Northeast China woos investors by targeting bureaucratic flaws

SHENYANG - A housing official demanded a sedan for his wife from a heating materials firm. A market official asked for a "favor fee" from an optical store to help resolve a customer complaint. A policeman wanted a similar fee from a company over fire safety requirements.

These were three typical cases exposed Tuesday by the discipline watchdog of Shenyang, capital of Northeast China's Liaoning province. The first two officials were fired and the third received a serious disciplinary warning.

Liaoning, which has been struggling to revive its unusually contracted local economy, is staging a campaign to target bureaucratic inefficiency in order to attract much-needed investment.

A week ago, the city reprimanded 12 government units in taxation and public service centers in different districts for irregularities and inefficiency, which cause big headaches for entrepreneurs.

Secret investigations conducted by the city's leading team for business environment caught employees in these units chatting, playing with their mobile phones, eating snacks, asking for "favor fees," incompetence, and showing indifference to clients.

In the first three quarters of 2016, Liaoning's local economy shrank by 2.2 percent, the only province to see contraction. Its fixed-asset investment plunged 63.5 percent over last year. Private investment accounted for more than half of the total investment in Liaoning.

"The falling private investment is closely related to the poor business environment," said Feng Yuzhong, an economist and former president of Liaoning University.

"Investment does not go beyond Shanhaiguan Pass," goes a popular saying, referring to a traditional geographical division separating the northeastern provinces of Liaoning, Heilongjiang and Jilin from the rest of China.

It is harsh criticism, said Feng. But it has some truth, especially for entrepreneurs.

"The dishonesty and low efficiency of some government departments in the northeast have made us very upset," said a company boss who declined to be identified. The entrepreneur, a native of Heilongjiang, now runs his business in the southern boom city of Shenzhen.

His words were echoed by private investors. Some complained to State Council inspectors last year that local government departments did not live up to promises they had made when attracting investment.

Behind the "polluted" investment environment were deep-rooted institutional problems, said Li Kai, deputy director of the research institute for northeast China rejuvenation.

Northeast China is home to China's old industrial base. The regional economy has faced difficulties in recent years amid the country's restructuring.

The Liaoning provincial government has made it a priority to improve the "soft environment" in 2017, vowing to expose violations and seriously punish those who undermine the business environment.

The regulation on improving the business environment, adopted by the Liaoning provincial legislature in December, will take effect in February. It is the first of its kind in the northeastern region.

The rule bans officials from making empty promises to attract investment or acting as unlicensed law enforcement. It stipulates punishments, including dismissal, for government employees who violate it.

"It takes time to improve the environment. What is important is that the region has declared a fight against 'pollution' in the business environment," said Li.