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(Bloomberg Business) — When it comes to shuttering steel plants and transforming an economy, Pittsburgh can teach China how it’s done. That’s according to former Fed Chairman Ben Bernanke.

China is undergoing a painful transition from an economy fueled by exports and heavy industry to one driven by consumer spending and services. It’s all part of a bigger plan to rein in debt and modernize the world’s second biggest economy.
“What’s happening in China is that they are basically changing their growth model and they have to, it is the right thing to do,” Bernanke said at an event in Hong Kong.
That’s where Pittsburgh comes in.

“In the United States, Pittsburgh used to be the steel center and when steel manufacturing left the United States and moved to other countries, it turned into a kind of ghost town for a while,” said the former Fed Chairman.

Pittsburgh’s steel industry began to fall apart in the latter part of the 20th century under the weight of foreign competition. People left the area as jobs dried up, and the resident population in Allegheny County, where the city sits, fell to a low of 1.2 million people in 2008 from 1.6 million in 1970.

In recent years though, the population has stabilized as the economy has rebounded. Pittsburgh’s output rose to an inflation-adjusted $122.9 billion in 2013 from $98.7 billion in 2001, the first year for which Bureau of Economic Analysis data area available. The area has seen a rise in advanced manufacturing, consistent growth in its healthcare and education sectors, and in recent years the region has benefited from a natural gas drilling boom. Formerly downtrodden neighborhoods have seen a revival, with storefronts, coffee shops and yoga studios springing up to meet demand.

“They restructured themselves and brought in financial services, they brought in universities and all kinds of other things to make their economy recover and now Pittsburgh is a wonderful place to be in,” said Bernanke. “It is a tremendously interesting and diverse economy and very little by the way of steel, and that is kind of a metaphor for what some East Asian economies have to do.”

The Pittsburgh of China could be the steel-production city of Handan, 450 kilometers (280 miles) southwest of Beijing in Hebei province which is grappling with plunging demand for steel and plummeting prices. Economic growth has slumped. Transforming cities like Handan and the rust belt North East will be key.

“The Chinese have shown a little bit of capacity to make these kind of transitions so I am guardedly optimistic,” said Bernanke. For more on the global economy, check out Benchmark:

* China’s $1 Trillion Province Is Open For Business
* China Is Set to Lose Manufacturing Crown

* China Has Even More Megacities Than You Thought

To contact the author on this story: Enda Curran at ecurran8@bloomberg.net To contact the editor on this story: Rina Chandran at rchandran12@bloomberg.net