Unemployment is Daqing's biggest problem as oil runs short and state firms struggle amid the new economy The once high-flying oil centre of Daqing is fighting to avoid fading into obscurity. After the discovery of oil in 1959, the city in Heilongjiang was transformed almost overnight from a backwater marsh village to the envy of the nation. At its peak, Daqing was responsible for 70 per cent of the country's crude oil production. It flourished under the planned economy, flush with government money. The population grew to two million and the city boasted boulevards, grand theatres and a beautifully decorated square larger than Tiananmen. But the depletion of Daqing's oil resources and the onset of a market economy have led city planners to worry about the future. The local government is investing heavily in new industries, farming and high technology in an attempt to reinvent the community before the oil runs out. Daqing produced 24.28 million tonnes of crude oil in the first half of this year, 1.05 million tonnes less than in the same period last year. It now contributes only 35 per cent of total national oil output. The city's mayor, Gai Ruyin, said crude oil production would fall from 50 million tonnes this year to 30 million by 2010. For the first time, Daqing has had to face a mounting unemployment problem. The restructuring of the oil industry saw thousands of workers lose positions that were supposed to have been jobs for life under the old state-run system. Premier Wen Jiabao made a high-profile inspection tour of Daqing earlier this year as part of the central government's plans to reform the northeast rust belt region. Mr Gai said: 'What we are planning is for our future. We are not doing this for quick money. This is a strategic restructuring and we are thinking about 20 years from now.' The oil industry now comprises 70 per cent of Daqing's total industrial output. Mr Gai hopes the share will be reduced to a third by 2010. 'I hope one-third of our industrial output will come from the chemical products industry, one-third from local industry and one-third from oil. Our local industry output will grow from 18.7 billion yuan [HK$17.5 billion] to 70 billion yuan by then,' he said. To achieve this, the city government has set up a large hi-tech park which now accounts for more than 40 per cent of the local industry output. It has set up a modern dairy farm, reportedly the largest in China, with about 200,000 cows, most of them imported from New Zealand. The government has also provided the land for a science park costing 3 billion yuan, which it will help finance. It hopes to attract universities such as Tsinghua and Peking University to set up research centres there. Mr Gai hopes by exploring new oil deposits in a nearby region, the oil industry can continue to run for another two or three decades while gradually giving way to other industries. He said the city aimed to increase its contribution to the country's gross domestic product from 103 billion yuan now to 412 billion by 2020. Mr Gai said the most serious problem facing the city was unemployment. The official unemployment rate is 5 per cent, representing about 80,000 people, but the true figures are believed to be much higher. Last year, protests broke out when sacked workers from state-owned enterprises took to the streets to demand their jobs back. Mr Gai said the unemployment problem was under control. 'We don't lack job opportunities. In fact, every year there are 200,000 people from other places coming to Daqing for work. The problem is that many former state-owned enterprise workers still haven't changed their work attitude. They don't want dirty or tiring jobs.'