Summary of Key Points
The three northeastern provinces—Liaoning, Jilin, and Heilongjiang—are conducting a large-scale consolidation of their provincial-level economic development zones (EDZs). Liaoning has merged 49 zones in two rounds, reducing the total from 92 to 43, a decrease of over 50%. Jilin and Heilongjiang are also advancing similar reforms. The reason for these mergers is that there were too many EDZs in the past, which operated inefficiently (relying on financial support with low output values) and experienced severe industrial homogenization, leading to waste of land and staffing resources, as well as a heavy financial burden. After the consolidation, the provinces will focus on their core industries, eliminate non-economic functions, and improve service efficiency, aiming to transform the EDZs from areas that attract little investment into centers of high productivity, thus providing new pathways for the transformation of these former industrial bases.
Why the Need for Consolidation? Inefficient Zones Have Become a Financial Burden
Many EDZs have become ineffective entities. For example, in Liaoning, the average annual output value of the 92 provincial-level EDZs in 2024 was less than 7 billion yuan, far below that of coastal provinces (which often exceed tens of billions). Many zones were in deficit and relied on financial subsidies, not only failing to contribute to the local economy but also occupying valuable land and staffing resources. After the consolidation, Liaoning will have 5.51 million mu (about 3,670 square kilometers) less land and 47% fewer management staff (from 3,969 to 2,088 people), directly reducing financial pressure.
The excessive number of zones also led to competitive pressures: neighboring zones offered similar incentives to attract businesses, resulting in price-cutting competitions. This situation meant that no zone could profit, and output values remained stagnant. Experts argue that the removal of these inefficient zones will have little impact on the local industrial structure, as only the more viable ones will remain.
Why Were So Many EDZs Established in the First Place? They Were Once Highly Desirable for Investment
EDZs were a product of the reform and opening-up era, initially serving as tools for local governments to attract investment and increase tax revenue. In the 1990s, when the state relaxed land policies, provincial-level EDZs began to expand rapidly. The northeastern region, leveraging the 2003 strategy to revitalize the economy, saw annual fixed asset investment (used for building factories and purchasing equipment) grow by over 30% annually, higher than the national average. At that time, there was no concept of a "business environment," so regions like Liaoning focused on improving infrastructure and implementing incentives to overcome perceptions of poor investment prospects.
However, this growth came to an abrupt halt in the 2010s, with fixed asset investment plummeting in Liaoning (from 5.6% to -24.7%). The resulting financial challenges exposed the flaws in the EDZ model.
What Are the Immediate Changes After Consolidation?
The consolidation has led to several tangible changes in Liaoning:
- Reduction in Number: From 92 to 43 EDZs.
- Land Conservation: 5.51 million mu of land has been freed up for more efficient use.
- Staff Reduction: Nearly 2,000 management positions have been eliminated, reducing staffing waste.
Experts believe these changes will not hinder industrial development, as the remaining 11 national-level EDZs account for 43.2% of the total output value of all provincial-level zones in the province, representing the real driving force for economic growth.
Consolidation Is Not the End Point; Further Actions Are Needed
While consolidation is a form of "subtraction," more important are the following "additions":
- Focusing on Core Industries: Liaoning's remaining EDZs will specialize in specific areas such as equipment manufacturing and healthcare, avoiding industrial homogenization.
- Eliminating Non-Economic Functions: EDZs will hand over responsibilities for infrastructure maintenance and community management to local governments, allowing them to focus on attracting investment and serving businesses.
- Improving Efficiency: Efforts will be made to streamline institutions and expand economic management authorities to make processes faster. For instance, Jilin aims to transform its EDZs from being "comprehensive" to being "specialized and efficient," relying less on incentives and more on competitiveness.
The Liaoning Provincial Department of Commerce emphasizes that this shift represents a change in mindset—from focusing on quantity to emphasizing quality and effectiveness. EDZs do not need to be widespread but should be targeted and effective.
What Lessons Can This Reform Offer to Other Regions?
The reform in the northeastern provinces highlights the need for transformation in old industrial bases. The focus should shift from relying on quantity and policies to focusing on quality and efficiency. For other regions:
- The number of EDZs is not necessarily the key; they need to be more targeted and specialized.
- Governments must balance their roles, managing what is essential (such as providing industry support) and delegating what can be handled by others (such as social services).
- Only by focusing on the real economy and improving government-business relationships can long-term growth momentum be generated.
In short, the consolidation of EDZs in the northeast is about shedding unnecessary burdens to empower these regions for better development.