China’s north-eastern provinces are underperforming

By THE DATA TEAM

MAO ZEDONG called China’s three north-eastern provinces—Heilongjiang, Jilin and Liaoning—the country’s “eldest son”. In the Chinese tradition the family’s future rests on that child’s shoulders. This one seems to be failing in his duties.

Three unusual features account for some of the region’s problems. First, Maoist planning left it more dependent on state-owned enterprises (SOEs) than other areas are. In China as a whole, 17% of industrial jobs are in SOEs. By contrast, in Liaoning the share is 40% and in Heilongjiang 55%. These firms are inefficient, and many are unprofitable.

Second, the region, which has 109m people, is ageing fast, even by Chinese standards. At 39.2 years, Liaoning’s median age (the point at which half the population is older, half younger) is the oldest in the country.

Third, the north-east, which was a puppet state of Japan in 1932-45 and endured autocratic planning for a generation longer than elsewhere, now has an unusually strong collectivist tradition.

There are other lessons to be learnt from China’s north-east. It is a place where political connections are more important than efficiency, where local governments have wasted vast quantities of money and where investment-led growth has encouraged local protectionism. At the national level, Xi Jinping, the president, is making politics paramount, protecting SOEs and keeping government investment high. The moral of the north-east’s woes is that these policies do not help to sustain economic prowess.

Read more in Lessons from China’s rust belt from the print edition