What Is Dutch Disease?

The Dutch disease (the Dutch disease) refers to a phenomenon in which a certain primary product sector of an economy (especially small and medium-sized countries) prosperes abnormally and causes the decline of other sectors. In the 1960s, the Netherlands, a major exporter of manufactured goods, discovered a large amount of oil and natural gas. The Dutch government vigorously developed the oil and gas industry. The export surged, the balance of payments showed a surplus, and the economy showed prosperity. However, the booming natural gas industry has severely hit the Dutch agriculture and other industrial sectors, weakening the international competitiveness of the export industry. By the early 1980s, the Netherlands suffered from rising inflation, falling exports of manufactured goods, and increasing income. The problem of lower rates and increased unemployment is known internationally as "Dutch disease." Dutch disease is present in many cities in China, such as Fuxin, Liaoning.

Dutch disease

The Dutch disease (the Dutch disease) refers to a phenomenon in which a certain primary product sector of an economy (especially small and medium-sized countries) prosperes abnormally and causes the decline of other sectors. In the 1960s, the Netherlands, a major exporter of manufactured goods, discovered a large amount of oil and natural gas. The Dutch government vigorously developed the oil and gas industry. The export surged, the balance of payments showed a surplus, and the economy showed prosperity. However, the booming natural gas industry has severely hit the Dutch agricultural and other industrial sectors, weakening the export industry.

The classic model of "Dutch disease" was given by WMCorden and J. Peter Neary in 1982. Two authors divide a country's economy into three ministries

Happened in 1973

Assuming that the country's economy is in full employment at first, if a certain natural resource is suddenly discovered or the price of natural resources unexpectedly rises, it will lead to two consequences: one is the shift of labor and capital to resources

Dutch sick cities

In China, there are many cities that have emerged because of resources, such as Daqing, a city of oil, and Datong, a city of coal. Historically, although these resource-based cities have grown from small to large, they have become prosperous, but because of their over-reliance on resource advantages, they have created a single economic structure. When resources change from small to large or even dry up, crises begin to arise.

In the last century, the picture of the famous night production of Haizhou Open-pit Coal Mine in Fuxin City, the fiery red excavation scene, once moved one after another Chinese people. As a famous city of coal power, the high-rise coal mining electric pickaxe, Also printed on the 1960 edition of 5 yuan. However, in 2005, the Haizhou Mine, which had been rushed to work day and night, stopped after producing 2.4 billion tons of coal because the coal had been mined. More urgently, around 2000, dozens of mines have been shut down in Fuxin City, where coal resources are gradually depleted.

Dutch disease in China

Yang Zhonglin, deputy mayor of Fuxin City, Liaoning Province, said that several large coal mines have basically gone bankrupt, and a large number of industrial workers are facing the gradual depletion of unemployed coal resources, which has caused a lot of confusion in Fuxin, a coal-powered city. According to statistics, at the time, more than one-third of the industrial enterprises in Fuxin City were suspended or semi-suspended, and 156,000 industrial workers were laid off. This number accounted for 36.7% of the total number of employees. From the perspective of the city, a total of 198,000 people were living in the lowest living standard. Below the guarantee line. In addition, Fuxin also faces the embarrassing situation of the shantytowns being crowded and the mined-out areas constantly sinking.

The dilemma facing this resource-based city is not unique to Fuxin.

Whether Fuxin can cure "Dutch disease" is of extraordinary significance to similar cities across the country. Because China has a total of 118 resource-based cities, with the continuous exploitation of resources, some cities have gradually experienced the phenomenon of resource exhaustion. In 2008, the National Development and Reform Commission identified 12 cities, including Fuxin, Daxinganling, Panjin, and Jiaozuo, as the first cities to run out of resources. Only one year later, the National Development and Reform Commission announced that 32 cities nationwide, including Zaozhuang, Shandong, Fushun, Liaoning, Aershan, Inner Mongolia, and Jingdezhen, Jiangxi, were the second batch of resource-exhausted cities. Two years later, in 2011, the list added another 25 cities, and the total is now as high as 69.

There are 118 resource-based cities in China, of which 69 have suffered from "Dutch disease", while the people and 69 million families in 69 cities have been injured. Common sense of life tells us that we must pay close attention to severe illness, otherwise there will be endless troubles. So, how to treat cities with "Dutch disease"? Fuxin City, Liaoning Province has begun to challenge "Dutch disease". ^[1]

Dutch disease treatment

Faced with the predicament of Fuxin, the Party Central Committee and the State Council identified Fuxin as the country's first resource-based city's economic transformation pilot city, which caused the sinking of the surface of the most urgent goaf at that time and threatened the lives of residents. To this end, the state has allocated huge sums of money to build resettlement communities on the one hand, and on the other hand, it has also helped Fuxin to carry out economic transformation. Yang Zhonglin, deputy mayor of Fuxin City, Liaoning Province, said that the transition still addressed the employment problem of laid-off workers.

Although Fuxin's coal resources are getting scarce, it can still be mined for 30 to 40 years with reduced output. To this end, Fuxin City adopts a strategy of controlling the mining of 10 million tons per year and using its profits to escort the transformation. On the other hand, Fuxin also hopes to solve the urgent employment problem by developing other resources it has. This is a race against time, because the 156,000 laid-off workers who have hardly saved can't wait too long. To this end, Fuxin first hit a three-board axe:

The first axe is to coordinate other cities and transfer labor. Yang Zhonglin, deputy mayor of Fuxin City, Liaoning Province, also said that the highest export of urban and rural labor was 200,000 per year.

