The weak economy and lack of jobs have sped up the decline in the population, which in turn has reduced the capacity of the local economy to grow. Tieling’s population growth rate was minus 1.6 per cent in 2017, far below the national average of a 0.5 per cent. The region’s share of national GDP, meaning the three provinces that make up the rust belt, has declined steeply to around 6.3 per cent last year from around 11 per cent in 1990.

Worrying signs have become apparent in Tieling’s progress toward meeting some of goals in its current five-year plan which runs until 2020. It has found it impossible to achieve an annual average growth of 7 per cent with its labour productivity in 2017 less than half of the targeted 85,000 yuan (US$12,500) per person set for 2020. Its estimated urbanisation rate of 55 per cent for residents appears to be out of reach given that it grew less than 1 per cent to 49 per cent between 2015 and 2017.

China’s shrinking workforce and nationwide urbanisation campaigns have set cities of different sizes on two paths, and while big cities embrace more migrants with attractive policies and growing economies, smaller ones have been hit at home as old industries stagnate, preventing them from creating sufficient jobs to keep their own population employed, let alone outsiders.

The problem of shrinking cities is a global phenomenon that has occurred in developed countries such as Germany and United States for many years, but it has only recently caught the attention of Beijing.

In April, the National Development and Reform Commission, the powerful government planning agency, included for the first time the concept of shrinking cities in a directive on urbanisation and demanded that these cities “lose weight and strengthen their health” by concentrating public resources on their central districts. The admission that shrinking cities had become a problem marked a big change from the past when the government focused entirely on urban expansions.

“The population shrinkage has long been ignored. As China’s population growth slows and the demographic dividend ebbs, it’s unrealistic to expect all cities to have continuous and rapid population growth in the future,” said Zhou Kai, an associate professor from School of Architecture at Hunan University.

“In particular, big cities, mega cities, and central cities in major metropolitan areas are having population inflows, while some small and medium-sized cities, towns, and villages are losing people. It’s the two sides of the same coin.”

Since 2013, China has been following an urbanisation blueprint that plans to move 100 million rural people, or close to 10 per cent of the country’s population, to urban areas by the end of 2020. The idea is to build greener and more sustainable cities to attract yet more people.

But the challenge of building or restructuring a city from which people are leaving because of a weakening economy is the multibillion-dollar dilemma for policymakers and local governments that are used to continuous expansion.

It takes about 30 minutes to travel by taxi from Tieling’s old district to the Riverside New District, which spreads over 2,200 hectares (5,400 acres) and is now in its 13th year of development.

Back in 2013, the new district was widely reported by Chinese media to be a “ghost town” with empty shops and low occupancy rates. Six years on, it is no longer as uninhabited as it was, but it is also clear it is well short of booming.

The most lively parts of the new district are two cross streets where many local farmers live, while the rest is still a land of property projects that are either under development or for sale. But home prices have not increased much since 2013 with prices swinging between 300 yuan (US$44) and 400 yuan per square foot.

In the provincial capital of Shenyang, about 30 minutes away by high-speed rail from Tieling, the average price for a new home was slightly over 1,000 yuan per square foot in April, according to real estate information site Anjuke.

Officials have been trying to boost street traffic by moving schools and government offices into the new district, but there are few new jobs in the economy that would attract people outside Tieling. In a large shopping centre built in the eastern part of the district, only a few shops are open for business.  

The problem of overbuilding is also easy to identify. Aside from the bus terminal, two-thirds of the space in three connected government buildings that house the Tieling Development and Reform Commission and its Investment Promotion Bureau are unoccupied, with front doors and an underground car park boarded up.

In a 2015 survey, Tieling’s government found the city, which was then the sixth most populous urban area in Liaoning province and accounted for 6 per cent of its population, had lost around 65,000 residents in five years.

Tieling’s government predicted that its urban population would increase to 750,000 by 2020, according to its urban plan for 2014 to 2030 published in 2016, but in 2017, it only had 434,800, according to the Ministry of Housing and Urban-Rural Development. From 2007 to 2017, Tieling’s urban population, including temporary workers, shrank by 16,400, while the developed area of the city expanded by 2,200 hectares (5,400 acres).

