August 19, 2014 / 4:26 AM / 5 years ago

China steps up support for lagging northeast rustbelt region

BEIJING (Reuters) - China has announced fresh policy measures to support the lagging northeastern region, including quickening infrastructure investment and opening up state firms to private investment.

Chinese Premier Li Keqiang looks on during a joint news conference with German Chancellor Angela Merkel (not pictured) at the Great Hall of the People in Beijing July 7, 2014. REUTERS/Andy Wong/Pool

Premier Li Keqiang has already pledged to provide more support for the northeast region, which is made up of the provinces of Liaoning, Jilin and Heilongjiang.

The government will speed up the construction of railways, highways, airports, power grids and water conservation, as well as spend more on shanty town renovation, according to a guidance issued by the cabinet on the central government website,

Private investors will be encouraged to participate in infrastructure projects through public-private partnership (PPP) deals, and privately owned banks will be allowed to set up in the region, the cabinet guidance stated.

Private investment will be allowed into state-owned firms when they restructure and state firms will use part of returns from their share transfer and asset operations to pay for “the necessary cost of reform”, it added without elaborating.

Known as China’s rustbelt, the northeast was plagued by widespread layoffs in the 1990s, when the government forced state factories to shut en masse to cull inefficient industry.

The region enjoyed an economic boom in the past decade due to Beijing’s supportive policy and increased demand for raw materials and machinery products, but the revival wobbled this year as China’s growth grinds towards a 24-year low.

The region faces new challenges “as the rate of economic growth has continued to drop since last year and some industries have production difficulties,” the cabinet said.

The government will encourage the region to embrace technological innovations, supporting new industries, such as robots, gas turbines and high-end marine engineering equipment.

The region will step up trade and energy cooperation with Russia, Mongolia, Japan, South Korea and North Korea, it said.

Of China’s 31 provinces and regions, the three northeastern provinces were among the six with the weakest economic growth.

Liaoning’s economy grew 7.2 percent in the first six months, below the national average of 7.4 percent. Jilin’s economy expanded 6.8 percent, and a Heilongjiang official said the province was the worst performer in all of China, with growth likely to be under 5 percent.

Reporting by Kevin Yao; Editing by Kim Coghill

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