Published: September 2006
Manchurian Mandate
China Looks to a New Generation of Model Workers to Revive its Decaying Industrial Heartland.
By Brook Larmer

There is no turning back. That much, Iron Man knows.

The bus is starting to roll down the rutted dirt road in Dongfa village, carrying the young worker and his wife away from this ghost town near the Russian border. The couple squeeze into the backseat, she carrying a bright blue gym bag, he the dull burden of history. Twenty-six years ago, his parents named him Wang Tieren, or Iron Man Wang. It was a tribute to the communist icon whose selfless toil symbolized the industrial muscle of China's Northeast, a region whose state-run factories and furnaces fueled the communist dreams of the People's Republic. The new Iron Man on the bus—silent, gaunt, a look of worry wrinkling his freckled brow—embodies the same region but in a challenging new era: Even as other parts of China flourish in the mad rush toward a market economy, once proud Manchuria (as the area is known abroad) has fallen on hard times; it, like Iron Man Wang himself, is desperately searching for salvation.

As the bus pulls away, Wang stares ahead into the middle distance while his wife, Sun Jing, buries her head in her arms. Neither dare glance out the rear window at what they are leaving behind: their two-year-old daughter, named Siting, nestled in the arms of Wang's father. It was barely a year ago, just ten days after Sun had finished nursing, that they first left their daughter. When the couple returned home two weeks ago, they proudly unrolled a thick wad of cash—their annual savings of nearly $2,000. The money will feed their parents and daughter for another year, but Siting didn't comprehend. Recoiling from the two strangers standing in front of her, she scrambled over to her grandmother and peered out anxiously from between her legs. For two weeks, Wang and Sun have used hugs and sweet biscuits to win their daughter's trust. She has finally learned to call them "mama" and "baba," but when they boarded the bus to leave for another year, the girl showed no emotion. "It's hard to bear," says Wang, laying a hand on his wife's arm as she wiped a tear off her cheek. "But there's no other way for us to give our daughter a future."

Pursuing a better future takes Iron Man and his wife through the three northeastern provinces—Heilongjiang, Jilin, and Liaoning—that make up the region once revered as the "cradle of industrialization." Their odyssey from the depressed northern reaches of Manchuria to their final destination near the glittering port city of Dalian in the region’s more vibrant south mirrors, in many ways, the government's own ambitious plans for the northeastern rust belt. In 2003, shortly after coming to office, President Hu Jintao and Premier Wen Jiabao unveiled a program to turn the Northeast into China's next engine of development. In the hands of American marketing gurus, the campaign slogan, "Revitalize the Northeast," might well have been the "Manchurian Mandate." The road to salvation, for the region as well as for Iron Man's family, will demand sacrifices: a break with the past, a voyage into the unknown—and no guarantee of success. But the journeys, at least, have begun.

Why would China's leaders stake their legacies on the dubious prospect of resuscitating a region overtaken by history? Part of the answer lies precisely in Manchuria's historical symbolism. Though first developed by Japanese and Russian colonists, China's Northeast was championed by Chairman Mao as the soul of the communist industrial revolution. During the early years of the People's Republic, vast armies of workers were deployed to man the new state-run mines and factories, churning out coal, steel, and oil, along with cars, trucks, ships, and missiles—all the products that would finally, after several thousand years of agrarian life, turn China into an industrial power. By the early 1980s, the Northeast produced 16 percent of the country's industrial output with just 8 percent of the population, making it one of the richest regions in an ostensibly egalitarian society. Iron Man ruled.

In just two decades, however, China's Northeast has gone from dynamo to dinosaur, tracing virtually the opposite trajectory of the country's thriving southern coastal regions. The frenzied economic growth that has propelled Shanghai and the southern province of Guangdong headlong into the global economy has largely bypassed the land of the Iron Man. The region's industrial production has sagged to less than 9 percent of national output, while its heavy reliance on state-owned enterprises—once a blessing, now a curse—has made market-oriented reforms seem like all shock and no therapy. The landscape left behind is not simply the corroded shell of the great socialist experiment but a stark tableau of the most intractable problems China faces in the wake of its unequal boom: Thousands of obsolete state-run factories, millions of laid-off workers, a growing gap between rich and poor, rampant corruption, deadly human and environmental disasters, and, hovering above it all, the specter of social unrest. "The government can't afford to let frustrations boil over in the Northeast," says Li Cheng, a professor at Hamilton College in New York State. "The cost would be too great."

