Yue Songdong, Development Research Center of the State Council

Research Report No.161, 2005

Recently, the author conducted a surveyin Fushun, Benxi and Fuxin in Liaoning Province over social problems related to drained urban resources. He found a number of serious problems related to drained urban resources such asmass poverty, mass unemployment and a deteriorating environment for human habitation. These problems must not be overlooked. They have become a huge obstacle for the effort to construct a harmonious society. It is imperative to take painstaking efforts to solve these social problems.

I. The Root Causes of the Aforementioned Social Problems and Ways for Settlement

The root cause of the problems in the aforementioned cities is widely seen, to some extent, in all resource-reliant cities across the country. Meanwhile, cities in Liaoning Province which are running out of resources have their own problems. They have three common root causes.

First, as the planned economy was in practice for a long time in these cities, public utilities are backward.

Our country’s primitive accumulation of industrialization was financed on the basis of the differential between the prices of farm and mine products and those of manufactured goods. In resource-reliant cities, raw materials were appropriated at controlled prices while manufactured goods were brought in at market prices. Enterprises lost profit both ways. Under the principle of "production prevailing over livelihood," the public utilities of resource-reliant cities have always been backward.

Second, the cities have long been engaged in crude, extensive production with emphasis on mining and little attention to environmental protection.

Take Fuxin for example. Over the past 50-plus years, the city has provided 560 million tons of raw coal to the country. The railway carriages used to carry this coal, if linked together, could go around the earth three and a half circles. Hills of coal gangue were left in the cities. The recessive debt to the environment is huge. The State Council designated Fuxin as a pioneer city for the experiment of transforming the economy. The GDP was rising but the urban environment was not fundamentally improved. If cities continue this practice of over tapping resources, they will inevitably end up by "drinking poison to quench thirst."

Third, the market mechanism cannot directly solve poverty and environmental problems.

The market economy cannot automatically bring equal benefit to all sectors of the population. Markets always favor more comprehensive social strata. Therefore, the final solution to the problem of poverty lies in improving the comprehensiveness of the impoverished and strengthening their ability to survive market competition. In regards to environmental improvement, market mechanisms often fail to function because the environment is an "externality." Strong intervention from the government is neededtop rectify this.

Besides the aforementioned common causes, the causes of the urban social problems in Liaoning’s resource-drained cities have their own special characteristics, demonstrated mainly in the following three aspects:

First, these cities were once under colonial rule and the colonialists imposed indiscriminate mining on the resources.

The Japanese imperialists cruelly ruled the three cities for 14 years from 1931-1934, inflecting poverty to them. They exploited the resources over a long period of time and thus speeded up the draining of these resources.

Second, these cities have "donated blood" for a long time and need rehabilitation.

All these cities were liberated before the founding of the People’s Republic. They made great contributions to supporting the Liberation Army in thewars for national liberation and the War to Resist US Aggression and Aid Korea. They exerted their utmost to "nurture" the young republic. Resource-reliant cities made huge contributions to China in its bid effort to build an independent and complete industrial system. Excessive mining over a long time, insufficient depreciation of equipment and chronic lagging-behind in prospecting caused the resource-reliant cities in Liaoning to "lose too much of blood." After the cities have made huge contributions over the past 50-plus years, a feedback mechanism should be established to let them recuperate.

Third, it is very difficult for these cities to repay their historical debts after state-owned coal mines were handed over to localities.

The large coal mines in these cities were previously state-owned mines which supplied coal under the centralplan. In 1998, they were handed over to local governments in a process of management reform. But at this time these state-owned coal mines had begun to dry up, and many historical problems had been left unsettled. Those mines had only one leading industry with a short production chain. Accessory industries relied heavily on the leading industry. Meanwhile, employment in the mine areas had a special feature: usually the miner’s whole family would be employed by the mine generation after generation. Once mine pits close, however, accessory enterprises go bankrupt immediately, resulting in mass unemployment and a large number of "completely unemployed" families. Historical debts and new problems which arise after state-owned enterprises are transferred to local governments still reflect historical legacies. Therefore, the problems cannot be solved by local finance alone. The State should give strong support and take proper measures to help alleviate these problems.

Therefore, further moves should be taken to improve mechanisms and find ways to settle social problems faced by cities suffering from resource drainage. These can be summarized as follows:

First, maintain coordinated social and economic development.

The traditional concept of development favors the economy but attaches little importance to society. It takes for granted that economic growth will lead to social progress. Yet this is not the case. Some petroleum-exporting countries in the Middle East are among the most advanced in the world in terms of per capita GDP but still havemonarchical systems. The so-called "Latin-American phenomenon" also illustrates that economic growth cannot directly lead to social harmony. Therefore, we must make sure that the economy develops in coordination with society. If this remains unsolved for a long time, social problems will not only disrupt social stability but also hamper economic development.

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