Breaking the resource curse

Once a county living off coal, Fenxi has successfully transformed its economy, providing referential experience for other regions

The economic transformation of resource-dependent regions has long been a global challenge amid industrialization and industrial restructuring.

Fenxi county in Shanxi province was once a textbook resource-based county living off coal. But as China's development model shifted and the government pushed to optimize the country's industrial layout and raise industrial concentration through coal resource consolidation policies, Fenxi's coal enterprises were shut down entirely in 2009. Fiscal revenue, long dependent on coal, plunged, employment pressure spiked and large numbers of workers from the coal sector and related services urgently needed new jobs. Fenxi had to find new sources of growth.

Faced with this crisis, the local authorities prioritized industries with comparative advantages, such as broiler chicken farming and Yulu fragrant pear cultivation, charting a distinctive development path, in which agriculture replaced coal as the county's economic mainstay.

The local government has placed strong emphasis on integrating research with industry — its broiler chicken industry partnered with Shanxi Agricultural University to establish a "Science and Technology Backyard", building laboratories on-site at chicken farms to develop breeding techniques, smart environmental control, green production, and food processing technologies across the full value chain, creating a seamless link from lab to production line.

Fenxi has also carried out a vocational skills upgrading campaign, training more than 7,000 people and turning many former miners into skilled poultry farmers and pear growers.

As this industrial transition has unfolded, new growth drivers have taken shape in Fenxi, and a more diversified development pattern is beginning to emerge.

The broiler chicken industry brought in leading agribusiness and food enterprises for joint restructuring, investing 37.5 million yuan ($5.55 million) to upgrade the industry chain and build a smart digital factory powered by 5G and the industrial internet technologies, raising the annual chicken output from six batches to seven.

The poultry industry generated more than 1 billion yuan in output value in 2024, and has extended into rural areas, channeling the added value increasingly back to farmers.

The Yulu fragrant pear industry, meanwhile, has adopted a model combining intensive development, standardized management, and integrated production, storage, and sales, with enterprises and farming households splitting profits on a 35:65 basis. Specialized cooperatives have pioneered a land-for-shares model, turning barren hillsides into new industrial parks. The pear industry has also brought in advanced techniques from Shanxi Academy of Agricultural Sciences to raise product quality through standardized management.

Tapping ecological value has proved an effective path for Fenxi's industrial upgrading. Environmental protection facilities have been built simultaneously with the broiler chicken industry, implementing manure and waste utilization to effectively control pollution while improving resource use efficiency. The Yulu fragrant pear industry has promoted green technologies such as organic fertilizer substitution, and obtained pollution-free, green food and geographical indication certifications.

The upgrading of these industries has also driven the expansion of production factors into new spaces. Leveraging the global market networks of leading enterprises, Fenxi's broiler chicken products have been exported to markets such as the Middle East and Southeast Asia. The Yulu fragrant pear industry has partnered with the Chinese Academy of Agricultural Sciences and Shanxi Academy of Agricultural Sciences to broaden distribution channels, with products sold to first-tier cities across China and exported to Canada and Malaysia.

The emergence of these new industries has also cultivated new talent. The broiler chicken industry chain has directly created more than 100 jobs, and indirectly channeled 15,000 people across the county into related occupations. The Yulu fragrant pear industry cooperatives employ 168 people on a fixed basis and 522 people seasonally.

Fenxi's experience offers several key lessons for other resource-dependent regions.

First, breaking free from resource lock-in requires effective coordination between external shocks and internal responses. The coal resource consolidation policy served as an external shock that broke apart the old technology-institution complex, but Fenxi did not passively wait it out. It actively identified shifts in local factor endowments and turned external policy pressure into an internal driving force for industrial restructuring.

Second, unlocking "dormant assets" is crucial to making comparative advantages dynamic. Rather than abandoning its local resource endowments altogether, Fenxi rediscovered and activated underused land, ecological and labor resources, turning its natural landscape into assets with market value.

Third, regional transformation requires building an "embedded" institutional network. Fenxi's experience shows that the government should neither try to do everything nor be absent. It should instead draw up plans, introduce policies, and build cooperation platforms that effectively link leading enterprises, research institutions, cooperatives and farming households into a network built on shared benefits and risk.

Fourth, the core of industrial restructuring lies in achieving an "adaptive transformation" of the workforce. Turning miners into skilled poultry farmers or pear growers is not simply a matter of retraining; it also involves reshaping identity and social value, which is essential to giving the transformation a solid social foundation.

There is no one-size-fits-all blueprint for transforming resource-dependent regions, but Fenxi's experience shows that combining a capable government with an effective market, while building new industries on the foundation of local resource endowments, offers a path worth pursuing further — one that can help such regions break free from the "resource curse" and achieve high-quality development.

The author is an associate research fellow at the National Academy of Economic Strategy at the Chinese Academy of Social Sciences and the managing editor of China Finance and Economic Review.

The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.