Hoping to reverse this dangerous slide, Beijing has so far spent 7.5 billion dollars to rehabilitate the region, closing or privatizing old state-owned factories while retraining workers for industries more suited to the 21st century: computer assembly, software engineering, even tourism. The real key, however, will be foreign investment. The region that once symbolized China's drive for self-sufficiency is now unabashedly courting foreign investors, notably its former occupiers Japan and Russia. It is too early to tell whether the rust belt can truly be revitalized. But all along Iron Man Wang's route south can be found signs of a region, and a people, struggling for a new future. These are the beginnings of Manchuria's great capitalist experiment.

It is all an illusion, the picturesque scene of twin peaks silhouetted against an azure sky, their upper reaches swathed in wisps of vapor. These mountains on the outskirts of the city of Qitaihe in Heilongjiang Province are not mountains at all but massive heaps of discarded rock and coal coughed up by the mine far below. High on one steep incline, nearly 500 feet up, a scavenger named Chang Mingdong trawls for usable fragments of coal, dodging fresh loads of rock careering down the embankment, sidestepping the coal embers smoldering beneath the surface. Chang has spent nearly half his life—12 of his 29 years—in the dark bowels of the Qitaihe coal mines, performing one of the most dangerous jobs on Earth. Yet he can't afford the coal he needs to heat his own home, especially on winter days like this, when the temperature drops to minus 20°F. So when his shift underground is over, Chang staggers up the mountain with his wife to scavenge for coal.

Covered with black soot from his wool cap to his thick boots, Chang personifies the stubborn traditions of a region most Chinese refer to simply as Dongbei, which means Northeast. Chang's father was one of several million laborers who moved to northern Manchuria four decades ago to fulfill Chairman Mao's vision of turning China into a socialist industrial giant. Some of those workers ended up in the region's iron and steel mills. Others went to the oil fields of Daqing, a one-industry town where the iconic "Iron Man" toiled. Chang's father landed in these rolling hills near the Russian border, a key zone in a country where coal is still king: China is the world's largest producer and consumer, with 80 percent of its soaring electricity demand fueled by coal-powered plants.

Not much has changed for Qitaihe miners in 30 years—except the world around them. The privatization of some local mines, along with alleged government corruption, has spawned a prosperous new class that exists side by side with the old. Modern high-rises tower over huts in Xinjian Coal Miners' Village; sleek black Audi sedans zoom past miners straining to haul wooden carts up a hill. The wealth has not trickled down to Chang and his family. In the shadow of a coal mountain, he and his wife, Yuan Chenglian, subsist on a diet of cabbage, potatoes, and corn gruel, splurging on meat only twice a year. One of the few decorations in their spartan home is a wedding photo showing a well-scrubbed couple in rental finery—he in a black tux, she in a long white gown carrying a dainty parasol. Yuan looks at her grimy clothes and laughs apologetically. "These photographers," she says, "can make anybody look beautiful."

An explosion at a nearby mine where Chang's father works killed 172 miners last November, pushing the Chinese coal industry's death toll for 2005 to 5,986—suffering nearly as many fatalities per day (16) as the U.S. did the entire year (22). Fearing a backlash among Qitaihe workers, Beijing gave all local miners an 11 percent pay raise. Chang is convinced that conditions will get even more dangerous as dwindling coal reserves drive mines ever deeper. But he is happy to take the extra cash, for he knows that, like his father, he will probably never escape the mines—or the dark mountains that loom, beautiful and menacing, above his home.

The demolition crews will not be stopped. Today, they are bearing down on one of the last stubborn remnants of China's socialist past—a crumbling five-story apartment block known as Building 8-1. For more than half a century, the Tiexi Industrial District in the city of Shenyang—460 miles southwest of Qitaihe—served as China's first "model workers' village," home to dozens of factories and more than a million workers. One by one, the smokestacks and settlements that once breathed life into the district are coming down. Building 8-1, however, still stands forlornly in a field of rubble. Its brick hulk seems deserted until night falls, when a dim yellow glow emanates from the only intact window on the ground floor. Inside, a laid-off factory worker and his wife huddle with their two children around an electric heating coil. They are some of the last holdouts against the march of history.

