Liaoning Province

The most southerly of the three Manchurian provinces - the two others are JILIN and HEILONGJIANG - was once China's industrial showcase. Before 1949 Russian and then Japanese investment made it the most industrialized and urbanized region in the country. Rapid development after 1949 reinforced this position. But the new priorities of the reform era and the poor performance of Liaoning's state sector have turned past glories into pressing burdens. Nowhere do Beijing's plans to revive its ailing state firms face so severe a test as in the strategic heartland of northeast China where, once again, the interests of China, RUSSIA, JAPAN and KOREA meet.

where empires meet

Until the 1870s, China's Manchu rulers sought to preserve their vast tribal homeland beyond the Great Wall as a retreat, hunting ground and source of precious commodities. Chinese immigration into the area was controlled. While it gathered pace throughout the nineteenth century it failed to populate the region fast enough to deter Russian military adventurers. Under the treaties of Aigun (1858) and Beijing (1860), the Tsar gained all of northeast Manchuria north of the Amur (in Chinese, the Heilong) and east of the Ussuri (in Chinese, the Wusuli). Heilongjiang and Jilin provinces lost their access to the Sea of Japan. Ever since, the whole of northeast China has had to look west, to the distant port of Dalian,
for maritime contact with the outside world. Dalian is at the tip of the Liaodong peninsula in what, until 1929, was known as Fengtian province. It was the part of Manchuria in which Chinese migration, much of it from SHANDONG, was greatest, and its southern tip figured large in Russia's search for an ice-free port in the Far East.
Nevertheless Japan was the first to stake a claim to the Liaodong peninsula. It did so following the Sino-Japanese war of 1894-5. However, rival powers forced Tokyo to relinquish its gains in favour of Russia, which built the naval base of Port Arthur (modern Lushun), southwest of Dalian, and set about constructing a Southern Manchurian railway to link the region with Mukden (modern Shenyang), Fengtian's capital, and Harbin in the north. Harbin was the headquarters of the Russian-controlled Chinese Eastern Railway, built to provide a shorter route to Vladivostok from central Siberia (see HEILONGJIANG;
RAILWAYS).
Japan returned to Liaoning after the Russo-Japanese War of 1905, a conflict fought in Manchuria and resolved in the United States under the Treaty of Portsmouth. China was not a party to the war but was its main theatre and principal casualty. In the years which followed Japan took control of the Southern Manchurian railway, built mines and industries along its route - notably at Anshan, Fushun and Benxi, still major industrial centres at the start of the twenty-first century - and founded the modern port-city of Dalian. Tokyo even formed a special military unit, the Guandong Army, to keep Southern Manchuria safe for Japan.

Manchuguo to Communist Manchuria

China's freedom of movement in the region, limited at the best of times, narrowed still further after the fall of the QING DYNASTY. Marshal Zhang Zuolin (1875-1928), warlord of Manchuria from the Republican Revolution until 1928, sought to turn the Japanese presence to advantage both at home and in his wider struggle for control of north China. He at first enjoyed some success. But in 1928 Japanese agents assassinated him, blowing up his train as he returned to Mukden after a brief period as head of a 'national' government in Beijing.
ZHANG XUELIANG, his son, known as the young marshal', took over at a time of growing anti-Japanese sentiment in China. Officers of the Guandong Army decided to bring things to a head. In the 'Mukden Incident' of 1931 they destroyed a section of the Southern Manchurian railway as a pretext for placing the entire region under their control. In 1932 Japan turned Manchuria into MANCHUGUO, a nominally independent state ruled from modern Changchun, capital of Jilin, by PU YI the last Manchu emperor.
Manchuguo was founded to serve Tokyo's economic, political and strategic interests. Long an important source of raw materials, it was built up as a major, predominantly Japanese, centre of industry and transport. It was cut off from the rest of China until Tokyo's defeat in the Second World War.
Even then Manchuria's travails were not over. In accordance with decisions taken at the YALTA CONFERENCE, the Soviet Union entered the war against Japan and occupied the former puppet state. Soviet troops stripped the region of all the industrial facilities they could lay their hands on and shipped them back to European Russia. They also made good their rights, under the Sino-Soviet Treaty of 1945, to 'joint management' of the Chinese Eastern Railway, and access to Port Arthur and Dalian.
The Soviet presence had a more important consequence: it facilitated the takeover of much of the Manchurian countryside by Communist troops who raced to the region from north China via INNER MONGOLIA, and by junk across the Bohai Gulf from Shandong.
This set the scene for the bitter struggle for control over the northeast between the Communists and Chiang Kai-shek's Nationalists (see CIVIL WAR).
Chiang had never ruled Manchuria. Before the war, the 'old' and the 'young' marshals curbed his power in the region. After 1931, the creation of Manchuguo ended all forms of Chinese authority northeast of the Wall. Japan's defeat in 1945 at last held out the promise of government rule over an area rich in resources, thoroughly developed (despite Soviet depredations), and of immense strategic significance.
It was a fateful, if understandable, obsession. Chiang moved his best forces into south Manchuria and ordered them to fight their way north where the Communists were strongest. They occupied most cities in the region together with the main lines of communication. But in a series of brilliant campaigns directed by LIN BIAO, Communist troops gradually isolated, besieged and defeated their opponents. By November 1948 Shenyang had fallen and the Nationalist position in Manchuria had collapsed. Chiang's government never recovered; the following year it fled to Taiwan.

