Zhao Yue: The key to the revitalization of Northeast China lies in the transformation of green industries

Author: Zhao Yue, assistant researcher of Chongyang Institute of Finance, Chinese Min University

Zhao Yue believes that in the context of carbon peaking and carbon neutrality, the key to "revitalizing the northeast" lies in the transformation of green industries and the overall economic development driven by green production capacity, so as to achieve sustainable economic development in the true sense.

The economic boom in the Northeast began with industrialization and ended with digitization. In the second half of the 20th century, the mature heavy industry system in the northeast created a good foundation for the economic development of the mainland, but with the digital upgrading of the overall domestic industry, the transformation of the northeast industry failed to keep up with the pace of the times, and eventually fell into the "economic development trap". The author believes that in the context of carbon peaking and carbon neutrality, the key to "revitalizing the northeast" lies in the transformation of green industries and the overall economic development driven by green production capacity, so as to achieve sustainable economic development in the true sense.

There are also many successful cases of the transformation of heavy industrial cities that are worth learning from around the world. Pittsburgh, an American city previously known as the "Steel Capital of the World", is one of the excellent cases worth referencing. During World War II, due to the surge in the demand for military products in the United States, Pittsburgh shouldered the heavy responsibility of US military production, and since then, the heyday of Pittsburgh's industrial development has officially begun.

Particulate matter pollution brought about by the rapid development of heavy industry is the driving force for Pittsburgh to realize the industrial transformation, and the heavily polluted environment has caused local middle- and high-income families to gradually move out of Pittsburgh, which has also directly hindered the city's economic development. Subsequently, the local government launched the "Pittsburgh Revitalization Plan", that is, to phase out the more backward heavy industrial enterprises and vigorously develop new industries, such as finance and medical care. Since then, Pittsburgh has seen both environmental and economic development improve, hosting the Global Group of 20 (G-20) Summit in 2009 and being named a nationally livable city on several occasions.

In terms of urban development, the Northeast has many similarities with Pittsburgh, but in terms of natural endowments, the Northeast has its own transformational advantages. Similar to Pittsburgh, the economic lag caused by industrial backwardness has led to a large population loss. According to the GDP ranking of all provinces in the country in 2020, Liaoning Province ranks 16th, Heilongjiang Province and Jilin Province rank 25th and 26th respectively, and the overall economic development of the three provinces is in the middle and lower reaches of the country. The results of the seventh national census show that Liaoning, Jilin and Heilongjiang have the largest number of permanent outflows. The declining regional economic development has led to a continuous outflow of population, resulting in a significant shortage of human resources.

The natural resources and manufacturing base of northeast China are advantages that cannot be ignored in the future green development. The forest land area of Heilongjiang Province reached 20.07 million hectares, ranking second among the provinces in the country. Changchun City, Jilin Province, also previously had the reputation of "Detroit of the East", and had a unique industrial advantage in shifting from traditional energy vehicle manufacturing to new energy vehicle manufacturing.

Combined with the above cases and the northeast's own situation, the core path to drive the overall economic development with the transformation of green industries lies in three aspects.

First of all, the northeast should improve its soft power and form a high urbanization rate supported by employment. From the macroeconomic level, the better the economic development of the city, the population will increase; on this basis, a high urbanization rate is formed, but behind the high urbanization rate does not represent absolute economic prosperity, so economic prosperity is a sufficient and unnecessary condition for a high urbanization rate. At present, the overall urbanization rate of the three northeastern provinces is not low, and the 2019 national statistical yearbook data shows that the average urbanization rate of the three northeastern provinces is 62.6%, higher than the national average of 60.6%. However, due to the continuous population outflow from the northeast region and the slowdown in economic development, there is no economic logic behind the high urbanization rate in the northeast. In the context of the slow short-term transformation of heavy industry, the northeast should upgrade the soft power industry with less cost investment and shorter return cycle. For example, expanding the scale of urban green belts, improving the quality of education in schools at all levels, and increasing the dissemination of urban image. The fundamental purpose is to attract the original middle and high-class classes of the city to return to the northeast, and then stimulate the domestic demand of the cities in the northeast, and ultimately achieve the double growth of population and economic development.

Secondly, the northeast should rationally use its own regional development endowments to achieve the "curve overtaking" of green industry development. As mentioned earlier, the development of heavy industry in the northeast has left many sequelae for the current industrial transformation, but at the same time, it has also formed a certain foundation for the transformation of heavy industry. For example, in the automotive industry, in 2019, the mainland's automobile production was 25.721 million, and Changchun's automobile production was 2.889 million, accounting for 11.2% of the country's automobile production, which shows the importance of Changchun's automobile industry to the mainland's economic development. At present, many countries have announced the time of the ban on the sale of fuel vehicles, although the mainland has not yet made a clear statement on the ban on the sale of fuel vehicles, but the rise of new energy vehicles has become a global trend. Therefore, if Changchun can transform the advantages of the traditional automobile industry into new energy vehicles, then Changchun will have the opportunity to become an industrial demonstration area for new energy vehicles on the mainland, and then drive the pace of heavy industry transformation in Northeast China as a whole.

In addition to industry, the advantages of green agriculture in the northeast are also more obvious. The northeast plain is rich in black soil resources, one of only four black soil areas in the world, and the rich organic matter in black soil provides good nutrient support for the growth of crops. On this basis, the northeast should further enhance the greening of agriculture, and after the realization of green production of crops, cultivated land can also be used for land use, land use change and forestry (LULUCF) to achieve independent emission reduction of arable land, and even in the future, it is possible to form an agricultural carbon sink for independent emission reduction trading.

When it comes to carbon sinks, the advantages of forestry carbon sinks in the northeast cannot be ignored. The forest land resources of the three northeastern provinces exceed 37 million hectares, accounting for about 27% of the country's forest land area. After the official opening of the national carbon trading market in July 2021, forestry carbon sinks can participate in carbon market trading as national certified voluntary emission reductions (CCER), bringing profit benefits to local governments and enterprises.

Finally, preferential policies and reasonable subsidies should be implemented for entrepreneurs, especially for green projects. At present, the financial situation in the northeast is relatively tight, and the statistical ranking of both fiscal revenue and public budget is at the bottom of the country. In view of the financial constraints, it is not realistic to introduce a large number of high-tech tertiary industry enterprises in the short term, but gradually incubating green enterprises and projects is a feasible long-term strategy. In the early stage of Pittsburgh's industrial transformation and the early stage of Shenzhen's economic development, technology-based enterprises were regarded as the pillars of future urban economic development, and this strategy proved to be successful. In terms of implementation methods, local governments can use the form of public-private partnership (PPP model) or prepare for the establishment of a green ecological office area (EOD) model. In this way, local governments will leverage more social capital with their limited financial investment and maximize the efficiency of capital investment.

In general, the concept of "revitalizing the Northeast" has been proposed for nearly 20 years, during which countless means have been adopted. Under the guidance of the mainland's "double carbon" goal, the northeast is expected to regain the path of economic revitalization. Establish a regional green development mechanism with ecological construction as the concept, industrial green upgrading as the starting point, and economic growth as the purpose. The northeast should seize the important opportunity of this economic breakthrough and become a demonstration area for the green upgrading of the mainland's heavy industry in the future.