VZCZCXRO0303
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #9114/01 2420919
ZNR UUUUU ZZH
R 300919Z AUG 06
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 2358
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHRC/USDA FAS WASHDC 0908
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 04 GUANGZHOU 029114 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/CM 
USDOC FOR 4420/ITA/MAC/MCQUEEN 
STATE PASS USTR 
USPACOM FOR FPA 
TREASURY FOR OASIA/INA-CRANE 
USDA FOR FAS/ITP AND FAS/FAA 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV EAGR ELAB CH
SUBJECT:  South China H1 Economic Report: Fujian, Guangxi, 
and Hainan 
 
REF: A) Guangzhou 18102 
 
     B) Guangzhou 26903 
 
¶1. (U) SUMMARY: In the first half of 2006, Guangxi Zhuang 
Autonomous Region, Fujian Province, and Hainan Province 
recorded rapid growth rates despite government control 
measures and natural disasters.  Strong industrial and 
export sectors fueled rapidly rising gross domestic product 
(GDP) figures.  Growth in fixed asset investment was 
particularly robust, although it focused primarily on 
manufacturing in urban areas.  Urban-rural disparities in 
income remain roughly fixed at a 3:1 ratio.  Despite damage 
from a series of typhoons that struck South China, economic 
growth is expected to stay strong in the second half of the 
year.  End Summary. 
 
¶2. (U) All currency conversions in this report are at the 
average exchange rate of USD 1 = RMB 8.0292.  The majority 
of statistics are from Chinese government sources, of 
limited reliability, and best used in comparison to other 
time periods.  Even then, their accuracy may be limited, 
since the methodologies used to calculate them often change 
without notice.  In the past, authorities have been 
unwilling to explain irregularities or changes. 
 
Guangxi 
------- 
 
¶3. (U) In the first half of the year, Guangxi's GDP amounted 
to RMB 201 billion (USD 25.1 billion), up 13.6% from the 
same period of last year, or 1.3 percentage points higher 
than the growth rate of the same period of last year. 
Guangxi's GDP growth has remained above 11% for the last 11 
quarters, and above 13% for the last 3 quarters. 
 
¶4. (U) The gross output of the farming, forestry, husbandry 
and fishery industries totaled RMB 42.3 billion (USD 5.27 
billion), up 6.8% from the same period of last year.  The 
industrial added value reached RMB 80.6 billion (USD 10.0 
billion), up 18.9% from the same period of last year. Due to 
the increase in residents' income and surging demand, the 
tertiary industry showed significant growth in the first 
half of the year. 
 
¶5. (U) Fixed asset investments in the first half of 2006 
reached RMB 88.2 billion (USD 11.0 billion), up 37% from the 
same period of last year.  Of the fixed asset investments, 
RMB 76.5 billion (USD 9.53 billion) were in urban regions, 
up 41.7%, the highest growth since 1995; RMB 11.639 billion 
(USD 1.45 billion) were in rural regions, up only 12.2%. 
The Provincial Governments recognize the need for additional 
investments in rural areas.  However, it will take time for 
these investments to materialize.  Fixed asset investments 
continue to go to the urban areas where there is a higher 
concentration of factories and businesses. 
 
¶6. (U) Guangxi's trade volume with ASEAN reached USD 790 
million in the first half year, up 49.8% from the same 
period of last year. 
 
-- Exports to ASEAN countries amounted to USD 440 million, 
up 22.9%. 
-- Imports reached USD 350 million, up 110%. 
-- Vietnam remained Guangxi's biggest trade partner among 
ASEAN countries. 
-- Trade volume between Guangxi and Vietnam reached USD 650 
million, accounting for 82.3% of the total China-ASEAN trade 
volume. 
-- Guangxi's top exports to ASEAN countries were 
mechanical/electrical products, garments, and spinning 
yarn/thread. 
 
¶7. (U) In the first half year, 3,271 enterprises in Guangxi 
were engaged in foreign trade, up 39% from the same period 
of last year; 56.2% of these companies were private 
enterprises. 
 
¶8. (U) Residents' income rose steadily.  In the first half 
 
GUANGZHOU 00029114  002 OF 004 
 
 
of 2006, urban residents' per capita disposable income 
reached RMB 5,174 (USD 644), up 9.9% as compared to rural 
residents' per capita income at RMB 1,590 (USD 198), up 
14.9%.  The price index rose 0.7%. 
 
Fujian 
------ 
 
¶9. (U) In the first half of this year, Fujian's GDP reached 
RMB 315.7 billion (USD 39.3 billion), up 12.8% from the same 
period of last year, or 1.7 percentage points higher than 
the growth during the same period.  Fujian's GDP growth in 
the first half year was 1.9 percentage points higher than 
the national GDP growth.  Fujian's GDP has maintained a 
growth rate of more than 11% in the last three years.  From 
2003 to 2005, Fujian's GDP growth was 11.6%, 12.1% and 11.3% 
respectively. 
 
¶10. (U) In the first half of 2006, Fujian's GDP only 
accounted for 3.45% of the country's total.  From 2003 to 
2005, Fujian's share of the national GDP was 4.56%, 4.43% 
and 3.6% respectively.  Fujian's share of the national GDP 
dropped due to greater growth in other Provinces, not from 
any economic slowdown in Fujian. 
 
¶11. (U) Fixed asset investments reached RMB 123.4 billion 
(USD 15.4 billion), up 39.9% year on year, or 22.9 
percentage points higher than the same period of last year. 
Urban regions accounted for RMB 109.2 billion (USD 13.6 
billion) of the fixed asset investments, up 42.8%, or 24.9 
percentage points higher than the same period of last year. 
 