industrialization and revolution

Liaoning's new masters made the most of their province's industrial supremacy. With Soviet help, they invested heavily in the coal, iron and steel, and transport industries, all of which made major contributions to the PRC's national drive for industrialization. This was especially true during the First Five Year Plan (1953-7). Liaoning's role as a staging area for Chinese troops during the KOREAN WAR, and the fact that it was the object of occasional American bombing, had little lasting impact. Meanwhile, Moscow's transfer of the former Chinese Eastern Railway to exclusive Chinese ownership in 1952, and the final withdrawal of Soviet troops from Lushun in 1955, marked a Symbolic end to almost a century of foreign control over all or part of Manchuria.
Nevertheless the position of northeast China in the national economy was sometimes a matter of controversy in Beijing. An example was the Gao Gang affair, named after the senior Party official (1895-1954) in the region who enjoyed close ties with Moscow. Promoted to Beijing in 1952, where he seemed destined for the very highest ranks of Party and government, he decided to speed the process up by plotting against those he believed stood in his way: LIU SHAOQI and ZHOU ENLAI The activities of Gao and Rao Shushi (1903- 75), the senior Party official in east China and a close ally, were soon exposed and condemned. The two men were purged. In August 1954 Gao committed suicide. Though there had been criticism of Gao's 'independent kingdom' in Manchuria, Liaoning and northeast China were only marginally involved in this first Split in Party leadership since 1949. But there is no doubt that Gao's demise deprived the region of a powerful representative in Beijing.
Liaoning fell under a far more searching spotlight during the GREAT LEAP FORWARD. From Mao Zedong's point of view the province symbolized much that was wrong with the Soviet model of development. It relied heavily on food imports - a function of long years of neglect of agriculture and excessive concentration on industry; its strengths were in capital investment rather than intensive labour; it placed more faith in a professional bureaucracy than popular mobilization; and it tended to favour technical experts over politically sound generalists. All these phenomena were at odds with the stratagems and goals of the Great Leap.
Local officials struggled valiantly to correct the situation, - particularly on the farming front. A sign of their Zeal was Liaoning's declaration, made even ahead of radical HENAN that it was the first province to amalgamate its Agricultural Producers' Cooperatives into full communes. Delivering the promised record grain harvests proved much more difficult: famine and death stalked Liaoning in the early 1960s as they did other parts of the country.
The same was true of political radicalism. In 1960, during what is sometimes known as second or mini-Leap', Mao devised a controversial new 'constitution' for the giant Anshan Iron and Steel Works southwest of Shenyang It put politics in command rather than pro duction targets, called on cadres to engage in labour, and required managers themselves to produce rather than simply supervise those who did so. Opposition to Mao's plans meant that the Constitution was not implemented until 1970. By that time the CULTURAL REVOLUTION was well under way, and Liaoning was at the forefront of Mao's last attempt at fundamental revolution.
One of its chief instruments in the province was Mao- Yuanxin (c. 1943- ), the Chairman's nephew, who- exercised real power in Liaoning and whose control extended throughout much of the northeast. His rule was based on an untouchable revolutionary lineage and close links with those later designated the 'GANG 0F FOUR'. Neither asset survived the Chairman's death, the fall of the 'Gang' and the rise of DENG XIAOPING. In the later 1970s Mao Yuanxin's reign in Liaoning came to an end.

