China polishes up rust belt with switch to creative industries

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                                                       (World Today Saturday 8 July 2017)

China polishes up rust belt with switch to creative industries

A Yangtze River Cableway cable car travelling across the river in Chongqing, a former

industrial centre and China’s World War II capital. Photo: Bloomberg

Updated 7:05 PM, July 08, 2017 

CHONGQING — A poster from the Mao era hangs near the entrance to the Chongqing Asbestos Factory, depicting a burly worker exhorting all to “strive to build the nation into a modern and powerful socialist country!”

Once, this might have quickened the hearts of the factory’s workers. But today, it is no more than a surrealistic touch, lending ambience to Chongqing’s latest hipster-industrial art space, alongside statues of a giant teapot and dripping tap.

The plant was once at the heart of the Dadukou district on the outskirts of the south-western city of Chongqing, a former industrial centre and China’s World War II capital. But since 2014, it has been transformed.

Trendy galleries and coffee houses have opened in former factory buildings. The site has been renamed the Yiduchuang Cultural and Creative Park, and promotional materials feature a rousing new slogan: “Consolidate creative industries and transform into leisure and cultural industries!”

Yiduchuang symbolises a new phase in China’s economic development. Across the country, heavy industries, plagued by overcapacity and environmental problems, are closing down or moving outside city limits and giving way to service and consumer businesses. In many cases, former factories have been turned into cleaned-up “green zones” aimed at attracting more eco-friendly knowledge industries, using cheap rents, trendy leisure and cultural facilities and copious amounts of industrial chic to lure high-tech and creative businesses.

Dr Gan Jie, an economist at the Cheung Kong Graduate School of Business in Beijing, estimates that industrial overcapacity accounts for about 7.6 per cent of existing capacity in China. “That gives you some idea of how much industry still needs to close or be upgraded,” she said.

In Dadukou, a steel mill that was the district’s main employer and taxpayer was moved outside the city for environmental reasons in 2010. But the hole in the local economy has yet to be filled by espresso bars and shops selling artisanal soaps.

Dadukou’s gross domestic product (GDP) contracted 30 per cent following the closure, and by 2015 the district’s debt stood at 160 per cent of GDP, including off-budget borrowing. Daduko’s sudden transition from its industrial past may be relatively extreme, according to Dr John Litwack, a World Bank economist leading a financial restructuring project in the district aimed at controlling spending and making budgets more transparent. But it is “characteristic of China’s current rebalancing away from excess capacity manufacturing toward greener growth, services, and consumption”, he said.

The 120-acre space of the asbestos factory has attracted 34 companies since it opened, although the target is 150, according to its website.

“The government wants knowledge businesses to relocate here, and creative people need somewhere like this to go and have fun,” said Ms Wang, who runs a cafe in a former garage on the site. The location on the outskirts of the city means businesses like hers have been set up to service a clientele that largely does not yet exist, she said.

“The general level of culture and education is very low here. This is what motivated me,” she added, pouring espresso for patrons.

The transformation of China’s former factories into artsy-bohemian spaces was pioneered in Beijing in the mid-1990s with the conversion of a military factory complex into what is today known as the 798 District.

“Everyone is using 798 as a model,” said Ms Wang. Chongqing already has a number of such developments, she noted, adding that part of the attraction is the offer of rent-free premises for the first year.

But Mr Chen Shaofeng, vice-dean of the Institute for Cultural Industries at Peking University, said that many of these “cultural industrial parks” simply suck subsidies from local government budgets. “Their current business model is mostly based on office leasing and simply utilising the physical space. Most of them need an upgrade to make them flourish as part of a local system of development.”

A similar bid to transform Dadukou’s former steel plant into a museum and industrial park appear to have stalled — the factory is overgrown with weeds and there is no sign of appreciable progress. But elsewhere in Chongqing, other developments are moving along. Dalian Wanda, China’s largest real estate and entertainment conglomerate, is building a Wanda Plaza shopping centre.

Mr Zhang Guangning, former chairman of Anshan Steel, one of China’s largest steelmakers, and ex-mayor of the southern city of Guangzhou, drew analogies with the regeneration of Birmingham in Britain and Pittsburgh in America to illustrate what needs to be done in China. “The essence was to eliminate fallen-behind sectors and companies that failed to comply with anti-pollution standards,” he says. “It’s a path that nearly every city in China must travel.” FINANCIAL TIMES