China, People's Republic of : Innovation-Driven Green Economic Diversification for Resource-Exhausted Cities in Heilongjiang

Water and other urban infrastructure and services / Urban policy, institutional and capacity development

The Government of the People''s Republic of China (PRC) has requested knowledge and support technical assistance (TA) from the Asian Development Bank (ADB) on innovation-driven green economic diversification for resource-exhausted cities in Heilongjiang Province. The TA will build on previous ADB projects in the northeast of the PRC and provide support in research, strategic planning, policy recommendations, and knowledge dissemination to advance innovation as part of a comprehensive strategy to enable green economic diversification.

The TA is included in the list of projects agreed between ADB and the Government of the PRC on 22 January 2020. The TA is in line with ADB''s Strategy 2030, which supports the operational priority on making cities more livable; the corresponding operational plan; and ADB''s country partnership strategy for the PRC, 2016-2020.

Economic development of resource-dependent cities relies on the extraction and basic processing of natural resources. Cities with declining resource-dependent development and accumulative recovered reserves exceeding 70% of recoverable reserves are defined as resource-exhausted cities, and are facing more urgent needs for economic diversification. Heilongjiang Province is part of the northeast of the PRC and has a population of 37.73 million in 2019. With resource-dependent industry as one of its economic pillars, the province has been losing its growth momentum since the late 1990s, going through economic recession and population outflow. The province has 10 officially listed resource-exhausted cities, or 14% of the total number in the PRC. Heilongjiang''s resource-exhausted cities face development challenges, including economic underperformance, business failures, rising unemployment, decreased tax revenue, and difficulty in making new investments. The cities' gross domestic product and per capita disposable income are below the province's average. They also suffer from severe environmental degradation caused by extraction of natural resources, high energy consumption, and highly polluting industrial emissions.

The PRC''s new urbanization and ecological civilization agenda recognizes that the economic transformation and sustainable development of resource-exhausted cities is an important strategy. The national government and the Heilongjiang Provincial Government have formulated development plans to transform their singular and resource-dependent economy towards a more diverse, high-value, and low-carbon development. Guided by these plans, the governments of these resource-exhausted cities have identified their target pillar industries, including advanced equipment and technological equipment manufacturing, new raw material industry, modern agriculture, and modern services. Initial progress has been made in urban infrastructure improvement, reconstruction of shantytowns and industrial and mining areas, and environmental remediation. However, much remains to be done. Because the validity period of current development plans ends in 2020, Heilongjiang Province is preparing new plans to continue to guide the long and comprehensive diversification process, i.e., through the Fourteenth Five-Year Plan, 2021-2025 and beyond.

Current development plans recognize innovation as one of the key drivers of green economic diversification, but the innovation capacity of the resource-exhausted cities is still relatively low. This has constrained effective technology transfer, entrepreneurial activities, and competitive business models and financial instruments, which are needed for the key diversification tasks of developing small and medium-sized enterprises and high-value green industries (such as green food processing and tourism). The long-standing insular economy and dominance of large state-owned enterprises in Heilongjiang have dampened the spirit of innovation in local society. The lack of awareness and weak incentive mechanism for human capital retention has led to a shortage of innovative human capital, including entrepreneurs, managers, and technical professionals. Although innovation facilities and platforms have been developed in Heilongjiang, the innovation systems remain weak in terms of inter-organizational cooperation, intermediary services, and other regulatory frameworks. Heilongjiang Province needs to comprehensively address these gaps from social, human capital development, and institutional aspects in the new development plans for resource-exhausted cities, placing innovation-enabling systems and institutions at the forefront.

Sustainable development of resource-dependent cities enabled

Innovation-driven green economic diversification development planning for resource-exhausted cities in Heilongjiang strengthened

Research on innovation-driven green economic diversification for resource-exhausted cities produced

Innovation-driven green economic diversification strategy and policy framework for resource-exhausted cities proposed

Knowledge on innovation-driven green economic diversification for resource-exhausted cities enhanced

All national consultants have been mobilized. The engagement of individual consultants was completed on 14 June 2021. The draft inception report was submitted to the executing and implementing agencies and ADB and the official inception workshop was held on 13-14 January 2022. Consultation and interim workshop with local stakeholders as well as field visits in Heilongjiang for data collection and consultation, and selected cities for national study are expected to be finished by December 2022. The draft strategy and roadmap and the draft policy framework are for submission by December 2022. The TA's final reports on assessment of innovation capacity and international and national best practices are to be submitted by November 2023.