Times force change of heart

PUBLISHED : Thursday, 14 December, 1995, 12:00am
UPDATED : Thursday, 14 December, 1995, 12:00am

THE last time the world took notice of Shenyang was in the 1930s. Back then it was known as Mukden, part of a puppet state called Manchukuo, and the Japanese occupied it.

These days, the Japanese are back in force, as are the Hong Kong Chinese, the Taiwanese, the Koreans and the Americans, to mention a few. But Shenyang is not complaining.

This old industrial base in northeastern China's Liaoning province, steeped in socialist ideology and Manchurian heritage, has been splashed by the 'second wave' of foreign investment rolling across the mainland - through major cities in the northern and central provinces instead of the coastal areas.

Under the watchful eye of an enormous statue of Mao Zedong, and the guidance of a municipal government still trying to understand exactly what patriarch Deng Xiaoping meant by a 'socialist market economy', Shenyang has taken some cautious first steps towards reform.

It may take another decade before its investment environment begins to approach that of Beijing, Tianjin, Shanghai, or even Dalian, a bustling port city in Liaoning.

One cause for the delay is Shenyang's inland location, which puts it about 150 kilometres from the nearest port, Yingkou.

But the main reason is that Shenyang's greatest strength under a socialist planned economy, its heavy industry, has become its greatest weakness during the transition to a market economy.

Crippled by mounting debts, poor management, obsolete or inappropriate technology and often unmarketable products, most of the city's once-proud state-owned enterprises have become a showcase for how not to run a company, or an economy.

Residents say that well over half of the city's state enterprises cannot pay their workers, much less pay their heating bills.

Some company managers were forced to turn in their Mercedes Benz and Audi cars, and implore workers to hand over bedspreads, woollen shirts, knitting yarn and even light bulbs to pay their heating bill so that the government would allow them to start their furnaces.

Declaring in a bright red, page-one headline that the government 'absolutely will not let the people freeze', the Shenyang Daily reported that all of the city's 930,000 households finally received heat on November 27 - weeks after the average daily temperature had fallen to about zero.

The natural environment is not much better than the economic one. Except for a few hot summer days and the occasionally windy winter one, the city lies obscured by a thick smog of industrial pollution and coal-burning stoves.

Senior local government officials also have relatively minimal contact with the outside world. They could not make time to see a foreign journalist during a week-long stay, despite his having informed the government of his intentions three weeks before arriving.

One long-time resident said privately: 'We've had a lot of problems with enterprise reform and there are not a lot of bright spots we can show the world.

'Our leaders are not as free-thinking as those in the south either. They usually implement Beijing's policies word for word, no questions asked.' Nevertheless, this city of 6.7 million people has made swift progress since 1992. Buoyed by municipal government investment, rapid growth in private and township enterprises, overseas funds and a large supply of highly educated workers, Shenyang has developed hi-tech industries and begun to modernise its ailing state firms.

By the end of November, the city had approved about 3,500 foreign-invested projects worth about US$5 billion, of which 1,500 had been established, according to Guo Yiqing, deputy director of the municipal commission of foreign economic relations and trade.

Overseas companies promised $1.78 billion in new investment last year alone, an increase of 50.8 per cent from 1993. Over 70 per cent of the projects were industrial, and 40 of the industrial projects had contracts worth more than $10 million each. Major investors include Toshiba and Sanyo of Japan, and General Motors, IBM and Coca Cola of the US.

The World Bank has pitched in with $175 million in loans, which will go towards re-vitalising a major state enterprise, Shenyang Machine Tool Co, as well as building a waste treatment plant, establishing a line of credit for reform-minded enterprises and educating government officials in market economics.

The city has also established two economic zones, the Shenyang Economic and Technological Development Zone and the Shenyang Nanhu Science and Technology Development Zone, which together include about 710 foreign-invested companies.

Both offer preferential tax policies, but projects in the Nanhu zone must involve high technology and be non-polluting, says Nanhu director Wang Chengxiang.

Foreign investors were generally pleased with the attention and assistance they received in Shenyang's economic zones, which are hungry for capital since loans are scarce under the nationwide tight credit policy.

Yoshiki Tsubouchi, general manager of Nissan Textile Machinery of Shenyang Co in the Economic and Technological Development Zone, said: 'Managers of joint ventures in downtown Shenyang often tell me that they have to go to several departments every time they have a problem.

'Here I get help when I need it and I just have to go to one office.

'The leaders are also realistic. At least they tell us when they can't solve a problem.' Raw materials and industrial products are also in large supply in Shenyang, the largest city in northeastern China. Grain, steel, petrochemicals, medicines, machine parts, coal and iron are produced or mined in central Liaoning province.

A comparatively well developed transport system fanning out from Shenyang eases distribution and supply problems.

Liaoning completed China's first highway, a 375-kilometre toll road from Shenyang to Dalian, in 1989. That cut travelling time to the port from 12 hours to less than five hours.

Shenyang has also built highways to Tieling, Benxi, and Fushun.

In the next five years, the province will extend the Tieling road to Changchun in Jilin and build a new road west to Shanhaiguan in Hebei, effectively linking Shenyang to Beijing.

Taoxian Airport, which has international flights to South Korea, Japan and Hong Kong (four a week from the territory), also began offering three weekly flights to Macau last week.

But any foreign investor contemplating a venture here must contend with poor sanitation, constant delays in shipments of parts, unenlightened managers at state enterprises, planned electricity 'brown outs' even in the economic zones, and bureaucratic hassles.

There are also no foreign bank branches yet, but several banks have established offices.

The expatriate community is small, and there are few restaurants to choose from. For long-term residents, the Riverside Garden development offers spacious single-family homes on a cramped plot of land for about two million yuan a piece.

The Huaxin International School provides elementary and middle school education for 23,000 yuan a year, but there are only about 30 foreigners among the 250 students.

For short-term visitors, the newly opened four-star Gloria Plaza Hotel currently offers Shenyang's best accommodation.

The hotel, which is part of Hong Kong's Top Glory Group, has restaurants serving Western, Shanghainese and Cantonese food, as well as sauna and massage parlours.

But most foreign investors, salesmen and engineers living in the city are men, and nearly all leave their families at home.

'Shenyang is paradise . . . compared to Siberia!' one foreigner said.