A town in China’s rust belt offers a cautionary tale of development ambition
- Hegang has lost nearly a fifth of its population in 10 years, and government revenues have dried up while many flats for sale sit empty
- Other cities hoping to avoid Hegang’s fate require an approach to development that looks beyond property and infrastructure
The rust-belt city of Hegang in China’s northeastern Heilongjiang province has been an unlikely hotspot of social and economic news this year, as analysts and the general public have expressed concerns that this area’s lack of economic vitality and meagre number of young people could be a dark omen for the country’s future.
In the latest news from the industrial city of 890,000, the local government said it is entering a kind of fiscal emergency by freezing new hires and suspending public spending on items such as accommodation and overseas trips. Fiscal pressure has built up amid a declining population, as nearly a fifth of its residents have left over the past decade.
Revenue from land sales, a key source of income for local governments in China, have dried up. Hegang is now home to many empty flats for sale, despite already being one of the most affordable places in the country. Flat prices per square metre are much lower there than in top-tier metropolises like Shenzhen, Shanghai and Beijing.
Hegang by no means represents China’s entire economic landscape, but there are growing concerns that the problems the city faces today could soon be seen in many parts of the vast country.
A shrinking population is one area of particular concern for policymakers. The central government’s hastily organised campaigns to encourage new births, a complete reversal from just a few years ago when the family planning police ruthlessly restricted new births, could take decades to halt the decline.
To make matters worse, the country’s preparations for these grey rhinos – a looming but neglected threat – are not sufficient, if started at all.
When it comes to economic planning, expanding property and infrastructure is still the default choice for most local Chinese governments. Anyone who visits a municipal urban planning exhibition hall will be struck by the ambitious plans for new industrial parks, development zones and town centres, which are often started from scratch on undeveloped land.
This inertia is dangerous. As the central government has sent signals of policy easing in 2022, some local governments can barely contain their excitement about the possibility of additional liquidity in the state banking system that can be used to bail out indebted projects and break ground on new ones.
This, of course, will do the country no good in the long run.
The right approach for many Chinese towns and cities is probably to have a deep look at places like Hegang and prepare for a day when not everything turns out as rosy as projected.
