Mu Suixin may smoke like a blast furnace chimney but for Shenyang he is a breath of fresh air. For years, the city's leaders refused to see anyone as their once proud city sunk further into smog and bankruptcy. Last May, not long after Premier-designate Zhu Rongji inspected their latest efforts and declared that within a thousand days, the state sector would be back in the black, Mr Mu was made mayor as well as deputy governor of Liaoning. While some in Shenyang still treasure their Mao jackets and the city's grand Mao statues, Mr Mu wants to look like the new generation. For one thing he sports a smart suit and tie and exudes informality, turning the air blue with curses as well as smoke. More refreshing, is that he actually talks without reading from a text. A 55-year old engineer born in Shaanxi, Mr Mu trained - like President Jiang Zemin - as an electronics engineer and moved to Liaoning 18 years ago. He seems determined to match the flair of Bo Xilai, the mayor of Dalian, whose high profile has helped rescue the city by attracting foreign investment. Mr Mu is determined to travel the world promoting Shenyang and is about to embark on another tour of Japan and Europe to drum up business. Until now Hong Kong has been the biggest investor and he admits that the regional financial crisis may hit Shenyang hard. 'Some Hong Kong businessmen who originally planned to invest have put their projects on hold because interest rates are outrageously high now,' he said. He is not discouraged, though, and has appointed a number of the sons and relatives of Hong Kong tycoons as advisers. 'We have assets. Hong Kong is strong in fund raising but we are both not familiar with modern management. We should go together and find the best enterprises in Europe, America and Japan,' he said. 'Hong Kong businessmen can help us wrap up our enterprises properly and then list on the Hong Kong stock market. They will make money doing so and afterwards still earn dividends.' Mr Mu will be accompanied on his tour by 18 Shenyang business leaders as well as representatives from five Hong Kong companies. His first experience on the investment seminar tour was in the United States and found a considerable degree of scepticism about the potential attractions of his city. General Motors retreated from a failed effort to manufacture trucks with Shenyang firm Jinbei, and other foreign companies have complained about the innate conservatism and a rigid and corrupt bureaucracy. 'I was asked by an American businessmen why he should choose Shenyang instead of Shanghai . . . I said: 'conditions may not be as good but the Shanghai cake has already been divided up. Ours may be smaller but at least it is untouched',' Mr Mu said. Dalian's Mr Bo has aggressively gone out and courted investment from Japanese firms. Capital inflows peaked in 1994 but the investment has helped make the city the fastest growing industrial centre in the northeast. 'It is true we have been a rather closed society and not active enough internationally,' Mr Mu said. He believes the regional economic crisis will not affect his city's exports too badly, but it will destroy hopes of pulling in more investors from Japan and especially South Korea. Having to look to Western countries instead, Mr Mu has apparently decided honesty is the best policy. Set beside Shenyang's traditions of secretiveness, he is disarmingly honest about both the scale of the city's economic crisis and the central government's policies. About 30 per cent of Shenyang's factories have partly or completely halted production. Of the city's 1.24 million workers, 380,000 have been paid off. Most of them are getting less than 150 yuan (about HK$139) a month. Shenyang was not just a bastion of the centrally planned economy but a manufacturing base for the People's Liberation Army. About 80,000 workers have been laid off from plants operating in that sector and, of those, 10,000 are not even getting a subsistence wage. This year Liaoning province will lay off another 250,000 workers, many from Shenyang enterprises. The city also has 560,000 pensioners and supports 150,000 of these senior citizens from its own funds. However, he believes the daily protests outside the municipal Communist Party headquarters are not about wages or pensions, but about housing. 'Foreigners imagine Shenyang's streets are filled with unemployed workers staging demonstrations. This is just not true. Until now there has not been a single demonstration,' he said. Mr Mu admitted some retired workers whose pensions were too low came with petitions but the majority of protesters were residents who lost their homes and had been cheated out of a new one by unscrupulous developers. 'Some people end up living in temporary sheds for years,' Mr Mu said. Shenyang also has a reputation as having the worst industrial pollution in the mainland and probably Asia, but even on this point Mr Mu is keen to go on the offensive. 'People say Shenyang is an old industrial city full of factories and chimneys and unbearably dirty. It is not true! Shenyang is actually cleaner than Beijing or Shanghai if you look at air quality,' he said. Admittedly, after one visit Deng Xiaoping said Shenyang was the dirtiest city in the mainland but Mr Mu points out this was back in 1963. 'At the time, Shenyang was just factories and workers dormitories. Now we qualify as one of China's 'sanitation cities'. We launched new projects to clean up our city and we will catch up with cities in America and Europe as quickly as possible.' Mr Mu admits though that crime is getting worse. The city is in the midst of a violent crime wave. Robbers have killed over a dozen taxi drivers as well as attacking cash delivery vans. The mayor has had to put over a thousand extra police on the streets, buy armoured vans from Europe and set up roadblocks all over the city. He even wants to set up a satellite positioning system so taxi drivers can be located and helped in an emergency. Mr Mu is determined to rebuild Shenyang's image. He had planned to hold an international friendship month including an Asian Sports Festival, a trade fair and other activities. However, with a long list of problems the last thing Mr Mu wants to worry about is putting more people, such as government employees, on to the streets. 