Liu Guojun is one person Hong Kong financial chief Henry Tang Ying-yen and PCCW chairman Richard Li Tzar-kai may not meet on their tour of Shenyang today. After five years in the army, Mr Liu spent 15 years in a glass factory that employed more than 8,000 people before he was laid off three years ago, with a one-off payment of 20,000 yuan. Now he sells Coke, Sprite and soyamilk on a street in Tiexi district, which used to be the biggest industrial estate in northeast China. 'There are tens of thousands of people like me in Shenyang, who used to work in the heavy industrial plants and now have no proper job,' he said. 'It is worse for the women. If they are over 40, no one wants them. I tell my son to study hard and leave. There is no future for him here.' Behind Mr Liu, huge tracts of land which once housed giant metallurgy, steel and petrochemical plants are visible. Most have been demolished and replaced with apartments and glitzy showrooms selling foreign cars. If the Hong Kong tycoons do not meet Mr Liu, he and those like him are the reason they are here. The provinces of northeast China need investment and jobs, and only private capital - be it from Hong Kong, Hangzhou or Hamburg - is going to provide them. The decline of what used to be the industrial heartland of 20th century China has been dramatic. In 1980, Liaoning's gross domestic product was double Guangdong's. Now it is half. Last year, Liaoning created 800,000 jobs, but twice that number of people were still seeking work. Its population grew last year by just 70,000 to 42.1 million, as people migrated to other parts of China. Between 2001 and last year, the number of unemployed in the three northeastern provinces of Liaoning, Jilin and Heilongjiang accounted for 25 per cent of all the unemployed in China. The Communist Party knows only too well the risk they pose. Late last month, a Liaoning court sentenced two unemployed workers to two and seven years for 'subversion'. Their crime was to damage cars and shops in a demonstration in 2002 by about 30,000 workers in the city of Liaoyang demanding payment of wages and benefits delayed for months. The patience of the central government toward the northeast is wearing thin. The late Deng Xiaoping and former premier Zhu Rongji had little time for the region and rarely visited the area. Their view was that one yuan invested in eastern Zhejiang province or southern Guangdong would generate a return of two yuan, while one yuan invested in the northeast would disappear into the pocket of a corrupt official or become part of a non-performing loan owed to a state bank. 'This is the last chance for the northeast,' said Liang Qidong, director of research at the Liaoning Academy of Social Sciences, referring to an initiative unveiled last year by the government to revitalise the troubled region. 'The central government has given the northeast many opportunities,' Mr Liang said. 'It turned debt into equity, reduced debts and gave benefits in the reform of state firms. But the northeast made poor use of these opportunities.' The issue is not one of capital or natural resources, but mentality. The governments of the three provinces, among the most conservative in China, have failed to create an environment conducive to private capital, foreign or domestic. Last year state companies accounted for more than 70 per cent of GDP in the three provinces, while the level of foreign investment and private capital is far below that of the rich provinces of the south and east. Many entrepreneurs have left the region to set up business elsewhere. Officials have blocked attempts by private companies to buy state assets. So, while state factories have closed, as they have done all over China, they have not been replaced by new companies and new jobs. 'Our biggest problem is the problem of people,' said Wen Shizhen, Communist Party chief of Liaoning. 'These unemployed people have made an enormous contribution to the modernisation of industry in China, but have been sacrificed in the transition from a state to a market economy.' Mr Wen's government has identified petrochemicals, iron and steel, transport equipment, machine tools and military equipment as the strongest sectors of the province's economy. Its aim is to double the private sector's share of the province's economy to 50 per cent by 2007. The challenge for Mr Wen and his colleagues is to find projects in which the visiting businessmen - including the Li brothers (Richard and Victor Li Tzar-kuoi), Hopewell Holdings' Sir Gordon Wu Ying-sheung and Henderson Land's Lee Shau-kee - want to invest, when they and their capital are being wooed by provinces all over China and countries abroad. Why choose a region so far from Hong Kong, with which they are not familiar? Why bet on a region with a poor record of corruption scandals and poor governance? Mr Liu is not optimistic about the 'revitalise the northeast' campaign. 'We welcome the investment in roads and a subway for the city. But we do not see any concrete benefits for ordinary people. It is our corrupt officials who will benefit, not common people.'
