State planning legacy leaves city suffering in market economy
Aman selling children's socks on a stall in the main street of Fushun shifts from one foot to the other to keep himself warm against the sub-zero temperature.
'Spring festival is nearly here but no-one is buying. Too many people have been laid off and they have no money to spend,' he said.
Towering over the street is a giant chimney of one of the city's three power stations belching white smoke into the sky, a fitting symbol of the heavy industry that dominates Fushun, a city of 2.3 million in Liaoning province, founded 100 years ago to mine the vast reserves of coal beneath it.
Like the rest of the northeast, Fushun has been a loser in 20 years of Deng Xiaoping's reforms, with rising crime and unemployment, industries that are losing money and a shortage of capital to retool its factories and improve its degraded environment.
'Liaoning was the earliest province to enter the planned economy and the last to leave it,' said Wang Yong, head of the city's sports commission.
State companies account for 80 per cent of its output and 900,000 workforce. About 200,000 of them work in the coal mines.
The city produces 10 per cent of the mainland's aluminium and processes 11 per cent of its crude oil, piped from the Daqing field in Heilongjiang to the north.
In the first 10 years of Communist rule, Liaoning received 18 per cent of government spending, which enabled Fushun to build these giant plants. A blessing then, they have become an unbearable burden now.
'In southeast China, they did not talk about a market economy but went ahead and did it,' said vice-mayor Deng Ao.
'But here we have been used to the plan for 50 years. We started our transition later and then were hit by the slowdown in the economy.
'Our production costs are too high and efficiency too low,' she said.
But reducing staff at the state factories and mines is difficult.
'For decades, workers were told they were the masters of the state and the vanguard of the revolution,' she said.
'They greatly resent having to give up the status of a state worker. In addition, many have done the same job for many years and have no skills needed in the market now. They are poorly educated and unable to learn new things.
'A new social welfare network is not in place. We cannot fire people overnight, as in the West. This has to be done gradually,' she said.
City officials complain bitterly about a tax regime under which Fushun pays Beijing two thirds of its tax revenue or two billion yuan (about HK$1.86 billion) a year, more than that paid by the whole of Guangdong, the mainland's richest province.
This is a legacy of Dengist reforms which gave preferential treatment to Guangdong but left in place the old system under which large state firms, such as those in Fushun, give most of their taxes and profits to the central government. Years of complaints to Beijing have failed to change the system.
As a result, Fushun does not have the money to retool its ageing factories, some still using equipment brought in by the invading Japanese before 1945.
The Asian crisis made things worst last year, with the city's petrochemical sector posting a loss for the first time, because of lower exports, the drop in oil prices and rival smuggled imports.
The result of all this is more than 100,000 workers laid off, or 11 per cent of the city's workforce, according to official figures. Average monthly wages are just 400 yuan.
'I have been driving a taxi since I was laid off from a construction company eight years ago,' one driver said.
'The company exists in name only and has no business. I am fearful of getting sick because I have to pay all the costs myself. If I have a serious illness that needs surgery, I cannot afford it. Will I get my pension? I hope so but am not sure.' A man in his 20s running a bookstore in a shopping mall said he was laid off last year from a firm that went bankrupt.
'After I was fired, I received no basic living allowance as we are supposed to. The policy is good but many laid-off workers get nothing because local governments have no money,' he said.
Provincial leaders devoted a meeting to the issue at the end of last month.
'Paying this money is not only an economic matter but a grave political duty,' said Liaoning governor Zhang Guoguang.
'Every level of government must make this a priority. Mayors who fail to do so will be held responsible.' The Liaoning Daily on January 23 painted a dark picture of the social effects of rising unemployment and poverty.
Echoing editorials in the early 1950s, the paper said: 'The hidden battle is intensifying day by day, with the risk of infiltration and destruction by enemy forces, domestic and foreign, increasing.
'As reforms deepen and the Asian crisis intensifies, many unexpected problems have occurred in our economy, causing enormous new social contradictions. All kinds of crimes are rampant, having a great impact on political and social stability.'