Editor’s Note:
 
Since the financial crisis hit last year, all levels of government have been struggling with its impact. Yang Shuping, Deputy Secretary of the Municipal Committee of CPC and Mayor of Sanmenxia city, Henan Province, participated in an online discussion with the public on July 10 on the topic of “How can local governments deal with the financial crisis?” The interview was translated by Wang Buzhi.

Yang Shuping

Q: What was the impact of the financial crisis on Sanmenxia city?

Yang: Sanmenxia is a resource-based industrial city in the west of Henan. Its industries concentrate on resources and raw materials, such as gold, aluminum and coal. The financial crisis has had a huge impact on us, although it was late in coming.

Raw materials are the lowest end of the industrial chain and it takes time for the crisis to be transmitted from the high end.

For the first several months of the crisis, it had little impact; it was not until December last year that we suffered a deep blow.

By this I refer to the large price difference of industrial raw materials before and after crisis. Before the crisis, the price of electrolytic aluminum was 20,000 yuan ($2,927) per ton.

After the crisis, it fell below 10,000 yuan ($1,463) per ton, or even to 8,000 yuan ($1,170). The price of aluminum dropped from 6,000 to 1,600 yuan ($878 to $234) per ton. All this resulted in negative industrial growth this February.

Q: What measures did Sanmenxia city take to deal with the crisis?

Yang: The crisis is a challenge to our traditional economy, but it is an opportunity for environmently friendly and high-tech industries. I think there are opportunities in four aspects.

The first is to narrow the gap between us and more developed areas. The crisis was like a huge wave. Everyone was smashed to the bottom. At this time, those who see things early and act quickly can seize the high ground.

The second is to undertake industrial transfer. After the crisis, the regional limit on international industrial transfers was broken. Within China, the advanced manufacturing in some developed areas will shift inland. Connecting the east and the west, Sanmenxia city has resource advantages and a certain competitiveness.

The third is to readjust structures and accelerate industrial upgrading. Why did the crisis have such a serious impact on our city? It’s because of our backward industries, which consume a lot of energy and produce a lot of emissions. Complying with the crisis impact and industrial transfer, we can introduce high-tech, environmentally friendly projects to replace those outdated factories and to aid the positive interaction of different industries.

The fourth is to increase economic opening. At the moment our ratio of dependence on foreign trade is only two percent. This is an opportunity not only to go out and explore markets, but also to bring in high-tech equipment.

In terms of the measures to deal with the crisis, we implemented a strategy of “one body, two wings” to stimulate the economy. “One body” refers to expanding investment by carrying on projects. This is the main engine for maintaining economic growth. “Two wings” means attracting investment and encouraging bank-enterprise cooperation to provide support to projects.

In January of this year, the local People’s Congress passed a resolution to determine the “8155” investment promotion program. “8” is the eight areas such as transportation, construction, infrastructure and environment protection. “1” refers to one hundred projects above 100 million yuan ($14 million).

The first “5” means that the investment to all the projects should surpass 50 billion yuan ($7,318 million). The other “5” indicates that the annual social fixed asset investment should also reach 50 billion yuan ($7,318 million).

The result of this resolution is that we identified 138 projects after screening, surpassing the 100 projects originally expected. And the total investment was more than 96 billion yuan ($14 billion).

To attract investment we conducted promotional campaigns across China, and we’ve consolidated cooperation between banks and business enterprises. We’ve signed strategic cooperation agreements with major State-owned banks. In three years we will finance major projects of our city with 61.2 billion yuan ($8 billion). We also established a platform for small and medium enterprises financing. The investment guarantee has reached 5 billion yuan ($731 million).

Q: You have proposed “5 winter policies.” Can you introduce them?

Yang: The “5 winter policies” are the measures we adopted at the beginning of the crisis. In general, they are measures to serve business and to make enterprises mutually supportive during the crisis.
 
At that time, we called together the coal, electricity and aluminum sectors and urged them to get over difficulties together by making mutual concessions.

Another point is to live an austere life. Last year, we decided to avoid unnecessary expenses, such as travel, car and official receptions, in order to prevent high expenses before the end of the year.

Q: Did these measures work?

Yang: So far they have been quite successful. The turning point was in May, but they had a significant effect in June, when industrial added value increased 15.8 percent and fiscal revenue increased 7.9 percent to 2.18 billion yuan ($319 million).