Pollution. Corruption. Aging state-owned factories and dying industry. All of these are commonly associated with China’s northeast, and Shenyang, the capital of Liaoning province and the region’s largest city (population 7.2 million), often gets tarred with the same brush.
But while it may not compare so favorably with Dalian, Liaoning’s younger, high-tech, seaside city, Shenyang is rediscovering its strengths as a production hub.
Northeastern China, which comprises Liaoning, Jilin and Heilongjiang provinces and eastern Inner Mongolia, has not always been depressed. The region was primed as an industrial base during Japanese occupation and, after 1949, it thrived as the backbone of the People’s Republic’s early industrial development.
Favored by Mao Zedong, the northeast turned out everything from coal and chemicals to airplanes and trucks. By the end of the 1970s it accounted for 20% of national output, with just 8% of the population.
Once the area’s key city, Shenyang fell on hard times during the 1980s and 1990s. Efficiency in its mammoth state-owned enterprises declined with the emergence of manufacturing in China’s south and east. Factories went bankrupt and unemployment and unrest soared.
A major scandal did nothing to help the city’s reputation. In 2001, Shenyang mayor Mu Suixin was tried and sentenced to death for corruption after police discovered a stash of gold bars, jewelry and cash in his home (he died in prison a year later). A couple of other officials were executed after being convicted of similar offenses.
On the rebound
Those recent events seem like distant memories in today’s Shenyang.
Thanks in part to the central government’s "revitalize the northeast" campaign, which began in 2003 after the early success of its "go west" initiative, the city is beginning to rake in foreign investment in a way that it has never done before, and unemployment numbers are dropping. It attracted US$2.12 billion in foreign direct investment (FDI) in 2005, an impressive 106% increase over the previous year.
"Shenyang has gone through a 100% turnaround in the last three years," said Yoland Perras of the Traders Hotel.
Foreign auto giants were one notable arrival, with GM, Nissan, Mitsubishi and BMW – which makes its 3 and 5 series cars in Shenyang – all present in the city.
"Shenyang is one of the best automotive hubs in China," said Dagwin Decru of Sino-American joint venture Jinbei Johnson Controls, an auto supplies maker with operations throughout the northeast.
It is not just the same ancient industries that are driving Shenyang’s economy, which grew by 16% in 2005.
"Shenyang has diversified its industrial base, even though it was already very broad," said Lisa Liu of the China-Britain Business Council.
Gregor Wateler, general manager of the Kempinski Hotel in Shenyang, added: "Shenyang is still very much a manufacturing center, but it’s obviously moving towards sectors with more of a future."
There is a nascent software industry based around the Shenyang Software Park while logistics has taken off thanks to Shenyang’s proximity to Beijing (just 628 kilometers away) and its well-developed highway and rail networks. Dalian may be the region’s main port, but all the heavy land traffic goes through Shenyang.
In many ways, this revitalization has come at the expense of other big northeastern hubs like Changchun and Harbin. Decru puts this down to effective promotion by the government, although it must help to have former Liaoning governor Bo Xilai as China’s minister of commerce.
The city has not only offered attractive incentives for investors, ranging from cheap (or free) leases on land to favorable tax deals for foreign enterprises – it has also undergone a dramatic image makeover.
Shenyang’s once notorious air quality has noticeably improved greatly in just a few years after the the government evicted smoke-belching factories and planted acres of trees to make a greener city.
"Air quality is still sometimes an issue," said Decru. "But it’s still better than Beijing, that’s for sure."
Though it is unlikely to ever become the tourist draw that Dalian is – it lies on an unremarkable plain and has an unimpressive skyline – Shenyang is fast improving its visibility to travelers. Efforts have been made to promote the city’s cultural heritage as the ancient capital of Manchuria. Shenyang is home to Mukden Palace, seat of the Manchu rulers prior to the advent of China’s Ming dynasty and the shift to Beijing’s grander Forbidden City in 1644.
A horticultural expo it hosted earlier this year attracted 12 million visitors in six months and a new stadium is being built to play host to 12 Olympic football matches in 2008. A subway line that will connect downtown with the manufacturing zones outside the city is also underway.
"Tourism will not bloom here," admitted Perras, adding that Shenyang is fundamentally "a business town". To that end, the city is getting more and more attention as a conference location – a new exhibition center is on the way.
After a long, dark period, Shenyang has regained its confidence. It is still very much a regional city (Perras estimates that 80-90% of his guests are Chinese, most of them northeasterners), but efforts to reverse negative perceptions among foreign investors appear to be having an effect.