History has a habit of storming through China's Northeast, spawning a new incarnation at every turn. Dongbei has served as staging ground for the Manchu conquerors who established the Qing dynasty (1644-1911), as military-industrial center of the Japanese puppet state, Manchukuo (1932-1945), and as muscular embodiment of Mao's state socialism. Today, market reforms are forcing another reincarnation, and Dongbei is struggling to adapt. With a gross domestic product of 176 billion dollars, the region's economy is still relatively large, about the size of Poland's. Yet more than 70 percent of its industrial output still comes from inefficient state-owned enterprises—a reliance that has created a sense of complacency and entitlement at all levels of Dongbei society, from top leaders to laid-off factory workers. William Mako, a World Bank analyst and an author of a recent report on Dongbei, says: "This mindset is the most important thing to change—and the most difficult."

Still, some things in Dongbei are changing with startling speed. Far north in Harbin, a city whose onion-shaped domes hint at its Russian history, a grandiose office-and-residential complex emerges from the carcass of a defunct locomotive factory—with a shiny gold Mao statue standing incongruously at its center. In Changchun, whose pungent corridor of North Korean restaurants reflects the city's proximity to the Hermit Kingdom, the burgeoning middle class clamors for apartments in a high-rent development called Up East Side Manhattan. (Changchun yuppies also pay good money for consultations with Wang Yiyang, a fashion guru whose message of "cultural reeducation" could serve for the region as a whole.) Even Shenyang is getting a makeover. There are now Wal-Marts and KFCs, a high-tech industrial park, and, across one neon-lit intersection, three Ikea-like home-furnishing stores battling for business.

Looming in the background, though, is the darker world of the xiagang—the laid-off state workers. Of the 31 million Chinese who lost their jobs between 1998 and 2003, nearly one-quarter live in the Northeast, giving the region one of the highest unemployment rates in the country. (This has created an economic paradox: Even as Dongbei has posted an annual average growth of 9 percent over the past decade, urban employment has actually dropped.) Dongbei's official unemployment rate stands at just over 6 percent, but the World Bank estimates the real rate is closer to 15 percent. What's so troubling for Beijing is that most xiagang live in the cities, where their suffering is more visible—and their frustration more potentially volatile. The central government has headed off social upheaval by taking over parts of the social safety net that unraveled with the demise of bankrupt state-owned factories. But urban poverty is now a fixture in China's Northeast, and nobody embodies it more than poorly educated, laid-off workers in their 40s and 50s. They are the lost generation.

Back in the dimly lit room in Building 8-1, Li Zhongxu rubs his swollen hands after another unsuccessful day looking for work. The 41-year-old machine repairman lost his job at the No. 3 Wool Factory in 2001. (Li's wife, Liu Yaqin, was fired four years earlier from a pharmaceutical plant for violating the country's one-child policy; after having a daughter, she chose to keep her second child, a son, rather than have an abortion.) Having grown up on the "iron rice bowl"—with housing, education, and medical care provided by the factories—the family today scrapes by on a monthly supplement of $17. And now the building Li has lived in all his life is slated for destruction to make way for a high-rise development. Li and Liu are resisting eviction, spurning the government's offer of compensation, which they considered inadequate. Demolition crews have torn down apartment blocks around them, cutting off all water, gas, and electricity to Building 8-1. Li now pirates electricity from the street lamps outside. But the winter nights get so cold that the family of four sleeps together to stay warm.

Each morning, Li heads to one of the informal day-labor markets that have sprung up in Tiexi. The sheer number of laid-off workers makes even manual labor hard to find, and Li isn't qualified for much else. "I only know how to fix old textile machines," he says. Hoping to retool these workers, the central government has funded free retraining classes throughout Dongbei, even turning Tiexi's socialist-era Workers' Cultural Hall into a place of capitalist reinvention. The diverse classes offered there—on cooking, haircutting, computing, and English—attract eager students but rarely lead to jobs. On a recent Monday afternoon, the only moneymaking activity took place behind a heavy velvet curtain. There, in the near-complete darkness of a large circular hall, a few dozen couples clung to each other, barely swaying to the music on the loudspeaker. Heavily made-up women, many of them laid-off workers in their 30s and 40s, circled the periphery. "Ten yuan [$1.20] for three songs," suggested one, "and you can touch me anywhere you want."

