Hansel and Gretel-style timber houses painted in yellows and greens and topped with steeply pointed roofs, sit along the stretch of the Songhua River that runs through the Chinese city of Harbin. The benzene-spill from a nearby petrochemicals factory, which badly contaminated the waters in 2005, has now been cleaned up and the river walk is as busy as ever. Cyclists, tai chi enthusiasts and people playing jianzi (which involves kicking a piece of metal studded with feathers between team members) are out in force.

Harbin has a frontier-town feel to it, partly because of its remote location in Heilongjiang Province – 400km north of North Korea and 350km from the Russian border – but mostly thanks to its 10 million inhabitants. North-easterners are known in China’s national psyche as being the most ambitious in the country. In Harbin, that ambition is manifested in the city’s aim to become the economic powerhouse of the northeast.

Taiping International Airport will go through an expansion – runways, air traffic control and terminal number two will experience a €405m upgrade to accommodate the 15 million annual passengers expected by 2020. Three new five-star hotels, including a second Shangri-La property, are being built in anticipation of growing visitor numbers. As well as the subway system under construction, a future high-speed rail line will ease access to the city (if China can get its safety record sorted) by halving travel time from Beijing to four hours while also connecting to the coastal city of Dalian.

Harbin wants to attract big business and is doing a pretty good job of it. Every summer, some 300,000 people roll into town for the government-sponsored Harbin Trade Fair, one of China’s most important events for heavy industries as well as the pharmaceutical and agricultural sectors (Harbin has a benevolent power-hold on other parts of the country thanks to Heilongjiang’s fertile soil, known as black earth). Since the trade fair first got off the ground in 1990, in honour of trade between Heilongjiang Province and the former Soviet Bloc, contracts worth over €74bn have been signed between the city, Russia and European countries including Germany and Slovakia.

Propped up behind a polished oak table and with strip lighting buzzing overhead, the Harbin Trade Fair’s deputy director general Guan Haibin, concedes that the fair’s success comes down to the people of the region. “We have many skilled workers in Heilongjiang,” he says and explains that companies should invest in Harbin because the city has it all – a well-educated population, beautiful nature and clean water (he doesn’t mention the chemical spill). “We have a blue sky – we are so proud of that. Compare here with Beijing, which is polluted because everyone owns cars there now.”

Harbin’s Institute of Technology (HIT), located in the central Nangang District, is the university from which most of the region’s clever people graduate. Founded in 1920, HIT is one of the oldest in the country – the 1950s-style metal chairs and heavy wooden doors throw visitors back in time here. With a healthy government injection of €233m in research funding for this year and strong links to various government ministries such as technology and defence (several cadres in China’s military top brass have come through HIT’s campuses) it continually tops China’s educational league tables. The school is most famous for its astronautics programme – HIT professors developed the complex docking technology for the unmanned spacecraft Shenzhou VIII launched in November.

“The research level at the university is higher than at private companies. When companies have technological problems, they ask us for help,” says HIT president Wang Shuguo. “They know that we can solve their problems.” A diminutive and soft-spoken robotics expert, Wang thinks a lot about deep space. “I’m aiming for the moon, Mars and maybe Jupiter – that’s the idea I have.” He is currently overseeing a team of 50 staff and senior students who are developing a robot that can move on the moon. Wang is hopeful he can launch it within five years.

HIT has been instrumental in developing Harbin’s strong aerospace sector – which until recently specialised in small aircraft and helicopters – and attracting foreign companies such as Airbus, Embraer and General Electric to set up shop in the city. A year ago Airbus teamed up with a local partner to open a manufacturing centre in Harbin to produce composite parts such as rudders, maintenance doors and elevators for its A320 family and upcoming A350 model.

“We are ramping up our activities in Harbin,” says Laurence Barron, president of Airbus China. The French aircraft-maker is planning to employ another 400 staff in addition to the 200 already working at the centre over the next four years in order to meet demand. “We have our hands full,” says Barron.

If Harbin is ticking all the boxes for attracting foreign companies, it still has some way to go when it comes to the city’s small-scale enterprises. Alan Wong, a Harbiner with a heavy northern British accent (he used to live in the UK) is trying to change things. Wong moved back to Harbin five years ago to open his first bar and is now running Box Town, a club not far from the Harbin Institute of Technology. It could pass for a London pub; there’s a darts room (Heilongjiang Darts Association is experiencing a surge in members at the moment), it sports new pool tables and a dancefloor where Russian and Chinese women gyrate around tables decorated with fruit plates.

