Northeastern leaders said they are ready to turn the nation's old and struggling industrial belt into its largest ever testing ground for financial solutions designed to boost regional development.

The governors of Liaoning, Jilin and Heilongjiang provinces say they are going to employ a whole range of new financial measures to strive for the region's business revitalization.

New cars await sales floors at the First Automotive Works in Changchun, capital of Jilin Province in Northeast China, which produced the Chinese mainland's first truck on July 13, 1956. [China Daily]

Speaking at a news conference sponsored by the State Council Information Office yesterday in Beijing, the three discussed government-backed bonds, further write-offs of corporate debt, a lower rate of non-performing loans close to the national average, a new bank specializing in regional development, and more new banks and financial services establishing a joint-stock system and joined by private investors.

The group revealed the central government financial experts are also considering preferential policies for private enterprises, small and medium-sized enterprises, and export-oriented enterprises in the region.

Some of the things they are proposing, such as a joint-stock banking through private investors, are among the frontier concepts Chinese economists have been discussing.

But for the governors -- Bo Xilai of Liaoning, Hong Hu of Jilin and Zhang Zuoji of Heilongjiang -- the plans must become a reality quickly.

All say they are focused on how to mobilize greater financial resources to make that happen.

Bo Xilai

Hong Hu

Zhang Zuoji

The northeast region was one of China's major industrial powerhouses during the era of the planned economy, and is commonly thought to have the largest number of State-owned enterprises (SOEs).

It has a population of 110 million, or 9 per cent of China's total, and turns out around 13 per cent of its gross domestic product. But in terms of Chinese imports and exports, the region makes up barely 5 per cent of the of China's market in 2002.

The massive number of old SOEs was a key factor in slowing down the region's progress in the initial years of the market-oriented reforms, as the coastal provinces became the primary driving force for China's rapid economic take-off.

In May 2003, Premier Wen Jiabao pledged that the Chinese government would embark on a massive regional development plan to revitalize the northeastern industrial belt and help reduce its massive number of SOE laid-offs.

Zhang told journalists the financial system is "like the blood vessel for economic development. Without financial support, the revitalization of the northeastern region would become an impossible plan."

Unless flexible policies are taken, the ailing SOEs would not be able to free themselves from the burden of bad debts, he said.

According to Bo, the problem of bad assets is one of the two greatest difficulties (the other being the welfare of retirees, laid-off and unemployed workers) to overcome in northeastern revitalization.

Although the government has, in the last few years, provided some 16 billion yuan in re-financing, and Liaoning's bad loan rate has been on the decrease by 3 percentage points year-on-year in the last three years, the "historical burden" for local financial institutions has remained heavy, Bo said. The bad loan rate for the province is still higher than the nation's average.

But he revealed at the same time that the provincial government has been working together with the Industrial and Commercial Bank of China for the last year in preparation for "a package deal" to further improve Liaoning's credit situation.

However, none of the provincial governors was predicting a quick fix for the region's problems. Hong said he expects the revitalization programme to run for a decade or so before it can reach its targets.

And the change, he said, cannot be brought about by relying entirely on the government's financial help.

"Rather than directly pumping capital into the SOEs, the State will be creating the conditions for the former SOEs to resolve their own difficulties and, through this process, to turn them into genuine market players," he said.

But at the moment, the State Council, or the Chinese cabinet, did pledge resources for the nation's old industrial regions, the northeastern region in particular, to help them improve social security, ease the SOE debt burden, seek technological upgrading, and better develop public infrastructure and environmental quality efforts.

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