VZCZCXRO8476
RR RUEHCN RUEHGH
DE RUEHGH #0033/01 0160706
ZNR UUUUU ZZH
R 160706Z JAN 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7535
INFO RUEHBJ/AMEMBASSY BEIJING 2446
RUEHGZ/AMCONSUL GUANGZHOU 0142
RUEHSH/AMCONSUL SHENYANG 1675
RUEHCN/AMCONSUL CHENGDU 1686
RUEHHK/AMCONSUL HONG KONG 1856
RUEHIN/AIT TAIPEI 1476
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 8162

UNCLAS SECTION 01 OF 02 SHANGHAI 000033 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM, INR/B 
STATE PASS USTR FOR STRATFORD, WINTER, KATZ 
USDOC FOR ITA DAS KASOFF, MAC/OCEA - SZYMANSKI 
TREASURY FOR OASIA - HAARSAGER, WINSHIP 
NSC FOR LOI 
 
E.O. 12958: N/A 
TAGS: ETRD PGOV PREL EINV ECON PINR CH
SUBJECT: ZHEJIANG VICE GOVERNOR PROMOTED TO COMMERCE VICE MINISTER 
 
(U) This cable is sensitive but unclassified and for official 
use only.  Not for distribution outside of USG channels or via 
the internet. 
 
Summary 
------- 
 
¶1. (SBU) China's State Council recently appointed Zhejiang Vice 
Governor Zhong Shan to move to the Ministry of Commerce (MOFCOM) 
as Vice Minister.  Zhong has served in Zhejiang's provincial 
government since 2003 during a period of rapid economic growth 
and the expansion of trade and investment ties.  The United 
States remains one of the province's top investors, but U.S. 
cooperation with Zhejiang has been hindered in recent years by 
poor intellectual property rights enforcement and lingering 
trade disputes.  Although in charge of the province's foreign 
affairs portfolio during his tenure as Vice Governor, Zhong has 
not historically had much contact with the Consulate.  End 
Summary. 
 
Moving To MOFCOM 
---------------- 
 
¶2. (SBU) China's State Council recently tapped Zhejiang Vice 
Governor Zhong Shan to replace MOFCOM Vice Minister Yu 
Guangzhou.  Zhong's appointment was one of nine personnel moves 
announced on December 10.  Zhong is expected to take over Yu's 
portfolio, which according to the MOFCOM website had included 
the Department of General Economic Affairs, Department of 
European Affairs, Department of Foreign Affairs, MOFCOM Party 
Committee, Department of Retired Cadres' Affairs, the China 
Foreign Trade Center, and China-Europe Association. 
 
Zhejiang's Economy 
------------------ 
 
¶3. (SBU) Named Vice Governor of Zhejiang in 2003, Zhong served 
in the provincial government during a period of rapid economic 
growth.  Zhejiang is known for its broad-based, entrepreneurial 
capitalism, and large number of private enterprises.  Per capita 
GDP in 2007 reached USD 4883, well above the national average of 
USD 2226, and the province's GDP accounted for 9 percent of the 
nation's total in 2007.  Despite reports that there are an 
increasing number of factory closures in the province, 
especially in the export sector, Zhejiang's GDP continued to 
grow through the first three quarters of 2008, increasing by 
10.6 percent over the same period in 2007 to USD 224 billion. 
 
Zhejiang's Cooperation with the Consulate 
----------------------------------------- 
 
¶4. (SBU) In recent years, the Consulate's cooperation with 
Zhejiang Province has been good, although not as active and deep 
as our cooperation with Jiangsu.  Notable visits include 
Treasury Secretary Paulson to Hangzhou in September 2006 and SED 
Ambassador Holmer to Ningbo in May 2008.  Ambassador Randt's 
visits to Zhejiang most recently included his participation in 
the November 2008 re-interment ceremony for the ashes of 
Ambassador Leighton, an event in which Zhejiang officials were 
among those making important preparatory contributions.  The 
United States remains among Zhejiang's top investors, accounting 
for over 4,700 U.S.-invested projects by 2007.  Prominent U.S. 
investors include General Motors, Merck, Motorola, and General 
Mills. 
 
