Old industry base shines yet again now

One-time manufacturing king-turned rust belt capital has regained its regal attire

A superhero, a witch and a giant apple walk into a bar. It is Halloween in the city of Shenyang, and the trio of costumed revelers joins a table of strangely attired friends knocking back beers and cocktails.

Behind the makeup and the outfits the group of young men and women are for the most part professionals from Australia, Germany, Russia and the United States.

That they are here at all is telling.

As recently as 10 years ago, there were few foreigners in Shenyang, the capital of Liaoning province, in the country's northeast. In the early 2000s, it was a region that had been dubbed the rust belt of China.

In stark contrast to most of the country throughout the 1990s, Shenyang was in decline even as the rest of China boomed.

In the northeast, the young foreigners in their Halloween costumes represent something new.

They are not just riding the city's recent change in fortune, a rejuvenation that is starting to pick up pace, they are part of a growing force that is helping to drive it.

In the late 1980s after China began to reform and open up to the world, it was in Shenyang where the government allowed the first State-owned enterprises to go bankrupt. It was the end of the city's halcyon days, a period that had lasted throughout most of the 1960s and 1970s. In that era, Shenyang was looked up to as the "older brother" of the country's manufacturing revolution, the factory town that turned out the machinery to outfit factories across the nation.

By the time the 1990s came, Shenyang and its infrastructure had become obsolete. Dickensian steel mills and smelters and factories shut down one after the other, such closures often putting thousands of workers out of a job in a single day.

As unemployment levels continued to rise, the city was given a new nickname, "China's worker's holiday village".

Local official Zhang Hongtao, who helps oversee one of the new industrial areas that have sprouted up just outside the city limits, remembers those hard times all too well.

"The 1990s was the darkest time for Shenyang people, for the traditional industries here. Machinery became outdated and production was inefficient. Northeast China endured the hardest time."

Zhang, deputy director of the administrative committee of the Tiexi BMW automotive industry new town, says the first step in righting Shenyang's ailing economy came in October 2003 when the Communist Party of China Central Committee and the State Council launched a revitalization plan that entailed moving old infrastructure out of the city and replacing it with updated facilities on its outskirts.

That same year, German carmaker BMW decided to set up a manufacturing plant in Shenyang. Zhang says that from then on, things began to change.

Since BMW opened the plant, it has invested 450 million euros ($561 million) in Shenyang and now employs about 10,000 people there.

BMW, which turns out about 30 vehicles an hour for the domestic market, is now upgrading its operations. This year alone its two Shenyang plants will produce 300,000 motor vehicles. But when the upgrades are completed, at the Tiexi plant in Shenyang alone a custom-made luxury car will be rolling off the production line every minute. Every single car is made to custom specifications and there is now a six-month backlog of orders.

"The effect of BMW spreads far and wide," Zhang says. "It's the driving force in terms of employment and consumption. It's reforming and rejuvenating Shenyang."

Suppliers and new companies sensing opportunity followed in BMW's wake. There was suddenly a demand for service sector support, more jobs as a result, and a level of expendable income plowed back into the local economy that resulted in long-depressed sectors such as hospitality, retail and real estate beginning to pick up.

In 1993 the total value of foreign investment in Shenyang was a mere $332 million; last year it was almost $6 billion, and this year it is expected to climb even higher.

Last year the revenue generated by foreign investment accounted for more than half of all tax income received by the Tiexi BMW automotive industry new town, and Zhang says that figure is also expected to rise this year.

"The overall tax from BMW's two plants in Shenyang may reach 20 billion yuan ($3.3 billion) this year."