China's rust belt faces exodus of young talent

A man walks past a wall of mirrors in Shenyang, Liaoning province, whose economy is plunging. Photo: AFP

North-eastern China is facing a demographic crisis as educated millennials abandon the industrial heartland, the country’s worst-performing region.

Planning officials revealed this month that the economy of Liaoning, one of the three northeastern provinces, had shrunk 2.2 per cent in the first nine months of the year — the largest regional contraction in China in seven years.

The depletion of the educated workforce has “worried” the central government, according to Zhou Jianping, director of the office in charge of transforming the north-east’s economy at the National Development and Reform Commission. “Most of the people who left that region are elites, at the management level or the backbone of production lines,” Mr Zhou said.

For younger workers, the slowdown is made worse by the region’s extreme reliance on the state. Most new jobs in China are created in private companies but north-eastern China is home to the state-backed heavy industrial companies and state-owned farms that form the Communist party’s traditional support base. In some cities, new jobs in government or state-owned enterprises only open when an older worker leaves, leading to a practice whereby parents or other family members will retire to create a slot for a younger relative.

In the 1990s, China’s three north-eastern provinces saw net immigration of 360,000 people, but from 2000 to 2010, 2m left.

The region’s problems are despite several waves of measures to “revitalise” the north-east since the bankruptcy of the state sector in the 1990s pushed millions of Chinese out of work or into early retirement, a strategy that kept unemployment rolls low.

In the past two decades the region has seen a resources boom that briefly revived the steel and coal industries and a real estate bubble that is now deflating. Today, it is at the heart of government plans for capacity cuts at steel mills and coal mines, offset by new infrastructure investment.

Beijing this month announced proposals for a new private bank to wean the region off its dependence on the state and encourage more lively private entrepreneurship.

Liu Dalu, a transplant to Shanghai, China’s financial hub, said he had left his home town of Dalian because of the difficulty finding jobs without connections, known as guanxi in Chinese. “Sixty or 70 per cent of my classmates back in high school have left town and have no plans to come back.”

Young people who depart are likely to leave behind older parents with few family members to care for them. Many Chinese moved to the north-east from Shandong and central China in the early years of the Communist revolution to populate the state-run industrial base there. Dependence on state employers meant few couples violated the one-child policy, first instituted in the early 1980s and only fully relaxed to allow two children last year.

China’s 2010 census showed that the fertility rate of the north-east had dropped to only 0.75, too low to replace an ageing labour pool. More recent mid-cycle census data from 2015 has not yet been released, but is likely to show a further decline.

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