HEGANG City is on China's northern frontier, with a population of 1.1 million. It does not rank highly in Heilongjiang Province in terms of its overall economy. However, over the short span of a few years, Hegang has emerged, by means of its urban construction, and attracted visitors from numerous cities within and without the province. On arriving in Hegang, one is pleasantly surprised by its clean, neat streets, imposing high-rise buildings, and garden-like square -- not at all typical features of a small coal-producing city in a remote frontier area. One is also conscious of flowing order amidst the pulsating life of the city as the busy stream of daily traffic proceeds smoothly along its central thoroughfare.

Hegang is a mountain city, and mountainous regions make up 70 percent of its total area, where quality timber trees, such as Korean pine and Manchurian ash, grow in natural forests, as well as edible mountain herbs and ginseng. In its waters, aquatic products such as the huso sturgeon and chum salmon swim. In remote antiquity, its luxuriant water plants attracted cranes, who made it their habitat, hence its name[Hegang meaning Crane Hill in Chinese]. The Weichang Red-crowned Crane Nature Reserve, located 40 kilometers from downtown Hegang, is one of the three major habitats of waterfowl in Heilongjiang Province.

Hegang is a city rich in natural resources. It has proven reserves of 3 billion tons of coal, its main mineral resource, which are estimated to last at least 100 years. The city was originally established, and subsequently prospered, on the basis of its coal mining industry, but these days it has many other features that attract and impress its numerous visitors. The works of sculpture in the city, such as those of Nobel and Einstein, evoke its innate pioneering spirit, and mark the ensuing cultural accumulation stemming from this era.

"Amiability Begets Riches"

"Hegang is a city not to be ignored," asserts Zhang Xingfu, secretary of the Communist Party of China Hegang municipal committee. "Apart from its 2,000-year history, it has made an outstanding contribution to the PRC'S coal mining industry. China's first modernized vertical shafts - the Dongshan Vertical Shafts -- were built in our city. In the past 20 years, Hegang has been consistently at the forefront nationwide in terms of its coal output. Its record high annual coal output was 17 million tons, when revenue and profits exceeded one billion yuan."

However, as a result of the state macro-economic policy, the coal industry faces pressure due to structural adjustment and fierce competition. Restricted by its location (on the northern frontier, far from political and economic centers), Hegang is at a disadvantage as regards market competition, and is consequently faced with an unprecedented challenge. During the Eighth Five-Year Plan (1991-1995), the city's average annual GDP growth rate was 4.2 percentage points lower than the provincial average, and 8.3 percentage points lower than the national average. In 1995, the number of enterprises whose production was halted or halved accounted for 56 percent of the city's total, and more than 80,000 people -- 24.5 percent of the total labor force, were out of work.

Enormous changes took place in economic development and urban construction during the Ninth Five-Year Plan period (1996-2000), the most apparent overriding feature being "harmony." As the Chinese saying goes, "Amiability begets riches," states Zhang Xingfu, before going on to cite a recent example. "Hegang has a typically regional pluralistic economy. The four major enterprises, headed by the Coal Mining Administration, are under the jurisdiction of the central government or provincial government, rather than that of the Hegang local government. Yet these enterprises are of vital economic importance to the development and stability of the city, and the taxes they generate make up two-thirds of the city's total tax revenue. One important problem the city faces is, how it may formulate a pool of common interest in order to realize a common goal, that is, the prosperity of the city and its people. We do our best to nurture the development of the Coal Mining Administration, and regard the workers' welfare as our responsibility. In terms of policy, we make a point of giving them preferential treatment, and in all other aspects do our best to communicate and build up an understanding. We have solved many difficulties for the Coal Mining Administration, and within two years the administration paid off its defaulted taxes of 100 million yuan a year.

Zhang Xingfu's motto is, "No merits mean demerits." When asked about the "utilitarian nature" of urban construction in Hegang, he smiles and answers: When residents buy good quality housing at low prices, they feel reassured and revitalized. The improvement in the city's outlook has increased the cohesion of its inhabitants and boosted their morale. Hegang is a city lacking financial, material and human resources. The gap between Hegang and more developed areas would widen if we tried to be completely self-reliant. The key to attracting talent and capital from outside is to improve the hard environment and enhance the city's reputation. Only by doing so can Hegang exert a strong attraction and thereby generate a radiation force. By gaining access to the utilization of outside resources and talents it may then accelerate its own development.

