Shenyang, Capital City of Liaoning

Charles Chaw, producer of 6 episodes "Inside China Next Powerhouse", presents the opportunities of Norheastern China. In this Part 1 of second episode:
Winter in Shenyang can be as cold as minus 20 degrees. In summer, it can hit a sweltering 30 degrees, and beyond. Compared to the changes that this region's economy is undergoing, the drastic change in temperature is no big deal. Shenyang, the provincial capital of China's Liaoning province, is also home to thousands of China's State-owned enterprises, or SOEs. Once the industrial might of China, many of these SOEs are now shadows of their former selves. The call for the rejuvenation of the Northeast is set to restore the glory of Northeast cities like Shenyang. How are the people coping? Is this city still the pride of China's industrial might? What lies ahead for this city?

Like other cities in the Northeast, Shenyang's economy was dominated by SOEs until the late 1990s. They accounted for some 85% of the city's industrial output. In the 1980s, when China began to embrace the market economy, SOEs found their businesses inefficient and their equipment obsolete. Many were forced to shut down. For the few surviving SOEs, they must get rid of this heavy and unnecessary burden. They have to restructure. Costs have to be cut, and workers have to be retrenched.

Shenyang Machine Tool Company Ltd, or SMTCL was one of the many SOEs that had to undergo massive restructuring. SMTCL first obtained a 26 Million (RMB) loan from the World Bank. It was subsequently listed on the Shenzhen stock exchange, in order to raise the funds needed to carry the company forward. But all these measures proved insufficient.
They realized that they were held accountable by shareholders and profit was what really mattered. So, SMTCL got rid of its non-core operations such as schools and hospitals.
Some 22,000 employees were retrenched, given early retirement and laid off.
In the face of bankruptcy, many SOEs had no choice but to make this painful move.
Such drastic reforms shocked many Northeast workers. Massive and sudden unemployment, in the absence of proper welfare system, inevitably gave rise to social tensions and problems. Some serious reforms had to be implemented before the city was thrown into social turmoil.
Just when Shenyang seems to have fallen into the gutter, and left abandoned, a few big foreign names took an opposite stand. They made calculated bets that within the great rust belt, there laid great opportunities.

Category:

News & Politics

Tags:

• Shenyang
• Liaoning
• Northeast China
• Charles Chaw
• China Knowledge Media
• SOC
• State-owned Enterprise
• retrenchment
• bankruptcy
• Shenzhen stock exchange