For Manchuria's lost generation, the future holds little promise. That is why Li and his wife place their hopes on their daughter, Mengxue (Snow Dream). Hunched over her Chinese grammar book, the long-limbed 12-year-old seems oblivious to the "Bugs Bunny" cartoon playing on the black-and-white television a few feet away. Mengxue is the top eighth-grade student at Heavy Industry Middle School, even though her parents can't afford to pay another ten dollars for extra classes that could help her get into a good high school. Despite her restricted circumstances, Mengxue's imagination runs free. She writes short stories set in ancient Egypt. She dreams of attending the Cherry Blossom College for Women, a Japanese school she once saw in an advertisement. "And then," she says, "I'd like to be a teacher."

Success in the new China often springs from the most unpredictable places. If her parents are lost, why shouldn't Snow Dream be found?

“I apologize profusely for inconveniencing you.”

The 12 Chinese women sitting in a small classroom in Dalian's Senmao Building repeat the phrase in tittering unison—not in Mandarin, but in Japanese, the language of their former occupier. Outside, in a much larger room with a wall clock set to Tokyo time, several dozen Chinese operators wearing headsets are working the phones, gushing polite Japanese phrases as they sell NTT telephones and Canon copiers to customers across the sea. This call center, part of an outsourcing enterprise run by Recomm Co., Ltd., a Tokyo-based office supply and services company, is just one of hundreds of Japanese businesses flooding into Dalian, a city of six million suspended at Dongbei’s southern tip. So many Japanese companies have moved into the Senmao Building—from Hitachi to Toshiba to Matsushita—that the sleek 24-story building displays a Japanese flag out front.

The second Japanese invasion of Manchuria has begun, and this one—driven by commerce, not conquest—couldn't be more welcome. So far, the bulk of this foreign investment has landed in Dalian, the showpiece of China’s Northeast. The rest of Dongbei hungers for an injection of cash, too. China’s growing wealth gap is usually seen as a divide between urban and rural, east and west, but it also cleaves north and south. The region's once invincible economy has now been eclipsed by Guangdong Province, whose population is more than 20 percent smaller. The three Manchurian provinces together receive less foreign investment than the city of Shanghai, even though their population (now 107 million) is nearly six times larger. Some investors may be scared off by Dongbei's reputation for inefficiency and corruption. (Shenyang's deputy mayor, for example, was executed on graft charges in 2001.) A few hardy enterprises, however, have ventured north: German automakers have teamed up with First Auto Works in Changchun, where instead of producing the lumbering old Red Flag limousine, they now roll out the Audi sedan that has become the car of choice for Chinese bureaucrats.

Dalian, however, is the only city in China's Northeast with a truly global ambition: To surpass Bangalore, India, as the world's capital for high-tech outsourcing. The city has a long way to go, but a flood of foreign investment has fueled 50-percent annual growth rates in its software industry over the past five years. Lured by tax breaks, solid infrastructure, and cheap labor—wages are approximately one-tenth of those in the U.S.—American giants IBM, Dell, General Electric, and Hewlett-Packard have all set up shop in Dalian for everything from data processing to software development. Even a handful of Bangalore-based Indian companies have shifted their outsourcing business to the Chinese city. But Dalian's biggest source of growth is the very country that ruled Manchuria more than 60 years ago. Some 2,500 Japanese companies are now operating in Dalian, accounting for nearly 80 percent of the city's outsourcing sales.

Working for the onetime enemy doesn't bother Zhang Hua. A native of a town just north of Dalian, the high school graduate was recruited by a Japanese electric-tools company five years ago. The firm had just set up a plant in Dalian and was offering monthly wages of $120—more than her father earned in their hometown furniture factory. Zhang knew about Japan's wartime atrocities in China from her grandparents and grade-school textbooks. But her longing for escape outweighed any anti-Japanese sentiment. Zhang moved to Dalian and in her spare time began taking classes in Japanese. Earlier this year, her ambition paid off. A headhunting firm invited her to join a three-month Japanese training program that would guarantee her passage out of the factory. The only hitch: The program would drain most of her savings—about $620. Nevertheless, Zhang says, "it was worth taking a risk."