The people of Hegang would never scoff at a dream, but they have strong belief in a down-to-earth spirit. Zhang Xingfu says, "Facts have shown that as long as they are based on science, all dreams can come true. The key lies in how far ahead you dare to think, and on whether or not you then act. The winners are those who work hard at innovation in a down-to-earth way.

How did Hegang, likened to a train, suddenly switch lines and transfer to the fast track of economic operation?

Behind the Growth Point

How is the slow-paced, low-efficiency economic operation of a resource-type city transformed?

By the end of 1995, the per capita housing space for urban inhabitants in China was 7.9 square meters, in Heilongjiang Province it was 7 square meters, and in Hegang City, 5.52 square meters. At this time there were more than 7,000 households whose per capita housing was only 2 square meters, and nearly 1,000 families inhabited unsafe housing built in the 1930s and 1940s. After investigation and research, the Hegang municipal government decided, in 1996, to make new housing the key point of urban construction, in order to encourage rapid economic growth. The government started its "518 Project," whereby the city would build 500,000 square meters of economy housing, five thoroughfares, 100,000 square meters of subsidized housing for low wage earners, one key infrastructure project, and eight public welfare or commercial service facilities.

The municipal government has revoked 24 unreasonable fees that formerly restricted housing construction, resulting in a decrease in cost of 420 yuan per square meter. For buyers of economy and subsidized housing the land use fee is exempted, and real estate developers' profits are limited to 15 percent. Emphasis is placed on the construction of both commercial facilities and apartments, using the former to subsidize the latter. For instance, a 10,000 square meter building is constructed with the intention of using the 1,500 square meter first floor area for commercial use, sold at 3,000 yuan per square meter, accounting for three-fourths of the cost of construction. The remainder of space, used for residential purposes, is sold at 600 to 700 yuan per square meter.

In the past five years, the city has invested 5.4 billion yuan in urban construction, only 60 million yuan of which has come from local revenue. Hegang has built 2.36 million square meters of housing -- 6 times the total area of welfare housing built over the previous 50 years, and all these new houses have been sold. This has spurred the city's rapid economic growth. In the past four years, housing construction has added 4 percentage points to Hegang's economic growth, promoted the development of 50 relevant trades, created 40,000 job opportunities, and increased the annual growth rate of the tertiary industry by 8.8 percent. Hegang has, in the past four years, absorbed 3 billion yuan in investment from outside.

For many years Hegang progressed slowly in developing an export-oriented economy. However, when the pattern of economic operation was at its turning point, the people of Hegang looked for a new springboard that would take their city to a new height. From its border location, only a river separates Hegang from Russia. Exploiting this geographical factor, Hegang practiced the policy of "opening to the north and allying with the south," the former referring to Russia, and the latter to provinces, municipalities and autonomous regions in southern China. To promote exchanges with Russia, Zhang Xingfu visited Jevrejskaja in Russia. On his first visit he donated 1,000 desks and chairs to a middle school in Birobidzhan City, and on his second visit to the school he donated over a dozen computers to senior high classes, causing a sensation in the city. The Russians gave the thumbs-up sign to indicate: Chinese, good! The Hegang people, very good!

In 2000, visits between the top leaders of Hegang and Jevrejskaja were frequent, and those between lower-ranking leaders also increased. Since Hegang established friendship ties with Jevrejskaja and Birobidzhan City, foreign trade between the two has boomed. Within one year they signed a series of agreements in the fields of science and technology, education, tourism, and economic relations and trade. During the Sino-Russian Border Tourism Festival & Trade Fair, Hegang signed more than 20 foreign investment and exports/imports contracts. The formerly quiet border port began to bustle and flourish. The volume of transit goods in 2000 increased two-fold, and the number of transit passengers increased three-fold those of 1999.

As a result of similar sincerity and perseverance, the Thia Thai Qingchunbao Pharmaceutical Group of Thailand has decided to build a plant in Hegang. Since then, the city has been home to a first-rate, up-to-date pharmaceutical plant, as well as a major taxpayer with excellent market prospects. Since Hegang's Jinhe Brewery merged with the Harbin Beer Group, its output has increased from 20,000 tons to 35,000 tons annually, and in ten years the output will reach 100,000 tons, bringing in annual profits and taxes of 18 million yuan. In August 2000, the five-star Jiuzhou Hotel, a joint venture comprising eight partners, including investors from Hong Kong, Macao and China's interior, was inaugurated. This magnificent hotel will enable Hegang to accommodate domestic and international guests, and to act as a kind of welcoming post station while promoting further opening, industrial upgrading and development.

By HOU YUN