China Power | Economy | East Asia

High-Speed Rail in China’s Rust Belt: A Fast Track to Economic Revitalization?

China’s northeast was left behind during the high-speed rail boom. But will a new construction boom be enough to solve the region’s economic woes?

High-Speed Rail in China’s Rust Belt: A Fast Track to Economic Revitalization?
Credit: Depositphotos

In the heart of what used to be China’s industrial hub lie the remnants of a long-forgotten era. The northeastern territories, comprising the three provinces Liaoning, Jilin, and Heilongjiang, form the Rust Belt, a region of chronic economic decline. Once hailed as the cornerstone of progress for a developing Chinese nation and dotted with roaring industrial machinery, its factories now rot away as a nationwide shift toward globalization in the 1970s centered trade and economic growth to the south.

Today, ongoing challenges prevent meaningful economic progress. With debt of over 600 billion yuan ($89 billion) and a persistent brain drain, the region’s talent has consistently migrated elsewhere, leaving behind an aging population and impacting the local workforce. In 2016, only 47.5 percent of university graduates from the provinces opted to work with local employers.

Indeed, productivity has bottomed out, with only nine out of China’s top 500 private firms in 2017 based in the three provinces, according to a list released by the All-China Federation of Industry and Commerce. Now the country’s northeast, once hailed by Mao Zedong as the country’s “eldest son,” faces a troubling future.

The Rust Belt’s decline stems largely from the shortcomings of its rural cities, which drag the region’s overall economy behind. Although the provincial capitals have never been hotspots of investment, they fare relatively well economically – the real wealth gap lies between these capitals and their rural towns.

For instance, in Qinggang, a small city in Heilongjiang province, living standards remain a struggle as rural incomes persistently trail behind those of China’s larger cities. Specifically, inadequate connectivity with larger cities causes rural towns’ lagging economic growth by hindering their access to markets, technology, and economic spillovers.

A Chinese proverb aptly suggests, “If you want to be wealthy, build roads first.” Yet, while this wisdom may have been held historically, now, merely having roads is not enough – they must also be fast and efficient to drive significant economic impact. Current systems of inter-city travel, relying on arduous trips via traditional rail and highways, are inconveniences that actively obstruct regional travel and subsequent growth.

However, where traditional technologies fall short, the nation’s high-speed rail (HSR) is a strong candidate to bridge the connectivity gap, exponentially reducing travel times and acting as a pivotal pathway to economic integration.

Unfortunately, during the early days of China’s HSR breakthrough, the Rust Belt found itself on the sidelines as the technologically advanced south surged ahead with multiple inter-city railways. It wasn’t until 2015, seven years after the nation’s first HSR route, that Jilin and Heilongjiang initiated their first major inter-province train connections.

The Rust Belt’s harsh winter weather partly contributed to the delay in HSR construction in the region. Pioneering blizzard-resistant trains like the CR400BF-G Fuxing were introduced only in 2019. More prominently, poor financial incentives, which historically left investors skeptical about investing in the area, only further hindered development.

Strong efforts to form inter-provincial connections have been initiated only recently. In Heilongjiang, the 2018 completion of the Harbin-Mudanjiang high-speed railway pioneered connectivity, linking the provincial capital with a chain of second and third-tier cities. Three years later, the Mudanjiang-Jiamusi line further advanced, shortening what used to be a seven-hour train journey to just over two hours.

Now, much hope rides on the success of these rails for an economic revitalization of the Rust Belt.

Indeed, HSR’s success in other corners of the country establishes a strong precedent for the potential benefits the Rust Belt might reap. Since its incorporation, HSR has spearheaded economic productivity by revolutionizing transportation and contributing to regional prosperity.

Recent analysis revealed that in southern and eastern China, creation of a HSR station is associated with a boost of nearly 9 percent to the local economy within a range of four kilometers (2.5 miles). Broad research consensus has also suggested that HSR is a known driver of regional development in southern China, fostering economic spillovers from metropolitan areas to lower-tier cities.

HSR’s contribution to economic productivity is evident in its far-reaching influence on local tourism and enhancing inter-city business collaboration. In certain cases, it has helped relieve tourist volume in traditional hotspots while redirecting tourists to other surrounding areas, stimulating related industries. For corporations, HSR amplifies inter-city cooperation, providing the flexibility of frequent trips and encouraging corporate decentralization. In turn, this effect creates jobs, propping up local economies through subsidiary branches.

Despite positive benefits, can these trains live up to their shiny exteriors? Are they truly a “silver bullet” capable of reproducing the same growth and impact in the Rust Belt as they have demonstrated across the country?

Economic disparities between China’s northeast and south underlie the core issues. While reformist policies in the 1980s established trade hubs in the south, the northeast suffered the repercussions of costly labor driven by prior Maoist industrial expansionism. Notably, the region’s state-oriented economy stagnated, producing low-value commodities as the south sped ahead with private investment and technological innovation.

This poses problems for HSR, whose transformative power hinges heavily on the underlying strength of the local economy. Because the south fosters a strong economy where existing resources and incentives are in place, high-speed rail facilitates growth by opening up channels of distribution. In the northeast, where industry, economy, and incentives fall short, HSR offers only a marginal impact, as the region lacks the necessary foundation for resource distribution and industrial expansion. Accordingly, research has found that “developed regions would benefit more from the construction of HSR.”

While HSR offers economic benefits, it also amplifies the area’s brain drain by making travel out of the area more convenient. Moreover, HSR construction in the Rust Belt may yield unintended consequences while connecting lower-tier cities. Tourists visiting the Rust Belt provinces have realized the convenience of day trips, leading to increased tourism but lower local spending. Conversely, residents of smaller cities who gravitate toward leisure and shopping in larger metropolises are better empowered to travel, causing a “siphonic effect” that drains money otherwise circulated within their local economies. Consequently, analysts have noted HSR’s potential to exacerbate inequality in regional development.

High-speed rail is by no means a panacea for the challenges faced by the Rust Belt; its technology is better seen as a double-edged sword. While it holds the potential to contribute to the region’s growth, its real impact is uncertain and should be considered only as a piece in the broader puzzle of the Rust Belt’s economic revitalization.

With a plethora of new rails planned soon, action is critical to ensure HSR’s success. Now, the burden rests on policymakers to support the fundamental cornerstones of the local economy, fostering local innovation, and attracting talent. Only through the synthesis of these efforts and HSR’s transformative potential can the Rust Belt’s tracks to economic revitalization finally be laid.