Q: Following the strategy of developing China's western areas, the government put forward a national plan to revitalize old industrial bases in the Northeast of the country. What are the considerations behind the plan? What is the relationship between revitalization of the Northeast and the development China's western areas? What kinds of policy and finical support has the central government provided to the Northeast?

A: The old industrial bases in the Northeast were the cradles of new China's industry. They have made historic contributions to the construction of an independent and integrated industrial and economic system as well as to the country's reforms and modernization drive.

At present, the Northeast Region produces two fifths of China's crude oil, 50 percent of its timber, one third of its ships and one quarter of its vehicles. However, during the process of transforming the country from a planned economy to a market economy in the past 20-plus years, the three provinces of Liaoning, Jilin and Heilongjiang in the region have develop0ed at a relatively low speed.

System and structural defects originated from the panned economy have become more striking. As a result, their industrial production has slipped into extreme difficulties, with low efficiency and high unemployment rate, which, coupled with the policy the central government implemented in the 1980s to first develop eastern areas, have created a widening economic gap between them and the eastern areas.
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In 2000, the central government initiated the strategy of developing the western areas. In 2004, it put forward the strategy of revitalizing old industrial bases in northeast China. In the overall national economic development, each of the three-pronged strategies has its own emphasis and complements to each other.

Since the northeast has been a fund-and-technology-intensive heavy industrial base, it has its own advantages. The main tasks of revitalizing the old industrial bases in the northeast, therefore, are as follows: continuing to readjust economic structures; encouraging technological renovation of enterprises; creating more employment and establishing a social security system; speeding up the development education; promoting reforms and opening up; and realizing comprehensive, coordinated ad sustained development.
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In order to facilitate the development of the Northeast, central government has lowered resource tax rate in northeastern areas, reduced the value-added tax on newly purchased machines and facilities, and exempted some enterprises of the income tax. A the same time, the central government has allocated special funds to support the region's agriculture, social security, education, technology, sanitation, culture, environmental protection.

The central government has allocated a total of 108.9 billion yuan (US$13.15 billion) to support structure readjustments of 297 enterprises.

In just over one year after the introduction of the strategy, the speed of the region's economic growth has accelerated and economic retunes have improved. In 2004, the GDP of the three provinces reached 1,513.39 billion yuan (US$182.78 billion, up 12.3 percent from 2003.

The growth rate was 2.8 percentage points higher than the national average. Per capita annual net income of farmers increased 16.7 percent in the same year. Foreign investment in the three provinces reached US$5.94 billion. Although the number was lower compared with coastal provinces, it represented an increase of 83.6 percent over 2003, much higher than the national average.
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Still, structural and systemic problems, such as employment problems, are continuing to hold back the development of northeast China's economy and have not been solved. There is a long way to go in revitalizing the old industrial bases in northeast China.