China’s Rust Belt is a case study in how local conditions and priorities can clash with grand plans for economic integration.

China’s integration into the global economy is traditionally viewed by external audiences through the lens of power projection. At the center of this lies China’s Belt & Road Initiative (BRI), which is being countered by a U.S. Indo-Pacific strategy that President Joe Biden reaffirmed with Quad allies in March.

Such outreach by China, in particular in the context of the BRI, has raised debates about neocolonialism.

But these plans are also linked to the long-term development of China’s own regions rather than just ambitions abroad. Regional economic integration in Asia has largely been a success story for China’s Coastal Regions.

Yet after four decades of market transition, China’s late-developing inland periphery captures the other side of this story.

China’s northeast rust Belt was envisioned as the next region in China to follow the export led coastal model, given its cross border geographic advantages and economic complementarities & policy initiatives engaging Northeast Asian neighbors.

Despite such hopes since the 1990s, why is China’s northeast frontier still waiting for regionalism?

China’s economic integration with Asia is best understood at the subnational level. The interaction of central, local, and international interests under given structural and historical conditions produces distinct provincial trajectories of foreign engagement.

While the interests of the central state in Beijing dictate policy choices, policy outcomes are shaped through processes of local feedback and institutional change. China and Northeast Asia have seen a negative orientation of such forces over the past two decades. Stagnation in the northeast can be traced to a poor alignment of interests, the region’s internal and external structural constraints, and a socialist historical legacy that has reinforced local conservatism.

The Jilin-Northeast Asia case embodies dynamic linkages between China and Asia’s regional economies. Jilin province links China to the Korean Peninsula and Russian Far East, and borders northeast provincial counterparts Heilongjiang and Liaoning.

These three “old industrial bases” represent only 6 percent of China’s GDP and 3 percent of its foreign trade, compared to coastal contributions of 50 percent and 80 percent respectively. While China’s total trade volume fell by 1 percent in 2018–2019, Jilin’s trade volume shrank by 9 percent to $18.9 billion.

Per capita GDP in Jilin exceeded the national average in 1990, but had fallen 40 percent below it by 2019. The region’s decline in population reflects systemic problems according to the National Health Commission, and makes northeast China this year’s proposed test site for fully lifting China’s family planning policy.

The 2003 northeast revitalization plan, under the leadership of Hu Jintao, made little difference. Under Xi Jinping’s BRI more than a decade later, northeast integration began to trail behind landlocked provinces on China’s western border like Yunnan.

The phenomenon of decline in China’s northeast triggered a renewed plan in 2016, signaling the central government’s ongoing commitment to the issue. Xi toured the northeast twice; advocating “self-reliance amid rising unilateralism and protectionism” in 2018, and promoting China’s 14th Five Year Plan (2021–2025) last July.

Current strategy emphasizes internal growth drivers in line with China’s broader development direction, which includes support from coastal regions as Deng Xiaoping envisioned in 1988. Last month, state media attributed the northeast’s recovery to the innovation drive of local government and emerging industries.

But as Jilin leaders admitted in 2015, “We talk big about innovation, but have no idea what to do.” In the same year, provincial Party Secretary Bayinchaolu cautioned that technological investment must generate productivity, citing problems of weak public supervision and local policy inaction.

Such assessments perpetuate the pessimism since the failure of cross-border economic cooperation in the 1990s. Jilin’s trade dependence was once the highest among inland border regions, and its export dependence even surpassed that of coastal giants Shandong and Jiangsu. But foreign trade fell from 33 percent of provincial GDP in 1994 to 11 percent in 2019; less than half the level at the start of the 2003 northeast plan.

In 2005, 38 percent of Jilin’s trade was with Japan, South Korea, North Korea, and Russia. That share declined to 20 percent in 2019, falling at a more rapid rate than the national rate of declining dependence on Northeast Asian Neighbors.

Unlike at the national level, Jilin faces a widening trade deficit, importing around three times more than it exports. The auto industry accounts for half of imports, mostly from Germany, which is Jilin’s biggest trade partner driving a quarter of its foreign trade. Jilin’s provincial capital, Changchun, calls itself a second home for Germans since China’s first carmaker FAW joined Volkswagen in 1991.

The forces of cross-border integration have multiplied since Jilin led China’s participation in the Greater Tumen Initiative (GTI) of the United Nations Development Program from the 1990s, centered initially on Jilin’s Yanbian Korean Autonomous Prefecture, the Russian Far East’s Primorsky Territory, and North Korea’s Rason.

