Investment heaven or hell?

By Li Xuanmin Source:Global Times Published: 2018/1/10 18:43:39

Amid Mao saga, experts, investors discuss future of Northeast China’s business environment

Snowboarders at the Yabuli Sun Mountain ski resort in Harbin, Northeast China's Heilongjiang Province File photo: IC

Is Northeast China a good place for investment? Public discussions on the topic have been heated in recent days following accusations by a prominent Chinese entrepreneur that a local committee in Northeast China's Heilongjiang Province improperly intervened in his business and illegally occupied his land. The Global Times recently spoke with several investors in the region as well as a number of experts to find out their views on the local business environment and the future prospects of investing there.

A video capturing a prominent Chinese entrepreneur's tirade against a local committee in Northeast China's Heilongjiang Province for "improper interference" in his business has gone viral.

While the video has sparked public discussion about the so-called hostile business environment in Northeast China - which has been labeled as the main cause of its struggling economy - experts and officials have also pointed out that the remarks in the video offer a chance for the region's authorities to improve the local investment environment, as already exemplified by the Heilongjiang government's swift response to the entrepreneur's accusations.

In a three-minute video uploaded online on January 2, Mao Zhenhua, chairman of ski resort Heilongjiang Yabuli Sun Mountain, also founder of China's first credit rating agency China Chengxin Credit Rating Group, says that his enterprise has suffered "a dark period" due to interference by a local administrative committee which oversees ski tourism in Yabuli.

Mao claims in the video that the committee illegally seized 230,000 square meters of land in his resort and then invited other private businesses to set up facilities on the property.

Unsurprisingly, Mao's video has provoked a storm on the internet, with several other business tycoons backing his claims and urging the local government to investigate the matter.

The video also triggered the start of an official probe by the Heilongjiang provincial government.

On January 4, the Heilongjiang provincial government issued a statement, publicizing the initial investigation result of Mao's complaints. It ordered the local committee to apologize to Sun Mountain for "illegally occupying land owned by the resort and improperly intervening in its business operation." The provincial government added that government officials involved in the "serious disciplinary violations will be punished."

Both Mao and the Heilongjiang provincial government refused to comment further when contacted by the Global Times on Monday. An executive at Sun Mountain surnamed Xue, however, told the Global Times on Monday that the resort welcomes the result.

"The quick response shows the local government's determination to improve the business environment… I'm confident about the future prospects of my resort, as well as investing in Heilongjiang," Mao was quoted as saying in a Xinhua News Agency report over the weekend.

But the incident seems to have taken a toll on the reputation of Sun Mountain. In an announcement on the website of the China National Tourism Administration on Wednesday, the resort failed to qualify as one of the national holiday resorts, a State-level honor, despite being selected as a candidate in late December. 

Struggling economy

Mao's rant, as well as a recent case of overcharging in Xuexiang village, another tourism spot in Heilongjiang, has also aroused heated public discussion on the broader business environment in Northeast China, where the widely held belief that "people should not invest beyond Shanhaiguan into the northeastern region" was once again highlighted.

Shanhaiguan was once known as a gateway along the Great Wall to China's three northeastern provinces — Heilongjiang, Jilin and Liaoning. Over the last five years, the three provinces, burdened with mounting debts, have ranked among the lowest five slots in China's annual provincial GDP growth ranking.

Some investors have pointed out that the region's lackluster economy is due to a "bureaucratic and abusive system" that has been rigged against private enterprises, as indicated in Mao's video.

A 31-year-old local investor surnamed Liu, who in 2014 set up a mechanics and electronics company in Changchun, capital of Jilin, told the Global Times over the weekend that building relationships with officials and bribing them "with gifts" is "extremely important" in Northeast China.

"Otherwise, local authorities may deliberately pose hurdles to your business," Liu said, with reference to his own experience.

In 2014, Liu was qualified to receive a 30,000 yuan ($4,599) government fund for a private company based on policy privileges for veteran businesspeople, but local regulators did not grant the fund to him due to his "lack of personal connections with senior officials," Liu said, indicating a lack of effective law enforcement and bias in the region.

Liu's opinion is echoed by another investor surnamed Wang.

Wang, aged 50, used to own a shopping mall in Changchun. But in 2012, his property, valued at 300 million yuan at the time, was seized by the local economic investigation department for "unspecific reasons." Later, the mall's asset ownership was transferred to someone else without his knowledge or consent. Since then, Wang has been appealing the case to the courts.

"The regulators at that time approached us and said that I could pay 5 million yuan to [get back] the shopping mall. I refused and ended up losing all my investment … [The scenario] is a typical case of local authorities seeking rent power," Wang told the Global Times on Monday.

In response to such cases, industry insiders have warned investors of a vicious cycle amid the ongoing spotlight on Northeast China's "hostile" business environment, which could eventually lead the region to lose its last bite of economic vitality.

"The more private corporations are treated unfairly, the less people are likely to invest here … As a result, both talents and capitals are fleeing elsewhere," Liu said, noting that he is also considering moving his factory to East China.

Better environment 

Although Northeast China lags behind East China, the business environment in Northeast China has in fact changed and improved in recent years.

Zhou Jianping, a senior official of the National Development and Reform Commission (NDRC), said on Friday on the sidelines of a meeting on revitalizing Northeast China's economy that Mao's experience is just an "individual case" and therefore should not be used to deny local governments' efforts to create a friendlier commercial environment. 

"For example, Liaoning has set up China's first business environment administration," Zhou was quoted as saying in another Xinhua report.

Liang Qidong, vice president of the Liaoning Academy of Social Sciences, told the Global Times on Monday that governments in Northeast China have sought to transform their function "from control-oriented to service-oriented" in recent years.

Xu Xiaobin, chairman of Qianding Group based in Shenyang, capital of Liaoning, which makes reduction gears, also praised the local government's practices of simplifying approval procedures and issuing favorable policies to rejuvenate the heavy industry.

Experts have also taken note of beneficial policies that will lay a solid foundation for the boosting of Northeast China's economy.

In recent years, the central authorities have rolled out a batch of documents on revitalizing Northeast China and are also helping to set up a number of free trade zones in the region, according to Liang.

A financial cooperation mechanism for Northeast China, led by the China Development Bank and the State Development and Investment Corporation, is also under way, the NDRC announced on Monday.

Against the backdrop, Xu told the Global Times that he is confident of the prospect of investing in Northeast China, although improving the local environment may "take some time."

Posted in: ECONOMY

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