The decision has led the long-haired 28-year-old to the pristine campus of Dalian's Neusoft Institute of Information, a high-tech training center nestled against a hill in the city's Software Park. With its rough-hewn stone buildings, graceful arcades, and old-fashioned clock tower, the institute wouldn't look out of place in Tokyo or Berkeley. But its mission is far more focused than most universities. Founded five years ago with public funds (and sponsored by every major IT company from IBM to Toshiba), the institute is one of several new centers in Dalian designed to feed the country's information-technology boom with the one thing that's in short supply: skilled workers. A massive construction site just a few years ago, the campus now buzzes with more than 10,000 students learning everything from computer engineering to software programming—along with one former factory worker honing her Japanese.

Wearing a cream-colored sweater with a Chanel logo, Zhang walks into her classroom with a friendly konnichiwa—hello. Soon after completing this course, Zhang will take an office job at IBM Japan in Dalian, making the leap that all Dongbei is striving to achieve: from blue collar to white collar. Though proud of her progress, Zhang still hasn't told her parents she speaks Japanese—much less that she uses the language every day to deal with Japanese bosses and clients. "They just wouldn't understand," Zhang says with a laugh. The one historical twist her parents might grasp more easily is that her new monthly salary far exceeds their combined income—and gives her a coveted foothold in China's rising middle class.

Seventeen hours after leaving their daughter behind in Dongfa village, Iron Man Wang and Sun Jing arrive at the metal gate of the fish-processing plant in Zhuanghe, at the northern end of Dalian. A decorative exotic fish flashes in colored lights above a sign in English: Rifeng Aquatic Products Co., Ltd. The couple's journey has taken them from one of the most isolated areas of Manchuria into the slipstream of the global economy. Today, the wholly unexotic variety of flounder that they scale, cut, and fillet in this private South Korean factory were caught not in Chinese waters but off the coast of Alaska. The fish were shipped here for processing before being reexported to Japan, South Korea, and the U.S.

Wang now forms a link in this chain of globalization. His future, the future of his village and the entire region, hinges on that connection. But he and his wife, like the other 60 migrants from Dongfa village, have come to Zhuanghe for a much simpler reason: This factory, unlike many others, has a history of actually paying workers' wages. The pay is hardly generous. The fastest workers, such as nimble-fingered Sun Jing, can earn about $5 a day. But the glut of new arrivals is slowing down the lines, limiting veterans to $2.50 and the rookies to just 63 cents. The grueling ten-hour days are also taking a toll on the weaker workers; in 2005, barely half the migrants lasted the year. The older workers do their best to keep everybody's spirits up, for they know their work is Dongfa's only hope. Last year, the 50 workers here brought back a total of $37,000. This year, it should be more.

It is the local connections, not the global ones, that sustain these migrants. Sun Jing lives in the factory dormitory with hometown friends, while Wang and 20 other men rent two rooms behind a nearby sauna. The dimly lit rooms have no beds, just raised wooden slats on which the men sleep in tightly packed rows. The corroded water pipes running along the walls are the prize: They ensure that the men will not freeze to death at night, as they almost did last year. After his shift ends, Wang grabs supper at the factory canteen—one of the few times he speaks to his wife during the day—and returns to his room. On their one day off a month, he and the others sometimes wander the city streets, peering into the windows of the fancy department stores. "We're dressed so shabbily," Wang says, "the guards don't allow us to go in." Tonight, as usual, a group of young workers on the makeshift bed is playing a noisy game of poker, betting with cigarettes instead of money.

The haze of cigarette smoke thickens around the huddled players. Wang, the elder statesman at 26, sits off to the side, enjoying the scene—until someone asks about his daughter back home. "We didn't even bring along a photo of her," he says softly, "because we knew that every time we looked at her, we would burst into tears." Iron Man bows his head and stares silently at the ground. Behind him, a young worker slaps a card down triumphantly, and the room erupts in a cacophony of whoops and hollers. It is a bittersweet bet these men are making, gambling on a better life in China's Northeast.