¶12. (U) Fujian's exports reached USD 18.9 billion in the 
first half year, up 18.4%, while imports amounted to USD 
10.2 billion, up 8.2%, with a corresponding trade surplus of 
USD 8.71 billion. 
 
¶13. (U) Foreign enterprises' foreign trade volume reached 
USD 18.89 billion, accounting for 64.87% of the Province's 
total foreign trade volume. 
 
-- Private enterprises' foreign trade grew 38.57% to reach 
USD 5.69 billion. 
-- State-owned enterprises' foreign trade only grew 2.89% to 
reach USD 4.54 billion. 
 
¶14. (U) The city of Xiamen's foreign trade volume reached 
USD 15.12 billion, up 11.26%, accounting for 51.92% of the 
province's total foreign trade volume. 
 
¶15. (U) The United States, the EU, Japan, Hong Kong and 
ASEAN were Fujian's top 5 export markets. 
 
-- The United States imported USD 4.76 billion in Fujianese 
goods and exported USD 1.01 billion to Fujian. 
-- The EU imported USD 3.58 billion. 
-- Japan imported USD 3.11 billion and exported USD 1.299 
billion. 
-- Hong Kong imported USD 1.33 billion. 
-- ASEAN countries imported USD 1.15 billion. 
 
¶16. (U) The top exported commodities from Fujian Province 
were machinery (USD 8.389 billion), footwear (USD 1.981 
billion) and clothing (USD 1.889 billion). 
 
¶17. (U) Retail sales rose to RMB 130.2 billion (USD 16.2 
billion), up 14.6% year on year, only 0.7 percentage points 
higher than the same period of last year.  The price index 
rose 0.2%. 
 
¶18. (U) Urban residents' per capita income was RMB 7,247 
(USD 903), while rural residents' was RMB 2,357 (USD 294), 
up 12% and 9.1% respectively. 
 
Hainan 
------ 
 
¶19. (U) Hainan's GDP for the first six months of the year 
 
GUANGZHOU 00029114  003 OF 004 
 
 
was RMB 49.155 billion (USD 6.12 billion), 11.6% more than 
the same period of last year, a growth rate of 1.75 
percentage points higher than the same period last year. 
 
-- Primary industry value-added was RMB 15.964 billion (USD 
1.988 billion), up 9.1%. 
-- Secondary industry value-added was RMB 12.65 billion (USD 
1.575 billion), up 15.7%. 
-- Tertiary industry value-added was RMB 20.541 billion (USD 
2.558 billion), up 11.1%. 
-- Growth rates for primary, secondary, and tertiary 
industries were 9.1%, 15.7% and 11.1% respectively. 
-- The average price of agricultural products rose 5% 
compared to the same period last year. 
-- The finance and insurance industries grew by 12.6%, while 
the tourism sector was up 9.5% from the same period of last 
year, with output valued at RMB 7.166 billion (USD 892 
million). 
 
¶20. (U) Retail sales in the Province totaled RMB 14.828 
billion (USD 1.847 billion), up 14.2%.  Retail sales in 
urban areas reached RMB 10.612 billion (USD 1.322 billion), 
while retail sales in rural areas reached RMB 4.216 billion 
(USD 525 million), up 14.4% and 13.6% respectively. 
 
¶21. (U) The Province's foreign trade volume amounted to USD 
1.27 billion, up 16.45%. 
 
-- Exports were valued at USD 605.35 million, up 28.3%. 
-- Imports were valued at USD 666.27 million, up 7.43%. 
-- Hainan's trade volume with ASEAN countries reached USD 
163 million, up 69%, far exceeding the growth of its trade 
volume with the EU, which increased only 38%. 
-- Hainan's major trade partners were Vietnam, Thailand and 
Indonesia. 
-- The Province's main exports were natural gas, meat and 
fish, fertilizer, steel, and wood products.  Its main 
imports were aircraft, aircraft parts, and machinery. 
 
¶22. (U) Hainan's utilized foreign direct investment in the 
first six months of 2006 reached USD 31.14 million, up 4.6% 
from the same period last year.  U.S. investments are mainly 
in the hotel, aviation, retail sales, and agriculture 
sectors. 
 
¶23. (U) Fixed asset investments in the first half year 
reached RMB 17.022 billion (USD 2.12 billion), up 16.6%. 
RMB 16.259 billion (USD 2.025 billion) of the fixed asset 
investments took place in urban areas, up 16.2%.  Only RMB 
763 million (USD 95.0 million) of the fixed asset 
investments took place in rural areas, up 25.4%. 
 
¶24. (U) Urban citizens' average disposable income for this 
period was RMB 5,023 (USD 626), up 16.2%.  Rural residents' 
per capita income was RMB 1,785 (USD 221), up 8.8% from the 
same period of last year. 
 
Comment 
------- 
 
¶25. (U) The region continues to record rapid growth rates 
despite government control measures and natural disasters. 
The strong industrial and export sectors fueled GDP growth 
higher than the estimated national growth rate of 10.9%. 
Fixed asset investments recorded particularly robust growth. 
However, rural versus urban disparities in income and 
investment levels continue, especially in Hainan Province 
and Guangxi Zhuang Autonomous Region.  The expectation of 
policy makers in the 11th Five-year plan is that continued 
development of infrastructure, particularly rural roads and 
connecting highways, will encourage increased investment in 
rural areas and gradually raise rural incomes.  However, in 
the short term, these income disparities, coupled with land 
compensation issues, homelessness resulting from recent 
typhoons, and higher prices for agricultural inputs, could 
increase socio-economic tensions in the affected areas. 
Nonetheless, despite the typhoon damage to farms, 
businesses, communications networks, and water conservation 
 
GUANGZHOU 00029114  004 OF 004 
 
 
projects, economic growth will likely continue at high 
levels in the second half of the year. 
 
GOLDBERG