March 11, 2010 / 4:43 PM / 10 years ago

China's sinking city hopes to rise beyond mining

BEIJING (Reuters) - There are reasons to be cheerful at last in the sinking city of Fuxin in northeast China’s Liaoning province as it seeks to end its dependence on coal and switch to cleaner industries, its mayor told Reuters.

Fuxin’s old mining and power sectors — built by Japanese colonists and then commandeered by planners from the Soviet Union after the Second World War — have left a legacy of pollution, inefficiency and perilous land subsidence, but mayor Pan Liguo said the city — with government help — was now finally turning things around after decades of stagnation.

“Being the mayor of a depleted city is extremely difficult ... but the state government is helping us to solve problems that can’t be left to the market,” Pan told Reuters on the sidelines of the latest session of China’s parliament.

Premier Wen Jiabao’s speech to parliament emphasized the “revitalization” of northeast China’s struggling old industrial zones and depleted mining belts, and Fuxin is emblematic.

Coal once employed 60 percent of its total workforce, but after decades of overmining, the huge Haizhou mine in the center of the city finally ran dry and was declared bankrupt in 2005.

Its air already thick with sulphur, Fuxin was now also struggling with crippling rates of unemployment, and thousands of residents had to evacuate as geologists worked to prevent the estates built on the mine’s banks from collapsing.

The plight of Fuxin, a tough, ramshackle city built around the biggest open-cast coal mine and largest thermal power plant in Asia, helped gather the momentum to launch the country’s 2004 campaign to “rejuvenate” the moribund mining regions of the industrial northeast.

Located on the chilly frontier between Liaoning and Inner Mongolia and designated one of China’s 44 official “resource-depleted cities”, it was the site of a pilot government “diversification” programme in 2006, Pan said.

“We have achieved a lot in the four years since, but this is a long historical process — Germany’s Ruhr Valley, England’s Manchester and Pittsburgh in the United States are typical resource cities that have already completed their economic transformation, but it took them more than 50 years,” he said.

CLEANER COAL

China’s breakneck economic growth over the last thirty years has depended on the rapid extraction and burning of coal, which helped triple the country’s total power capacity in just a decade but left provinces like Liaoning and Shanxi falling behind economically and struggling for breath.

The first stage in their recovery is to make better use of the resources they have left.

Just before the National People’s Congress opened, the state government finally approved the construction of a 25.4 billion yuan ($3.72 billion) “coal chemical base” in Fuxin.

The facility will process coal into liquefied natural gas and naphtha and will be built by the state power giant, Datang Group, the parent of Hong Kong-listed Datang International Power (0991.HK).

In the first stage, the project will require 20.6 million tonnes of coal a year, and most of that will be shipped into the city from mines in Xilin Gol across the Inner Mongolian border.

Fuxin still produces around 20 million tonnes of coal annually, but while its substantial reserves helped it win the project, Pan acknowledged that government recognition of the city’s plight played a big part in the decision.

“Why is it being built here? The project relies on Fuxin’s long history in the coal industry, but it is also because of strong support for our restructuring from the central government,” he said.

Along with “value-added” coal projects, Fuxin also aims to become a wind power base, manufacturing blades and turbines as well as supplying electricity to the rest of Liaoning.

Pan said Fuxin would eventually build 10,000 megawatts of wind capacity, with 1,800 MW likely to be connected to the grid by the end of this year. South Korea’s Unison (018000.KQ) and China’s Goldwind (002202.SZ) have already invested.

Fuxin is also trying to rectify its long-standing pollution problems. For decades, a Soviet-built power plant, once Asia’s biggest, spewed sulphur dioxide directly into the city, coating it in soot and causing chronic health problems. Pan said newly installed SO2 scrubbers at the plant had resolved the issue.

The Haizhou mine itself has been closed for a decade, and plans abound for the huge abandoned site. A coal industry museum has already been opened and the city plans to convert the ravaged, fractured land into forests.

Proposals to build a “coalmine theme park” and even a golf course are also being considered.

“The mine has made great contributions to China and now it is one of the main projects in our transformation,” Pan said. (Reporting by David Stanway; Editing by Jerry Norton)

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