Yet, without industries to support the economy, the city’s officials have so far had no choice but to follow the cycle of the property market and Beijing’s on-and-off restrictions on home buying to turn the new district into a giant residential neighbourhood.

Tieling City Investment Holding, a Shenzhen-listed company controlled by the Tieling Bureau of Finance, manages the new district, with two thirds of its revenues coming from land sales.

In 2016, when they could not sell a single land parcel for development in a cooling market, their profits turned negative and they were at risk of delisting. When the market in small cities improved last year after Beijing encouraged people to buy homes to clear out excess inventories, they moved back into the black.

Before Beijing recognised the widespread problem of shrinking cities, it had identified dozens of natural resource-dependent cities and tried to bail them out. Among 262 such cities identified by the State Council in 2013, a total of 37 were located in the northeast rust belt. Of those, 19 were suffering from a decline, meaning they faced nearly exhausted natural resources, slow growth, severe environmental pollution, and rising unemployment.

Fushun, a once coal-rich town in Liaoning, is one such city. The city’s coal mines boomed under the occupation of Japan at the beginning of 20th century. But after years of excavation and restrictions imposed by Beijing on mining activities, only 20 per cent of the city’s recoverable coal deposits were left at the end of 2017, according to the Fushun government.

Coal output accounted for only 7 per cent of the city’s industrial output after petrochemical and metallurgy production, based on 2017 data. In total, the three industries contributed 85 per cent of the city’s industrial output. Unlike Tieling, where around two thirds of the people work in the agricultural sector, Fushun is reliant on heavy industries, with its economic growth turning negative in 2016 after industrial output plunged by 14 per cent.

More than 100 years of mining have also extracted a heavy price on the city’s environment. In 2017, around 42 per cent of its developed area was geological unstable due to the impact of underground mining, with many homes on the verge of falling into sinkholes. Between 2005 and 2018, the government was forced to move 500,000 people to new homes, costing 17.3 billion yuan (US$2.6 billion), according to Fushun state TV.

The weakening economy has rapidly shed jobs, forcing many to look for opportunities elsewhere. In 2017, the number of employees in Fushun plunged to the lowest level in 20 years, according to the National Bureau of Statistics.

In a decade up to 2017, around 12,600 people left the city’s urban areas, even though the developed area of the city expanded nearly 2,000 hectares (5,000 acres). In its urban plan for 2011 to 2020 drafted in 2015, Fushun expected its urban population to reach 1.5 million in 2020, even though it had dropped to 1.3 million in 2015.

“Fushun has had a hard time deciding what kind of city that it should become. Here we have frequent political turnover and too many blueprints, from green city to consumption city to ice city,” said a veteran local journalist who has lived in the city for years but preferred not to be identified.

Big cities in Liaoning and other parts of the northeast, including the provincial capital city of Shenyang, and Daqing in Jilin province, still have large inflows of people. The number of shrinking cities in China’s northeast is also still lower than the number in the US rust belt, according to a 2017 paper written by Gao Shuqi and Long Ying, two scholars from Tsinghua University.

Aside from the need to be rational about urban planning given the population decline, Gao and Long argued that governments in the northeast should invest their existing resources more efficiently in growth areas such as tourism instead of continuing to sell land and build new properties.

Zhou Kai from Hunan University added that the governments of shrinking cities need to intervene to stop the decline in their populations, but for those in the rust belt, that would require a systematic makeover of their planning operations because it would be difficult to reverse the overall trend by improving the use of only one thing, whether it is resources or capital.

“At least they need a plan B for when population doesn’t increase,” Zhou said.

Liu Lijun, a local farmer in her 50s, swept the riverbanks after her homes were torn down to pave way for Tieling’s new district a decade ago. As a eyewitness to the area’s change over the last 13 years, she pointed at an unfinished hotel standing amid overgrown grass behind a wire fence, which Tieling government officials can see from their office windows every day.

“I think they should tear it down. It looks very ugly,” Liu said.

Both the Fushun and Tieling governments did not respond to requests for comment.

The fourth article of this five-part series looks at whether the new economy can buffer the downturn in traditional rust belt industries.