Northeastern China was once the engine of the country's growing economy. The three provinces in the region were the cradle of the country's modern industrialization that started fifty years ago. But in recent years, the southern and the eastern coastal areas have taken the economic lead, and the northeast has lost ground. State-owned factories went bankrupt, workers were laid off and crime rates rose. People there seemed to have lost their motivation to move ahead.

Recently, the central government embarked on a strategy to rejuvenate this traditional industrial base. China's northeast is also lagging in terms of attracting foreign investment. But with a new policy behind them, regional leaders are eager to attract foreign capital. However, investors remain cautious, without firm evidence of results.

Anshan Iron & Steel Group is China's oldest iron and steel company. It's also one of the largest. Anshan-steel's history spans almost nine decades. During most of that time, the whole country relied on the plant for iron and steel products.

Anshan-steel's glory lasted till about ten years ago, when market forces in China began to replace the planned economy. The company was hit hard by something strange to all state-owned factories: fierce competition from a growing number of rivals.

Anshan-steel lost the game: its outdated production methods drove clients away. For its employees, this was almost like the end of the world.

Vice General Manager of Anshan Iron & Steel Group Zhang Xiaogang said: "At the beginning of the 90's, old equipment, terrible production quality, low-level management, social function, population, these were all the terrible problems for us."

This blackened furnace is still smelting iron, reminding visitors of the company's miseries. But it's the only outdated facility left.

A major renovation effort began two years after Anshan-steel's fortunes plumbed their lowest depths. Old equipment was replaced by new facilities. The company adjusted its market strategy and focused on high-quality and high value-added products, on which it has the sharpest competitive edge.

Sr. Engineer of Anshan Iron & Steel Group Rong Feng said: "After that, our products were upgraded. That means our company gets more profit and staff members get more salary and have more money in our pocket."

Years of hard efforts paid off. Customers began to return for the new higher quality products. The company turned deficit into credit and is now back on track. But only just.

Technical innovations have given this old steel company new hope and a sizable market share. But the restructuring has been affected by problems left behind from the era of the planned economy.

For one thing, state-owned businesses are responsible for the welfare of retired workers. In the case of Anshan-steel that's 120,000 people, double the size of its workforce.

In fact, the company has downsized its workforce almost by half and is still cutting jobs. But it has had to pay its laid-off employees. Without a sound social safety net in place, the local government has to rely on the enterprise if social stability is to be maintained. But for businesses like Anshan-steel that have only just found a way out of their difficulties, that seems too heavy a burden to carry.

(CCTV.com November 4, 2003)