reforming the rust belt

And with the new emphasis on free market reforms and opening to- the outside world, Liaoning's record ended as one of China's fastest-growing provinces. The persistence of 'Leftism'; the preponderance of industry over agriculture and, within that, of heavy industry over light industry; the dominance of the state sector; and the fact that so- many of the province s goods were uncompetitive made Liaoning a laggard in the early 1980s. China's 'equipment department' - once a main source of the nation's producers' goods - acquired a new identity as China's rust belt.
After a slow start, and several local personnel changes, the province managed to- get back on to- a high growth track by developing township and village enterprises (TVEs). Unlike the situation elsewhere - notably in GUANGDONG, FUJIAN and ZHEJIANG - the state to-ok the lead in founding rural industry in Liaoning. Individual entrepreneurs were thinner on the ground, as were private enterprises generally in the northeast. But the collectively owned sector of the economy developed rapidly, generating most of the growth which has enabled Liaoning to remain one of the big players among China's provinces, and driving down the state sector's share of industrial output.
FOREIGN TRADE AND INVESTMENT played an important role, too. Again, Liaoning lagged behind the southern provinces in making the most of its coastal location. Political changes in Beijing and local uncertainties made life difficult. Dalian was one of the 14 coastal cities opened to foreign trade and investment on favourable terms in 1984. But it was not until 1988, when much of the Liaodong peninsula was opened on similar terms, that parts of the province became engaged with the international economy on any scale.
Chief among them was - and remains -Dalian. In the words of mayor Bo Xilai (1949- ), son of the Veteran revolutionary Bo Yibo (1908- ), Dalian has positioned itself as the 'Hong Kong of the north'. It is the centre for finance, business, trade, transport, and tourism for much of northeast China. Its aspirations are to perform the same role for a much larger Northeast Asian regional economy, including the two Koreas, Japan and the Russian Far East.
To some extent, the city has resumed the role it played during its long years of Japanese rule, though in the happier climate of peace and Chinese sovereignty. One of China's biggest ports, it is the main conduit linking the riches of the Manchurian hinterland with the investment and know-how of the wider world. And in another throwback to the past, much of this investment and know-how is coming from Japan, a four-hour flight from Dalian and not much more from Shenyang. Hong Kong was the largest investor in Liaoning during the 1990s, but the high-quality projects in Dalian were set up by Japanese companies such as Canon, Toshiba and Matsushita. Together with other firms they employ a disciplined, well-trained workforce of thousands.
The decentralization of decision-making within the province during the 1990s spurred economic growth in Liaoning as it did elsewhere. Shenyang, the location of American, Russian and North Korean consulates since the 1990s, competes for foreign investment with Yingkou (a port-city in the Gulf of Liao-dong known to an earlier generation as the
treaty port of Niuzhuang), and Dandong on the border with North Korea. None of these cities is as successful as Dalian. But all have gained from growing interest in the potential of northeast China in particular and northeast Asia in general.

state firms; socialism's future

At the start of the new era two major problems stand in the way of realizing this potential. One is the general economic slowdown in the region arising from the Asian financial crisis of 1997-9. Its effects have been profound but are not likely to be longlasting. The other, more fundamental, issue is the poor performance of China's state sector, whose problems are writ depressingly large in the northeast (see INDUSTRY).
Despite more than two decades of reform, Liaoning's large state enterprises remain the backbone of the local and, to some extent, even the national economy. Fundamental restructuring is required to revive such huge, inefficient, often highly polluting concerns. Carrying out this task without provoking major social unrest is proving difficult.
Shenyang has been trying to do so since 1986, when it became the first city in China to experiment with bankruptry. In the years which followed several state firms were merged, restructured or closed. However nowhere near enough were subjected to this fate. The authorities found it even harder to provide new jobs for those who ought to be laid off than pay the hugely bloated local workforce. An indication of the seriousness of the problem came to light in 1994 when the mighty Anshan Iron and Steel Works had to stop production because it could not sell its products. Emergency loans were needed to pay the workforce, and massive investment sought to renovate the plant.
During the 1990s, resolving the kind of problems which plague state enterprises in Liaoning moved smartly up the national agenda. In 1992-3, ZHU RONGJI, then a vice-premier, was charged with settling state firms' huge domestic debts. In 1995, WU BANGGUO was made vice-premier with particular responsibility for state enterprise reform. Two years later, at its 15th National Congress, the Communist Party called for the conversion of many state factories into joint-stock companies, and the closure of others. In 1998, Zhu Rongji, by then premier, promised the completion of such measures within three years.
Progress on the ground was less impressive than the rhetoric. In almost every major centre of heavy industry, strikes and protests were common in the 1990s. In Liaoning, and particularly Shenyang, the industrial capital of the northeast, reports of unrest were legion. It was no cause for surprise. The workers of south Manchuria belong to one of the oldest working-class communities in China. Many were nurtured on the belief that they were
masters of the state and the vanguard of socialism. It is no wonder that they do not take kindly to the idea of redundancy. It is no wonder, either, that their fate is symbolic of the wider fortunes of Liaoning - a province whose achievements in the age of central planning and state control have cast a long cloud over the era of mixed ownership and the free market.