. With the decline of many central and state-owned enterprises, many private enterprises have also declined or even disappeared. The term industrial park is a relatively broad term, encompassing economic and technological industrial parks defined by national laws and policies, high-tech industrial parks, export processing zones, comprehensive bonded zones, border economic cooperation zones, mutual trade zones, and various economic industrial parks, industrial concentration zones, industrial agglomeration zones, industrial parks, product processing zones, modern agricultural parks, logistics parks, modern animal husbandry parks, tourism economic development parks, and circular economy parks established and named by various provinces, cities, and autonomous regions. For the northeast Rust Belt, industrial parks are firstly the gateways for city governments to implement national revitalization policies for old industrial bases; secondly, they serve as the forefront for cities or regions to attract investment and promote reform and opening up; thirdly, they are experimental fields for innovative urban land planning and other resource development and utilization models; finally, they are the “vanguard” of resource-based city transformation and development in the new era, serving as demonstration areas for driving the upgrading of industrial structures and enhancing urbanization levels. Overall, the industrial park model is the main policy tool for the transformation and upgrading of the northeast Rust Belt, which is highly anticipated by city governments, enterprises, and the general public, and is currently guiding the construction and development of industrial parks with the goal of industry-city integration in the new era. Currently, the administrative management models of economic and technological industrial parks, high-tech industrial parks, border economic cooperation zones, mutual trade zones, and economic industrial parks in the northeast Rust Belt are mostly in the form of government dispatched agencies. The positioning of industrial parks within cities is not only as industrial agglomeration areas but also as administrative units of the city, possessing administrative jurisdiction and spatial boundaries, governing different numbers of villages, towns, streets, districts, and numerous enterprises and institutions. Looking at their formation and development trajectory, they have transitioned from traditional single economic functional zones to the current new urban areas that balance economic and administrative functions. Currently, the northeast Rust Belt has formed a development system centered on national-level and provincial-level economic and technological industrial parks and high-tech industrial parks, with various other types of industrial parks as support. Among them, there are 8 national-level economic and technological industrial parks, 4 national-level border economic cooperation zones, 7 national-level high-tech industrial parks, 2 national-level mutual trade zones, 1 national-level comprehensive bonded zone, and 1 national-level export processing zone; 114 provincial-level economic industrial parks, along with various types of industrial parks, industrial parks, and industrial concentration zones that enjoy provincial-level economic industrial park policies, amounting to several hundred, embodying the functional composite areas that reflect urban development potential and foster new economic growth points for cities.
4. Paths for Updating the Rust Belt through Industrial Real Estate Park Development
Looking at the current situation of industrial park construction in the northeast Rust Belt, industry-city integration is the core and main goal of the industrial park model. The proposal of “industry-city integration” is closely related to the development of industrial parks in China and their historical mission. On one hand, it is related to the issues existing in the rapid urbanization process in China. It is an important concept for redefining the relationship between industry and cities, as well as the goal of the coordinated evolution of industrialization and urbanization.Due to the difficulties of transforming resource-based industries, the northeast Rust Belt lacks endogenous motivation and needs to rely on external funding and government policy support. The driving force for urban development and economic growth mainly comes from upgrading traditional industries through high technology and exiting traditional resource-based industries, while cultivating emerging industries. The primary goal of establishing industrial parks is to promote industrial transformation or upgrading, but the core objective is to avoid falling back into the predicament of declining leading industries and the stagnation of urban development. Therefore, the fundamental task of industrial park construction is to promote the development of urban connotations, facilitate human development, and create a new environment for people to live and work happily within industrial parks, stimulating the formation and explosion of endogenous motivation within industrial parks, thereby generating a radiation diffusion effect that drives overall economic growth and urban development. From the perspective of industry-city integration, the construction of industrial parks in the northeast Rust Belt is still in a stage of changing concepts, experimentation, and pilot implementation.According to the plans published by most provincial-level and above industrial parks in the northeast Rust Belt, their development paths can roughly be divided into three categories.1. UrbanizationExamples such as the Jilin Economic and Technological Industrial Park, Daqing High-tech Industrial Park, Hohhot Economic and Technological Industrial Park, Yanji High-tech Industrial Park, Jilin High-tech Industrial Park, Panjin Liaodong Bay Economic and Technological Industrial Park, Anshan High-tech Industrial Park, and Fuxin High-tech Industrial Park are centered around industrial parks, forming urban sub-centers with emerging industries and population agglomeration. Their leading industries include equipment manufacturing, new materials, petrochemicals, fine chemicals, industrial automation, and automotive and component manufacturing.Traditional industrial areas and old urban areas are undergoing transformation and renovation, focusing on ecological restoration and industrial heritage preservation. Government policies and funds are directed towards the relocation, renovation, and overall infrastructure and public service project construction in shantytowns, subsiding areas, and old urban areas. The new urban areas centered around industrial parks are primarily led by market mechanisms, focusing on attracting and recruiting successor replacement industries and modern commercial and service enterprises to settle in, forming urban characteristic industrial clusters. The government collaborates with enterprises to encourage and support urban and rural populations to migrate to the new urban areas while attracting more employment and high-tech and modern management talents. This creates a dual-core dynamic in overall urban development, moving towards larger urban goals.2. Re-urbanizationExamples such as Manzhouli, Hunchun, Hegang, and Heihe border economic cooperation zones, mutual trade zones, and comprehensive bonded zones rely on ports to develop border trade, border tourism, and raw material processing industries. The industrial structure and economic and social development goals are not coordinated, and they are significantly influenced by international economic factors. Their urban populations are highly mobile, and land development models are overly extensive. To avoid imbalances in population and industrial structures, they are focusing on shifting port functions towards expanding domestic demand, with leading industries