Despite the limited impacts of the initiative as a multilateral scheme, it catalyzed reforms on the Chinese side. The central campaign to revive the economic fortunes of the northeast, and border development initiatives marking the post-global financial crisis period, facilitated such reforms.

At the local level, Jilin’s 2009 Changjitu project sought to expand ties with Northeast Asian neighbors, just as the GTI did in 1991. China’s external strategy at the international level has shifted increasingly to bilateral engagement, as seen in Xi’s recent summits with Russian President Vladimir Putin and North Korean leader Kim Jong Un.

Those meetings elevated the role of subnational exchange by renewing Russian Far East development plans for 2018-2024, designating 2018 and 2019 as years of cooperation between Chinese and Russian regions, and backing the Rason Special Economic Zone (SEZ); North Korea’s market experiment since 1991.

But as the engine of Mao’s planned economy, China’s northeastern provinces still carry the burden of market transition: state-owned heavy industry and local political conservatism. While coastal China was able to experiment, high restructuring costs in the northeast weakened local government incentives for implementing nationally-mandated reforms.

In Jilin, heavy industry still represented 82 percent of industrial revenue in 2018; while the manufacturing of transportation equipment, and oil and gas extraction, drew 58 percent of its $275 million foreign direct investment (FDI).

The 2003 revitalization plan was impeded by a local culture of “commandeering and laziness” stemming from central planning and state sector dependence, implying “there was no difference between more or less work and good or bad results.”

Bottom-up resistance has also emerged in the form of labor unrest, which drew global attention in the aftermaths of China’s entry to the World Trade Organization (WTO) and the global financial crisis. Protests in 2016 at Jilin’s Tonghua Iron and Steel Group replayed the 2009 riots that resulted in the killing of the firm’s general manager.

Across the border in the Russian Far East, local government and business interests have confronted popular backlash, where Chinese investment and migration are enduring sources of tension despite China’s declining presence there in reality.

In addition to such local defiance, institutional adjustments have made limited impact. Beyond geopolitical constraints, a lack of local coordination remains a persistent problem that delays cross-border projects as suggested by the GTI’s growing focus on building soft infrastructure.

Although China’s engagement of Pyongyang over the past decade produced bilateral mechanisms overseeing projects like the Rason Special Economic Zone, North Korean regulatory barriers have impeded such initiatives since their inception.

Bureaucratic inefficiencies similarly dampen exchange across the China-Russia border, where institutional advancements and high-level plans from 2009 mask poor funding and implementation.

Touring northeast China last month, Vice Premier Liu He said he favored the region’s potential as Asia’s commercial center, only to draw attention the same problems the revitalization plan identified 18 years ago. Other rust belts worldwide may share these problems, amplified by the global economic slowdown and China-U.S. trade frictions.

But compared to the coastal experience, the liberalization of China’s inland periphery differs in context. First, China’s global integration encompasses links to surrounding emerging economies, where border regions are rising players.

As the Commerce Ministry indicates, these frontier regions are the BRI’s “pioneers and vanguards.” Second, the domestic Chinese economic transition from basic manufacturing to high-tech sectors involves sequenced regional development and coastal support for inland areas, as China’s recent Five-Year Plans prioritize.

But concerns over marginalization of inland interests have only intensified with the BRI, viewed by critics as an extension of coastal development.

Xi’s BRI is as much about integrating China’s regional economies as it is China’s vision for global integration. Entry into the WTO coincided with China’s inland shift from 2000, led by the western development plan, which was reinstated last summer amid pandemic-induced pressures.

China’s regional development also underscores continuity of the party-state’s core priorities both inside and outside of its national borders. Mao’s inward orientation was based on communist egalitarianism and national security concerns, while Deng’s Greater China coastal zones aimed to propel not just export-led growth but also political reunification.

But while those diaspora linkages were welcomed as an opportunity for integration, the ethnic networks along China’s inland frontier challenged national unity and stability.

As the northeast case shows, cross-border initiatives appear more symbolic in importance; repackaging incomplete old initiatives rather than replicating coastal precedents.

Just like the GTI’s evolution, the BRI might only come to sustain the repeat cycle of hope and disappointment characterizing China and Asia’s northeast dilemma. Asia’s further economic integration depends critically on the success of China’s own regional transition transforming the fortunes of its inland periphery.

Author: See-Won Byun
Editor’s note: The article reflects the author’s opinion only, and not necessarily the views of editorial opinion of Belt & Road News.