China falls back on fiscal stimulus to revive growth in ailing northeast rust belt

Beijing has fallen back on its old trick of fiscal stimulus in an attempt to revive economic growth in northeast China, the country’s rust belt that is falling into economic stagnation or even recession.

China’s economic planner will roll out its Northeast Revitalisation Plan 2.0, a package of about 130 projects with total investment of 1.6 trillion yuan (HK$1.87 trillion), over the next three years to help the region, Chinese media reported earlier this week.

However, there are growing doubts over whether any government-led spending plan, in which some of the funds are expected to be paid by non-state investors, can be effective for a region plagued by commodity price drops, inefficient state businesses, rampant corruption and an exodus of young talent to other parts of China.

China started a revitalization plan for the region as early as 2003, consisting mainly of state-backed spending plans and preferential policies, to bring China’s old economic locomotive back to life. Yet, a decade later, the plan has apparently failed to make a difference.