IPR Problems and Trade Disputes Hinder Ties 
------------------------------------------- 
 
¶5. (SBU) Poor intellectual property rights (IPR) enforcement and 
lingering trade disputes, however, have hindered fuller 
development of ties and cooperation between the USG and Zhejiang 
Province.  Since the United States filed an IPR-related case in 
the WTO, Zhejiang largely refused - up until a January 12, 2009 
meeting (forthcoming septel) - to cooperate with the Consulate 
on IP-related issues.  FCS Shanghai has dealt with a growing 
number of business disputes related to American investors in 
Zhejiang, mostly in Hangzhou, the provincial capital.  Some of 
 
SHANGHAI 00000033  002 OF 002 
 
 
these cases appear to involve meddling by senior provincial 
officials or harmful actions by provincial state-owned 
enterprises (SOEs). 
 
Zhong Shan's Role 
----------------- 
 
¶6. (SBU) Although in charge of the province's foreign affairs 
portfolio during his tenure as Vice Governor, Zhong has not 
historically had much contact with the Consulate.  Previous 
Consul Generals have written letters to Zhong regarding 
investment disputes or political issues, but Vice Governor Zhong 
did not normally reply.  Zhong regularly attended international 
trade and investment fairs in the province 
 
Zhejiang Cadres' Views 
---------------------- 
 
¶7. (SBU) According to Zhejiang Province Foreign Affairs 
Officials (FAO) speaking on January 12, 2009, Zhong is of course 
acquainted with Vice President Xi Jinping from their shared time 
of service in Zhejiang, including participation at some major 
business events, such as ceremonies to announce new investments 
in Zhejiang.  However, the FAO officials point to former Vice 
Premier Wu Yi as having identified Zhong as a successful foreign 
trade and foreign investment bureaucrat and think it most likely 
that she had laid groundwork for Zhong's elevation to the 
Central Government, rather than something Xi Jinping had done. 
The FAO officials spoke highly of Zhong's pro-active approach to 
reach out to foreign businesses in Zhejiang and to ensure that 
provincial government departments addressed concerns raised by 
foreign-invested enterprises.  He warned about slowing foreign 
trade in the first half of 2008 and instructed provincial 
departments to try to prevent that. 
 
Comment 
------- 
 
¶8. (SBU) The Consulate has had little direct contact with Zhong, 
and Zhejiang's record on economic and commercial issues is mixed 
-- the province strongly promotes private enterprise and at 
least through much of 2008 continued to grow rapidly, but the 
provincial government has failed to protect adequately IPR or 
sometimes failed to protect the interests of foreign investors. 
 
Bio Note: Zhong Shan 
-------------------- 
 
¶9. (SBU) Zhong Shan is a native of Zhejiang Province, born in 
1955 in Shangyu.  He joined the Chinese Communist Party (CCP) in 
1974 and earned a PhD in economics from Zhejiang University. 
Zhong has a business background, having served as CEO of the 
Zhejiang Provincial International Ad Company, and CEO and Party 
Secretary of both the Zhejiang Apparel Import and Export Company 
and Zhejiang Zhongda Company.  He later became Director General 
and Party Secretary of the Zhejiang Provincial Economic and 
Trade Cooperation Bureau.  He was named Vice Governor of 
Zhejiang Province in 2003 and appointed to his new post as Vice 
Minister of Commerce on December 10, 2008. 
 
¶10. (SBU) According to Zhejiang FAO officials, Zhong's portfolio 
in Zhejiang Province included foreign trade and investment, 
tourism, and religious affairs.  Zhong has a daughter now 
studying at Tsinghua University in Beijing.  One of the FAO 
speakers on January 12 recounted that Zhong had been listed in a 
Taiwan publication in a recent year which identified up and 
coming Fifth Generation leaders in China.  (The FAO official 
also said the current Party Secretary in Ningbo and a Party 
Central Organization Department (zhongyang zuzhibu) official 
surnamed Chen were other predicted future leaders in that same 
Taiwan publication.) 
CAMP