Promoting private
Building up the private sector in northeastern China has become the central government's primary goal in revitalizing the region's ailing economy. Only six of the country's top 500 private companies are based in Northeast China's Jilin and Liaoning provinces. The Global Times recently visited the two provinces to learn about the major challenges private companies are facing there and what role the local governments have played in their development. This is the first section of a four-part report.
After working for global biopharmaceutical companies for more than two decades, Feng Xiao, who holds a doctorate from the University of California Davis, came to work in Changchun almost two years ago.
Scientists like Feng are in high demand by companies in the two provinces as a dearth of talent is one of the major obstacles to the central government's plans to revitalize Northeast China provinces.
The 51-year-old scientist now works as the head of the research and development (R&D) center at GeneScience Pharmaceuticals Co (GenSci), located in a high-tech development zone in the southern part of Changchun, capital of Northeast China's Jilin Province.
A private pharmaceutical company established two decades ago, GenSci had generated about 1.3 billion yuan ($188.4 million) in sales as of the end of November 2016, according to company documents.
On Monday, on the first floor of the company's new factory, four workers in protective gear were busily packaging ready-to-sell Jintropin - a recombinant human growth hormone injection.
Because GenSci was the first company in China to make this technological breakthrough, it currently controls more than 60 percent of the domestic human growth hormone product market.
Boosting the private economy by improving the investment environment is one way local authorities are trying to do to revitalize the region's economy. In the high-tech zone, in the southern part of Jilin, for example, biopharmaceutical companies can qualify for subsidies ranging from 50,000 to 500,000 yuan if they win approval for their clinical trial protocols.
In Shenyang, capital of Northeast China's Liaoning Province, the Shenyang local government has established a 50 million yuan fund to support the development of private high-tech industries.
Qualified companies can also receive a tax break that reduces their corporate income tax rate from 15 percent from 25 percent. Companies that win the title of high-tech company from 2015 to 2017 will also receive a bonus of 200,000 yuan in total.
Although private companies have been playing a more important role in driving the region's economy, only one private firm from Jilin and five from Liaoning were ranked among the top 500 private companies in 2016, according to a report published by the All-China Federation of Industry and Commerce in August.
Although the business and investment environment has improved in some northeastern cities, attracting qualified talent has become a common issue for local companies.
Talent shortage
Jia Yi, a senior manager at a Shenyang-based pharmaceutical company that produces cancer drugs, said that attracting talent has been his company's biggest challenge over the last few years.
The company, which is currently preparing to go public, reported 300 million yuan in revenue in 2015, which it hopes to grow to 500 billion yuan in 2016.
"As a pharmaceutical company, R&D of new bio-technology is the engine of growth … Capital commitment is an important factor, but without skilled talent, who will transform the large amounts of R&D spending into applications?" Jia claimed.
Even if the company offers graduate degree holders a monthly salary around 6,000 yuan, which is 2,000 yuan more than the average salary in Shenyang, it still has a lot of difficulties recruiting for its R&D team.
"After working for two to three years and accumulating experience, some researchers will just quit and fly to first-tier cities like Beijing and Shanghai to seek better opportunities, causing a heavy loss for the company," Jia told the Global Times on Monday.
Scientific breakthroughs are crucial for the sustainable growth of a pharmaceutical company, that's why GenSci spends 10 percent of its revenue each year on R&D, Feng said.
"Because the cost of living is lower than in first-tier cities, one can live a decent life here earning 6,000 yuan to 10,000 yuan a month," Feng said, though he acknowledged that many doctorate holders, especially those educated overseas, might disagree.
In the past decade, the population outflow volume reached 1 million, of which many were senior managers, Zhou Jianping, the head of the Northeast revitalization bureau of the National Development and Reform Commission (NDRC), was quoted as saying in media reports in November.
Government support
Unlike State-owned enterprises, which receive strong backing from local governments in Northeast China, private companies are involved in a love-and-hate relationship with local authorities while they expect more active communication.
With an investment of 730 million yuan, Changchun-based Sunbird Regenerative Medical Engineering Co has been in test operation since September. The company, which focuses on researching hematopoietic stem cells, said it aims to set standards for the industry's Chinese companies, which have been lagging behind their foreign competitors.
Although the company has recruited qualified talent with the help of the National Engineering Laboratory under the NDRC, the local government's "one-on-one" program that connects the company with a specific official has "saved us much more time," said Li Yumin, Sunbird's vice general manager.
"It usually takes time here in Northeast China to go through the administrative process, which sometimes requires a company wait for months to get a single approval," Li said.
To streamline the process, the local government in Changchun's southern high-tech development zone has shortened the average approval time.
"Some officials are directly taking care of my company's concerns," Li told the Global Times on Monday. "For example, the city's vice mayor is helping us get our problems solved, which is much more efficient than before."
Affiliation with the local government has largely reduced the company's communication cost and improved its operating efficiency, said Jia, the senior manager at the Shenyang-based pharmaceutical company.
Jia noted that the company has maintained a good relationship with the Shenyang local government thanks to its chairman, who also holds a position on the Shenyang Committee of the Chinese People's Political Consultative Conference in Liaoning. Jia didn't disclose the name of the chairman.
"We have some 'backstage support' at the local government," she said. "Otherwise things would not be carried out so smoothly and effectively."
