Business, China

Leading economists at odds over plans to turn around Chinese rust belt’s fortunes

A proposal by a prominent Chinese economist to revive the “rust belt” province of Jilin has triggered controversy among academics, showing the difficulty of finding a quick solution to the problems of the northeast zone as it grapples with debt and inefficient plants.

Justin Lin Yifu, who has worked for the World Bank as its chief economist and a senior vice-president between 2008 to 2012, proposed that Jilin, on the border with North Korea, should encourage light and textile industries to move from the country’s coastal areas, where labour costs are higher, while expanding heavy industry and manufacturing.

According to a 300,000-word policy proposal published by a team headed by Lin, Jilin – which is lagging behind China’s affluent coastal areas in terms of per capita GDP – should open its arms to manufacturers relocating from China’s more expensive areas.

It said that by doing so Jilin could increase local incomes and improve its economic performance.

The proposal by Lin, who studies how less developed areas can catch up with wealthier ones and is a teacher at Peking University, has been greeted with scepticism from other analysts.

Sun Jianbo, a former chief strategist from China Galaxy Securities, said the idea went “against common sense”.

Sun argued in an article published onlinethat Lin’s recommended approach would not work because the northeastern provinces of Jilin, Heilongjiang and Lioning, did not have the basic economic conditions to support manufacturing.

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“Considering how many icy and snowy days a year shut down production, who knows how much higher the cost could be [in the rust belt] than south eastern coastal areas,” Sun said.

But Fu Caihui, a researcher from Lin’s team at the Centre for New Structural Economics, an institute in Peking University, said Sun’s argument was wrong because products in question were made inside factories not in the freezing open air.

“Those who still believe that the northeast should stick to developing the heavy industry and coastal areas should hold on to the light…

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