Almost no one eats there any more and it's not making any money: the last remaining noodle bar outside Yunfeng steel plant cannot be long for this world. It seems destined to the same way as other small shops in the same area that have already shut. "The steel plant is running at a loss. Some contracted laborers have been laid off," said the eatery owner.
The Yunfeng works in north China's Hebei Province has cut its labor force from from 1,800 in its prime years to about 800. Yunfeng's home city of Wu'an, 400 km south of Beijing, once had 18 iron and steel plants. Many have slashed production, to survive the bitter winter of the industry; some have closed their doors for good. Hebei, the country's leading iron and steel producer, is struggling to cut capacity in iron and steel, cement, and glass, planning to cut iron and steel capacity by 18 million tonnes this year.
MAGIC BULLET
Last year, policymakers came up with supply-side structural reform as the latest magic bullet to deal with a number of industrial ills by cutting overcapacity, destocking, deleveraging, reducing costs and identifying growth areas. Supply-side structural reform will be a key word at this year's "two sessions" -- the annual gatherings of the national legislative and political advisory bodies, analysts predict. China's growth prospects this year are the subject of global concern. "I believe China will realize 6.5 percent or better GDP growth in 2016, a difficult feat, given the unstable global economy," said Shlomo Maital, professor with Technion -- Israel Institute of Technology.
China saw a record number of startups in 2015, with 4.44 million companies established, up 21.6 percent from 2014. "Today, China too is in a startup boom. China, like Israel, can become a startup nation," said Maital. "Part of the Chinese dream can be a dream about starting your own business." According to Maital, to avoid the middle-income trap, China will need to raise its "total factor productivity", which demands innovation, working smart, new ideas and improvements, not more use of resources.
SHEEP AND GOATS
China plans to take another 70 million people out of poverty in the next five years. Visiting Shenshan, a village in Jiangxi Province, early in February, President Xi Jinping said, "Not a single family living in poverty is to be left behind on our path to ending poverty." Villager Zhang Chengde, 63, doubled his income to about 8,000 yuan (1,200 U.S. dollars) last year by raising goats thanks to kids given as part of a poverty reduction campaign. Zhang's son is 29 years old and remains a bachelor, partly due to poverty. He will not seek a job in cities this year, believing that helping his father expand the size of their herd will be more rewarding.
PATH AND METHODS
According to the proposal on the 13th Five-Year Plan, the quality of free trade zones (FTZ) will be improved and more FTZs set up. Besides the four in the Shanghai, Tianjin, Fujian and Guangdong, all prosperous, coastal localities, a number of other provinces have unveiled FTZ applications. Liaoning Province in the northeast, said in its provincial 13th Five-Year Plan it will seek the approval for an FTZ in its port city of Dalian. The economy in Liaoning, part of the old industrial belt, only expanded 3 percent, the slowest at the provincial level, in 2015.
The interaction of the FTZs, the Belt and Road Initiative, the integration of Beijing, Tianjin and Hebei, among other strategies, will help produce a more balanced development and reshape the opening up policy. The "two sessions" will show how China perceives its path and the methods it will use to handle the challenges ahead. New governance concepts and strategies will also be widely illustrated across all agendas at the sessions this year.
China's shift from a low-wage manufacturing economy driven by exports and infrastructure investment to a medium-wage economy driven by services and consumption, is mainly driven by the growing middle class, said Maital. "Global businesses are aware of China's huge and growing market and the new middle class. They are aware that China is one of the few markets in the world that are growing strongly," said the Israeli academic.
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