The entrepreneur wants to educate his compatriots and make them understand that it’s better to pay slightly more for a drink at Box Town than go to bars that may be cheaper but that also serve fake Johnnie Walker. “It’s not easy,” he says. “We have to change everybody’s minds. It’ll take three generations.” Though Wong is planning on expanding Box Town with a karaoke room, he says he is fighting an uphill battle with the local government, which doesn’t support small businesses. “I might change my career. Perhaps I’ll open an English language school.”

The Harbin government is much keener to stand behind bigger moneymakers, a policy in line with its quest to make the city the northeast’s most bustling commercial centre. Shopping is strongly encouraged: Harbiners have a distinctly “northern” fashion-style (fur is the most prized garment in the ensemble), which they are immensely proud of, and they love their shopping malls.

Leading the pack is Japanese-owned Grand Shopping Centre located on Guogeli Street, one of Harbin’s main shopping drags. On any given day, more than 100,000, mostly female, customers come through its doors to visit Grand’s Japanese-style patisserie, nail salon, hotpot-restaurants and to go all out on the local and international brands on offer – Lacoste, Omega and Chinese label Zuczug top sales.

“GDP here is not as high as in Shanghai or Beijing but people here really take care of their appearances and image – just like in western Europe. Harbin people care about luxury brands,” says He Guangchuan, general manager of Grand.

He gets most excited about Grand’s basement-level supermarket; he triumphantly stuffs a steaming dumpling from a tester-tray in his mouth (northeasterndumplings are famous all over China for being the tastiest) and points to the produce stacked on the shelves – fine wines (a 1982 Château Lafite Rothschild is going for €16,000), piles of freshly made meaty Harbin sausages, Harbin Beer and bento box-style pre-prepared meals. If all goes to plan, the government will agree to lease a plot of land for a second Grand to open soon, he explains.

Looking out over Harbin from the city’s 336m-tall Dragon Tower, a broadcasting tower complete with the obligatory revolving restaurant, the city is a sprawl of tower blocks in all directions. On street level, areas including the central Daoli and residential Jiangbei neighbourhood are more inspiring. Having survived the Cultural Revolution, buildings such as the Russian Orthodox Sophia Church and a Synagogue from 1907, now occupied by the Kazy Youth Hostel and a café well liked by Harbin’s small contingent of bohemians, are reminders of Harbin’s origins as a Russian outpost of the Trans-Siberian Railway that sprung up at the end of the 19th century.

Harbin is again growing. One of the three new areas under construction, the aptly named Qunli New District, starts halfway along the motorway from the airport and extends in row after row of partly completed apartment buildings that stretch for kilometres.

So far, Qunli is a ghost-like suburb (though some have already taken up residence here despite the tractors and construction-cranes) but it holds some promise. Its urban planners may have lacked inspiration when naming Qunli’s boulevard-sized roads – Big Street no 1, Big Street no 2 and so on – but decidedly more thought has gone into the district’s cultural development.

A red, angular-shaped building in the middle of Qunli houses a history museum with staff at the ready – though not a single visitor is in sight. Further along, jutting out of scaffolding, is the Wood Sculpture Museum, a metal-plated, whale-shaped building due for completion this year. It’s designed by Beijing-based architecture practice MAD, which is also working on a government-funded €117m futuristic-looking opera house and cultural centre located on the Songhua River, expected to be done by the end of 2013.

“Harbin wants to catch up. People are looking for something new that also has a connection to the past through culture. There is a cultural boom taking place,” says Ma Yansong, MAD’s principal architect. International practices such as that of Japanese architect Arata Isozaki, who is working on a music hall in Harbin, are also getting in on the city’s cultural push.

This is all good news for Harbin. At the moment, the most anticipated event on the cultural calendar is the Ice Festival held in the early months of the year. Its elaborate ice-sculptures attract tourists from all over China and further afield – but if it wants to claim its place as the undisputed power-player of northeastern China, it is high time Harbin upped its cultural game.

It may be quaint to have pensioners doing stretches in Stalin Park on the Songhua River – but to avoid appearing serenely stuck in time, Harbin needs a dose of the cosmopolitanism that the Russians first brought to the city.

Harbiners have made a good start at elevating their city from remote outpost to a significant regional player. But they’ll do well to harness that northeastern ambition to see the job through.