In northeast China, a test for Beijing's big bet on fairer growth

For decades, the Communist Party's fate was tied to the pace of economic growth. Now, amid a changing economy, President Xi has emphasized his vision for a fairer society. But that dream can seem distant in regions hard hit by the transition. 

Early last month, Yang Yongsheng arrived in this hardscrabble mining city near the Russian border to look for work. He had fallen on hard times after a bad rice harvest and was eager to get out of farming. A coal miner told him he could make a decent wage in the mines spread out around Shuangyashan. With nothing to lose, Mr. Yang decided to take the man's advice.

He found work, but authorities shut down the mine nine days later – one of the latest causalities in China’s nationwide effort to reduce overcapacity and shore up coal prices. This northeastern province, Heilongjiang, has been among the hardest hit. In 2016, the provincial government said it would close 44 mines in the next three to five years, eliminating tens of thousands of jobs. 

Yang now spends his days wandering the streets in search of whatever work he can find. He’s happy that his wife found a job in a local restaurant, but the $330 it pays per month isn’t nearly enough to support them and their teenage son. On the verge of exhaustion and destitution, Yang is at a loss about what to do. When he thinks about Chinese President Xi Jinping’s recent promise to make a more prosperous and fairer society, his question is: When will I see it?

“I don’t believe in the Chinese Communist Party,” he says over soup and lamb skewers in a small restaurant beneath a decrepit apartment building. “What they say is different from what I see in reality.”

For the past four decades, the Party’s fate was tied to economic development. Now that the pace has slowed, however, the widening inequality and pervasive corruption that accompanied China’s boom years have emerged as the greatest threats to its legitimacy. At a seminal party meeting in October, Mr. Xi redefined the “principal contradiction” faced by Chinese people as one between people’s desire for a better life and “unbalanced and inadequate development.”

But the gap between Mr. Xi’s vision of a fairer society and the actual lives of people like Yang is starkly visible in Shuangyashan. The city is a drab assortment of concrete housing blocks, dilapidated storefronts, and rusting factories surrounded by rolling hills and wind-swept fields. It looks forgotten, a relic of the past waiting to be repurposed for an uncertain future.

Many of its residents are losing patience. The city’s economy has slowed to a crawl in recent years as China becomes less reliant on industrial growth. A plunge in coal prices in 2015 only accelerated the collapse of the local coal industry. In March of the following year, thousands of workers took to the streets to protest against a state-owned mining company for unpaid wages.

The protests came and went, but not before sending a signal to Beijing about the risks from social tensions created by decades of rapid and unequal growth. Those risks are something Xi appears to now be taking seriously as he looks for new ways to defend the Party’s image.

“This is a crucial issue for every Chinese person,” says Keegan Elmer, a researcher at China Labour Bulletin, a labor-rights group based in Hong Kong. “They know that inequality is growing day by day and that it's time for the average Chinese person to have a greater slice of the pie.”

Changing jobs and mindsets

Northeastern China presents an especially difficult challenge to Xi’s appeal for a brighter future for every citizen. The region’s three provinces have some of the weakest economies in the country. Collectively known as China’s rust belt, they’ve struggled to overhaul bloated state-owned enterprises and reduce their dependence on coal and steel production. A recently published index measuring Chinese cities’ economic performance provides further evidence of this grim reality. Out of the 226 third-tier cities included in the index, Shuangyashan ranks last. Many other cities in the northeast aren’t far ahead.

The economic decline was on full display at an indoor market in central Shuangyashan in early November. Stall owners complain about having fewer customers. Wholesalers complain about having fewer orders. And Mr. Yin, an affable man in his mid-40s who gave only his surname, tries not to complain about any of it.

“The economy isn’t good and it’s not easy to do business here, but there’s no free lunch,” he says. “If you work hard, you’ll get what you deserve.”

Two years ago, Yin was laid off from a state-owned coal mine. He had worked there for 20 years. In his early days, he never expected to work another job in his life. Coal production was crucial to China’s fast-growing economy. And while market reforms were well underway in much of the south and along the coast, the northeast clung to its socialist ways. State-owned firms still dominated the economy, and many people still believed that working for one of them all but guaranteed an “iron rice bowl” – job security from cradle to grave.

But by 2014, it became clear that the northeast was long overdue for reforms. China’s economy was growing at its slowest rate in a quarter century, weighed down by traditional industrial businesses struggling with excess capacity and dwindling demand. The government soon began to shut down inefficient mines and factories. In February 2016, the Labor Ministry announced plans to lay off 1.8 million steel and coal workers. Worried about their prospects in a bleak job market, workers began to organize strikes and protests across the country.

Authorities have responded to the unrest, including the incident in Shuangyashan, with a heavy hand. They’ve quashed protests and arrested activists. Xi appears willing to do whatever it takes to maintain loyalty to the ruling Communist Party at a time of economic uncertainty. In return, he has promised to lead China toward more balanced development.

“President Xi wants to make a firewall between civil society and the middle class,” says Wu Qiang, a political scientist in Beijing who formerly taught at Tsinghua University. “He sees civil society as a potential challenge to the Communist Party.”

That the party continues to portray itself as a guardian of worker’s rights is an irony not lost on some. As for Yin, who works at a small lunch stall at the market, he says he’s learned a valuable lesson about socialism. All that remains of his iron rice bowl is the roughly $75 stipend he receives every month from the government. In three years, that too will end.

“People’s minds have changed,” Yin says. “You can’t just wait for the government. You need to go out and find work.”

Yet finding a new job is easier said than done for many laid-off state workers, especially as the government encourages investment in high-tech industries unlikely to need their services. Still, Beijing is looking for ways to help as it pushes to reduce surplus industrial capacity while avoiding widespread unrest. Last year, it earmarked about $15 billion for relocating and retraining programs for state workers. Support has also come from outside the country. Earlier this month, Shaungyashan and three other cities in Heilongjiang secured a $310 million loan from the Asian Development Bank to help revitalize their economies.

In spite of such efforts, Fan Xingshen, an 85-year-old retired coal worker, says he sees little hope for Shuangyashan. After two of his sons were laid off from a local coal mine last year, he was happy to see them move south to search for better jobs. One moved to Beijing; the other to the port city of Tianjin.

“The good times are over,” says Mr. Fan, who lives in the sclerosis ward of a state-run hospital, his lungs severely damaged from the 28 years he spent working underground. “There’s nothing the government can do.”

Xie Yujuan contributed to this report.