mainly in wood processing, tourism, commerce, logistics, and light industry.The characteristic of this model is that the government leads the planning of industrial parks and industrial layout, mobilizing existing key enterprises to settle in and assisting them in upgrading production technology, thereby driving the transformation and upgrading of leading industries and forming new industrial agglomeration effects based on this.3. Co-City DevelopmentFor example, the Jilin Hunchun Export Processing Zone, Tonghua Pharmaceutical High-tech Industrial Park, Benxi High-tech Industrial Park, Songyuan High-tech Industrial Park, Mudanjiang High-tech Industrial Park, and Hailin High-tech Industrial Park aim to build industrial parks as relatively open and independent administrative units to accommodate related characteristic enterprises and various public infrastructure. The planning and layout mainly emphasize the coordination of enterprises within the industrial park along the industrial chain or related industries, while also emphasizing the complementary and integrated relationship with the leading industries in surrounding urban areas or towns, aiming to create and cultivate viable leading industries that drive the extension of industrial chains within the industrial parks, gradually forming new leading and pillar industries for urban development. After the implementation of the “grasp big and let go small” policy, the northeast faced significant unemployment issues. The central government was concerned about the potential impact on regional social stability and was determined to take action. Starting in 2003, the government proposed the “revitalization of the old industrial base in the northeast.” However, this approach still treated the northeast region as an industrial base for revitalization, with investments mostly concentrated on infrastructure construction and existing large industrial enterprises. This dominant policy has, on one hand, strengthened the dominance of large enterprises and the heaviness of the economy, while also squeezing the development of small enterprises in the same industry, and has not contributed to the growth of emerging industries. Under this orientation of revitalization, (super) large heavy industrial enterprises have maintained significant positions in the economy. As a result, the remaining production-type large enterprises in the region are mostly traditional mechanical manufacturing industries, such as Shenyang Machine Tool and Northern Heavy Industry, or state-owned enterprises like Ansteel and FAW. National policies and local governments continue to choose these enterprises as the main areas for policy and funding investment, focusing on supporting these traditional advantageous industries to continue or even expand production. It is worth noting that these large state-owned enterprises, which enjoy such “generous treatment,” are mostly concentrated in restricted-entry industries with national strategic significance. With the support of central policies, key local enterprises in the northeast have accumulated significant debt and expanded rapidly. By comparing the debt expansion of state-owned and state-controlled enterprises in Liaoning Province with the national average, it can be observed that the debt-to-equity ratio of Liaoning Province increased from 1.56 in 2000 to 2.3 in 2016, while the national average in 2016 was only 1.61. Liaoning’s state-owned economy has a debt ratio far exceeding the national average. Furthermore, the operating conditions of these enterprises and the effectiveness of their investment projects are questionable. An example is Northeast Special Steel, established in 2004, which fell into a debt crisis and was on the verge of bankruptcy in 2015. The remaining large enterprises in the northeast continue to pursue size in terms of asset scale, attempting to create “super-large” enterprises. For example, a certain large mechanical manufacturing company retained in Shenyang has integrated the assets and some employees of the original heavy machinery factory, mining machinery factory, and crane transportation machinery factory. I learned from an interview that one employee from a merged factory opened a small equipment manufacturing company after being laid off in 2004. Around 2008, this small company performed well against the backdrop of the national 4 trillion investment, but in recent years, due to economic influences, the order volume has decreased significantly, and its main business has been to undertake external orders from a large mechanical manufacturing company. From a broader perspective, many orders are given to small companies, and having small companies produce these orders is more cost-effective than producing them internally. This situation also indicates that, on one hand, although these “super-large” enterprises contain multiple production lines, many of those lines are inefficient, and keeping them within the enterprise wastes resources; on the other hand, the existence of these super-large enterprises squeezes the market space for private small enterprises, as clients tend to recognize the brands of large enterprises, while small enterprises lose opportunities to establish new brands and further grow. This wave of capital-driven revitalization policy has increased industrial capital stock while deepening the heavy development of the local economy. The industrial investment in Liaoning Province rose from 565.73 billion yuan in 2002 to 7302.59 billion yuan in 2010, nearly a 12 fold increase. In 1999, the proportion of heavy industry output value was 64.5%, reaching a new high of 83.5% in 2004, and returning to 80.5% in 2010. After a round of reform, local heavy industry has become a typical capital-intensive industry, indicating that the increase in productivity mainly comes from the renewal of production equipment or capital and will not significantly contribute to local employment, or in other words, it has almost no driving effect. We can observe that while the total industrial output value has rapidly increased, the number of employees in the secondary industry has fluctuated little. The central government, when revitalizing the northeast, based its considerations on maintaining social order, hoping that the investment could stimulate local economic growth. However, this capital-led revitalization unexpectedly led to the heavy development of the local economy, maintaining the dominant position of remaining large enterprises in the region, resulting in inefficiencies within super-large industrial enterprises, which depend on small companies in the same industry for production while squeezing their development space. What role then does the local government play in this round of reform? Firstly, during this period, local governments have not successfully transitioned the local economy away from industrialization. Apart from seizing local heavy industrial enterprises and continuing to develop industry, the northeast local governments have not developed systematic ideas and plans for other possible economic developments. Even though some emerging industries have emerged, such as the laser industry in Anshan’s “12th Five-Year Plan” or attempts at a “post-industrial economy” and the animation industry base in Shenyang, due to low relevance to the dominant heavy industrial enterprises and a lack of sufficient industrial chain and social ecological support, these attempts often yield little after a few years of effort. After the period of policy dividends, like transplanted organisms that do not adapt to the local environment, “post-industrial” enterprises have withdrawn en masse. Local governments have tried various experiments and frequently changed industrial plans, wasting funds without cultivating new economic growth points.Source: Hundred Battles Hundred Victories Business Innovation and REITS Research