The second axe is to give full play to the functions of the city on the spot and provide employment opportunities for the unemployed as much as possible. Yang Zhonglin, deputy mayor of Fuxin City, Liaoning Province, told reporters that there were some rickshaws at that time, and others, and some small private enterprises of various types of private houses were supported in recent years.

Fuxin's third board axe is the rapid development of modern agriculture with small investment and quick results when financial resources are limited. Yang Zhonglin, deputy mayor of Fuxin City, Liaoning Province, said that Fuxin City is a big agricultural city, and the per capita arable land is about 6 acres.

Relying on the advantages of more per capita arable land, Fuxin has successively introduced a number of agricultural product deep processing enterprises such as Shuanghui, Luhua, Liuhe, etc. Driven by the strong market sales capabilities of these enterprises, local farmers have started breeding and planting peanuts, not only increasing Employment, but also boost incomes of poor farmers. Among the companies that settled in, Shuanghui provided more than 1,000 jobs and paid more than 100 million yuan in taxes each year. To ensure the supply of raw materials for Luhua, 2.7 million mu of peanuts were planted in Fuxin alone. After ten years of development, the total output value of agriculture, forestry, animal husbandry and fish in Fuxin has reached 21.7 billion yuan, and the per capita income of farmers has reached more than 7,000 yuan.

Yang Zhonglin, deputy mayor of Fuxin City, Liaoning Province, said that this has also brought some other industries, logistics and other, auxiliary product packaging industry, and formed a real industrial chain for this enterprise.

After initially solving the employment problem of the unemployed through the three-pronged axe, Fuxin reexamined its own resources. In addition to coal, Fuxin also has various other resources such as hydraulic pressure, agate, sunlight, wind, and fluorine, and has abundant reserves. Because in the past, it was just staring at coal, so that other industries did not get the growth they deserved. Now, how can Fuxin develop the advantages of these resources through multiple channels to make the local economy bigger and stronger? Their preferred goal is: to develop the equipment manufacturing industry with the hydraulic industry as the engine.

Yang Zhonglin, deputy mayor of Fuxin City, Liaoning Province, also said that the hydraulic industry surrounds us, or coal mining, and some equipment surrounds Shenyang, the old industrial base in Northeast China. There are more supporting industries.

In order to help Fuxin's smooth transition, the state also approved Datang International to invest more than 24 billion yuan in Fuxin to build a coal chemical recycling economic park that uses low-calorie lignite from Inner Mongolia to process coal-to-natural gas. After the project is completed, 4 billion cubic meters of natural gas each year can generate 12 billion yuan in sales revenue.

Fuxin has many by-products, such as tar, Chinese oil, naphtha, and by-products such as sulfur and hexaamine. If processed, its output value will be roughly the same as that of the main product, which is not accurate initially, and it will add up to more than 30 billion .

At present, Fuxin City has also made plans to build a coal chemical industry park around coal chemical by-products and further process the by-products and main products of coal chemical.

In addition, Fuxin also has 2.2 million tons of fluorite ore resources, and Fuxin City has built a fluorochemical industrial cluster around it. Target of 100 billion yuan output value.

Dutch disease in China (8 photos)

The more energy is consumed at the front end, the lower the level of profit, the lower the cost, and the higher the back end, the energy consumption may not necessarily increase, but its added value is increasing. ^[1]

Dutch disease treatment results

After ten years of transformation, Fuxin has now established ten major industrial clusters such as equipment manufacturing, coal chemical industry, agate, and modern agriculture. In the past 10 years, the proportion of the coal industry in the industries above designated size has dropped from 33.4% to 22.2%, and the proportion of the equipment manufacturing industry in the industry has increased from 3% to 27.8%. Regional GDP increased from 7 billion yuan to 47 billion yuan, and public fiscal budget revenue increased from 450 million yuan to 5 billion yuan. The per capita GDP increased from 3,391 yuan to 25,893 yuan, the per capita disposable income of urban residents increased from 4,327 yuan to 14,994 yuan, and the per capita income of rural residents increased from 1,122 yuan to 7,615 yuan. The country's preliminary goal of a pilot city for the economic transformation of resource-based cities was achieved.

Yang Zhonglin, deputy mayor of Fuxin City, Liaoning Province, said that the current employment, real-name employment every year, is about 56,000 people, the actual enterprises in Fuxin City, have already found it difficult to recruit workers.

Fuxin worked hard to reverse the traditional thinking of focusing on coal and opened its eyes. Through ten years of economic transformation, ten major industrial clusters have been established to successfully resist the "Dutch disease". This also provides a reference for the transformation of other resource-exhausted cities. In fact, in Liaoning, not a city in Fuxin is thinking about the future like this. Benxi, a city of iron and steel, has already transformed in advance before the resources have been exhausted, demonstrating a well-planned urban development concept. ^[1]

Dutch disease transition

Since 2000, Fuxin City has been actively planning a new round of economic restructuring. For the first time, the concept of implementing the economic transformation of Fuxin has been proposed and used. To explore new ways of economic transformation. Fuxin's economic transformation has achieved significant initial results. The industrial structure has become more diversified, and the people's income has increased significantly. Fuxin, as the nation's first resource-exhausted city, has achieved economic success as a pilot.