China Focus: National projects aimed to help revive China's rust belt

Construction has begun on a power transfer project linking China's resource-rich northeast to its energy-thirsty eastern regions.

The 800-kv ultra-high voltage (UHV) direct current (DC) power transmission project, connecting Jarud in Inner Mongolia Autonomous Region to Qingzhou in Shandong Province, will transfer the abundant coal, wind and solar power in Inner Mongolia, Jilin, Heilongjiang and Liaoning in northeast China and consume more than half of the local surplus power.

With total estimated spending of 22.1 billion yuan (3.1 billion U.S. dollars), the 1,234-km line is expected to transmit 55 billion kwh of power, reducing coal consumption in north China by 25 million tonnes every year.

A launch ceremony for the project was held in Beijing on Friday and construction is expected to be completed next year.

It was the first project to be included in a national multi-billion-dollar plan to boost northeast China's flagging economy.

The three-year revival plan, announced by the National Development and Reform Commission (NDRC) on Aug. 22, involves a total of 127 major projects in the northeast from 2016 to 2018, plus major work in 137 areas.

The wide-ranging plan covers sectors including transportation, energy, water conservation, agriculture, as well as urban and rural development.

More than 1 trillion yuan will be invested in the projects, financed by private companies as well as central and local governments, said Zhou Jianping, an NDRC official.

The money will not be spent on industries that suffer overcapacity, but go to key areas to create growth, such as infrastructure and emerging industries, he said.

The northeast, which includes Liaoning, Jilin and Heilongjiang provinces and part of Inner Mongolia Autonomous Region, was among the first regions in China to be industrialized, relying largely on heavy and chemical industries, energy resources, raw materials and a large number of state-owned enterprises.

Amid an economic slowdown in the last two years, the region has experienced more difficulties than the rest of the country. According to NDRC data, the region's economy grew 2.2 percent in the first half of 2016, much lower than the 7.6 percent, 7.8 percent and 8 percent for the east, central and western regions of the country, respectively.

Economic observers believe the projects will help "stabilize" a staggering economy, winning breathing space for the region's ongoing structural reform and economic transformation.

According to a recent statement by Shenyang United Assets and Equity Exchange, Liaoning Province will sell stakes in some of its state-owned enterprises, an important step for the structural reform of SOEs. The province was the country's worst economic performer in H1 as its gross domestic product contracted by 1 percent in the period.

Experts expect local governments to be offered more rights to explore so that more measures will be put in place to free the market and eradicate the negative influence of the region's previously planned economy.

Liang Qidong, vice president of the Liaoning Academy of Social Sciences, advised the central government to approve establishment of a free trade zone in Dalian as soon as possible to play an experimental role in the region's reform.

According to the five-year plan of Liaoning, the province plans to apply for establishment of the Dalian Free Trade Zone before 2020.

Other suggestions to stimulate the local economy include supporting hi-tech enterprises to gain easier access to financing in the capital market.

"Rather than rely on central government investment, the northeast should step forward to promote structural reform with enduring efforts," said Jin Fengjun, a researcher with the Chinese Academy of Sciences. Endi