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Northeast Revitalization Update – August 2007
On August 20, 2007, the central Chinese government and the National Development and Reform Commission (NDRC) released a high level overview of the new “Revitalize Northeast” strategy. It is focused on the provinces of Liaoning, Jilin, Heilongjiang and eastern Inner Mongolia and covers a population of 120 million. The plan calls for government incentives to boost production and development of heavy equipment, machine tools, power plant equipment, automobiles/auto parts, biological sectors, aviation and other hi-tech industries.
The new “Revitalize Northeast” strategy will cover a 10 to 15 year period, but has near term goals which will require immediate action. Zhang Guobao, Vice-Minister of the NDRC said "People have joked that the Northeast was the first region to be brought under a planned economy, but the last to exit." Intense focus will therefore be made to assure that nearly 50% of the GDP from the region is derived from private industry. This will require a rapid privatization of State Owned Enterprises (SOEs) and if achieved, would entail a 12% increase in private industry GDP between the period from 2005 to 2010. The plan calls for private capital to be granted the same tax exemptions, land use and loan policies as the State firms being restructured, did not yet specifically address the expected favorable treatment for foreign investors will be granted.
To assist in the transformation, strategies will be pushed down which will "vigorously develop" service sectors, including logistics, financial and commercial services. The service sectors, in total, are expected to produce 41% of the regions GDP, by 2010. The growth in these service sectors will require an influx of foreign banks, accountants, strategy consultants and IT consultants.
The plan also introduces the concept of “Four Bases & One Region.” The “Four Bases” are to include:
· an equipment manufacturing base;
· a national raw material and energy base;
· a national agriculture and animal husbandry production base;
· a national technology R&D Center.
The “One Region” refers to promoting the entire Northeast as national ecological protection zone, where protection of the environment is paramount to economic expansion.
Additional clarifications and specific incentive polices for foreign direct investment are expected in the near future.