China’s rust belt starting to shine with new economy firms, but the prosperous south still leads the way

The northeast rust belt, once the pride and birthplace of China’s industrial development, is in its biggest economic slump as it struggles to shake off a deep-rooted planned economic mindset and dwindling resources, and a brain drain to regain competitiveness. This is the fourth article of a five-part series that looks at whether the new economy can buffer the downturn in traditional rust belt industries.

In the four years since it was established, automated flight control system developer Woozoom has grown into a 150 million yuan (US$22 million) start-up that is not short of suitors seeking to invest.

Based in the Liaoning provincial capital of Shenyang, the company is among a new breed expected to inject new blood into China’s struggling northeast rust belt, which could give ageing industries and state-owned enterprises (SOEs) a jolt, and over time help revive their competitiveness.

While these young firms are a long way from becoming an integral part of the region’s economic mainstream, they are slowly infiltrating a regional economy predominated by the country’s biggest industrial SOEs. But despite this, the development gap with the rest of the country has continued to widen, resulting in steady economic decline for the region.

Compounding the problem are inadequate market-oriented industrial policies and a poor business environment compared with China’s more prosperous southern and eastern regions, said Woozoom’s founder Su Wenbo.

“But the past two years have seen improvement,” Su said. “The [local] science and technology bureau has provided hi-tech firms with supporting policies. And their approach is also more holistic. Previous policies weren’t realistically usable, but these ones are now applicable.”