'Shenyang enterprises have laid off a lot of workers, if we cut cadres as well, it will be very difficult to find them jobs,' he said. 'We will wait for the upper level of government to do their re-organisation first.' Mr Mu predicted it would take the central government three years to finish its restructuring, then another two years for the provincial government to change and only then would cities and counties start. 'This plan has no chance of being completed within the five-year term of this administration,' he said. Mr Mu also pointed that this was at least the seventh attempt at re-organising the Government since 1949 and none of them had brought about any big changes. 'Each time we made a small step forward,' he said. 'The key point is to revitalise the economy and create more jobs to absorb laid-off workers and officials.' What he likes best about Premier Li Peng's work report is the downgrading of state planning and the ministries which enforce it. 'We don't want the ministries to have these powers anymore. The market is God. It decides what and how much shall be made,' Mr Mu said. He bemoans the fact Shenyang is still a stronghold of central planning and its officials are imbued with its spirit. About 85 per cent of the economy is state-owned and out of the mainland's 600 cities, it ranks third in terms of the amount of state loans it benefits from. On the other hand, Mr Mu is not in favour of rushing into bankruptcy or privatisation of state factories. Twenty were allowed to go bankrupt last year and many more would like to. 'The central government must standardise bankruptcy but we can't let them go bankrupt in a rush,' he said. This year Shenyang will focus on restoring to health six large state-owned enterprises and will raise investment capital somehow. 'But we are cautious about adopting the share-holding co-operative system. We don't want the enterprises to transfer their debts to the workers by converting their debts into shares,' he said. What Shenyang must do is to boost the private sector to absorb the surplus workers. Mr Mu argues that Shenyang's reported 10 per cent annual growth rate is being fuelled by the service sector which accounts for 50 per cent of the city's output. 'As I told Zhu Rongji during his inspection tour here, you find difficulties in the factories but prosperity in the streets,' he said. Shenyang wants to be the commercial centre of the northeast but to develop it needs a fast rate of growth and buoyant consumer demand to fill its large new shopping centres. 'Growth rate is the key factor. Experience in the past 10 years shows that our economy will develop smoothly when the rate is over 8 per cent. When it is lower there will be some problems in our economy, society and peoples livelihood,' he said. Yet the mayor thinks a huge infrastructure investment stimulus package will not particularly boost the local economy. 'It wouldn't be very effective for us, we are already using infrastructure investment to boost our economy.' Shenyang has built a new road system, expanded its airport, renovated the railway station and is building a motorway to Shanghaiguan. The city's new ring road cost 1.7 billion yuan and provided employment for 50,000. Mr Mu would prefer it if the central government got on with housing reform to enable ordinary families to obtain 20-year mortgages and so buy their own homes. The city has a vast stock of unsold housing which no one can afford to buy. 'We hoped that residential building construction could be a growth point. If it took off, it would boost the economy, consuming a lot of steel and building materials. Families would also buy a lot of new furniture and appliances,' Mr Mu said. 'It is not that they can't buy, but won't. This won't happen until we set up a new housing system'. Despite all this, the mayor remains confident that within three years Shenyang can achieve Mr Zhu's target. 'Foreigners are sceptical but it is not an unrealistic goal. 'I was a bit tentative myself when Zhu asked me about the three-year plan. 'I had not fully figured it out. I have 340 state-owned enterprises so if I revive one a day, it will take a year. If I revive one every three days then I could just about succeed. 'Now I am fully confident. I've made an official pledge to our NPC [National People's Congress] delegates. I organised 18 big industrial groups and I will concentrate on running them well. As for the others I will let them go by transferring their assets to other owners.' PROFILE Shenyang mayor Mu Suixin was born in Wubao, Shaanxi province in 1943. After graduating as an engineer from Qinghua University in 1970, he found employment with a Ministry of Metallurgical Industry company, where he eventually reached the post of Communist Party secretary. After holding various Liaoning provincial positions, including being director of both the labour and construction bureaus, he became vice-governor in May 1996 and took on the Shenyang mayor's post in February last year. Hong Kong businessmen can help us wrap up our enterprises properly and then list on the Hong Kong stock market. They will make money doing so and afterwards still earn dividends. People say Shenyang is an old industrial city full of factories and chimneys and unbearably dirty. It is not true! Shenyang is cleaner than Beijing or Shanghai if you look at air quality.