VZCZCXRO0290
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #3797/01 3200312
ZNR UUUUU ZZH
P 160312Z NOV 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 2120
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEHC/DEPT OF LABOR WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 023797 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR 4420 
STATE PASS USTR FOR STRATFORD, WINTER, ALTBACH 
STATE PASS CEA FOR BLOCK 
TREASURY FOR OASIA/CUSHMAN 
USDA/ERS FOR LOHMAR, TUAN, SYLVANA LI 
USDOL FOR ILAB 
 
E.O. 12958:  N/A 
TAGS: ECON EINV ETRD ELAB PGOV SOCI CH
SUBJECT: WUHAN RIPE FOR GROWTH, SAY U.S. BUSINESS 
REPRESENTATIVES IN CENTRAL CHINA 
 
SUMMARY 
------- 
 
¶1. (SBU) Wuhan's economy continues to grow rapidly, 
and the city's investment climate is increasingly 
attractive to foreign enterprises, according to Wuhan- 
based U.S. business representatives.  Extensive 
infrastructure, a strong industrial base, low labor 
costs, and a helpful local government spur Wuhan's 
macroeconomic growth, they said.  U.S. businesses 
currently face little competition in the sectors where 
they compete.  They added that establishing a 
permanent USG presence in the city would help expand 
economic influence in Central China.  END SUMMARY. 
 
TRAVEL TO HUBEI 
--------------- 
 
¶2. (SBU) Econ Macroeconomic Unit Chief, Econoff, Econ 
Assistant, and Conoff traveled to Wuhan, Hubei 
Province, from October 31 to November 2.  FCS 
Commercial Assistant arranged a briefing with American 
businessmen and site visits to Budweiser's China 
headquarters and the Cummins East Asia Research and 
Development Center for Emboffs on November 2. 
 
WUHAN'S MACROECONOMIC ADVANTAGES 
-------------------------------- 
 
¶3. (SBU) American business representatives said that 
Wuhan, located in Central China's Hubei Province on 
the banks of the Yangtze River, has experienced rapid 
economic change in the past three to four years.  They 
cited Wuhan's extensive transportation infrastructure 
(which includes barge, rail, and road netowkrs), 
strong industrial base, rich human capital resources 
drawn from high-quality universities, low labor costs 
relative to Eastern China, and available land as 
inherent advantages driving Wuhan's growth.  Katherine 
Bo, Deputy General Manager of Budweiser Wuhan 
International Brewing Company, stated that Wuhan's 
transportation network is an important asset for 
distributing consumer products, allowing Budweiser to 
have full national distribution from just one brewery. 
Thomas Conlon, CEO of Ironman Windmills, echoed 
others' sentiments, saying that Wuhan's relative low 
labor costs encouraged him to establish Wuhan as his 
company's headquarters in 2001. 
 
¶4. (SBU) Brian Xiaobo Sun, General Manager of the 
Cummins East Asia Research and Development Center, 
added, however that while labor costs generally are 20 
to 30 percent lower in Wuhan than in Shanghai, 
companies must revise their salary scales upwards if 
they want to hire and retain talented people.  Sun 
pays Shanghai-equivalent salaries to many of his 
engineers in order to encourage them to remain at 
Cummins in Wuhan. 
 
LOCAL GOVERNMENT SUPPORTIVE...MOST OF THE TIME 
--------------------------------------------- - 
 
¶5. (SBU) The U.S. business representatives said that 
an additional economic advantage in Wuhan is the local 
government's supportive attitude towards investors. 
Sun noted that Wuhan's business-oriented Communist 
Party Secretary, Miao Wei, previously was the 
President of Dongfeng Motor Company, while Luo 
Qingquan, the Governor of Hubei Province, visited the 
United States in September 2006 on a trade mission. 
Budweiser's Bo stated that local government officials 
act quickly and proactively whenever Budweiser raises 
any concerns. 
 
¶6. (SBU) Cedric Alexanian, Engineering Group Leader at 
SMW Automotive, stated that the local government is 
generally supportive, but for smaller foreign wholly- 
owned enterprises without the benefit of a joint 
 
BEIJING 00023797  002 OF 002 
 
 
venture partner, the investment process is not always 
a smooth one.  According to Alexanian, the local 
government continues to charge SMW a 26 percent import 
duty for equipment that he and his company believe 
should be tax-exempt. 
 
AMERICAN ECONOMIC INFLUENCE IN WUHAN GROWING 
-------------------------------------------- 
 
¶7. (SBU) Representatives of large companies such as 
Cummins noted the absence of strong competition from 
either foreign or domestic firms in their sectors, and 
said they believe they serve an important role in the 
market and will grow rapidly as Wuhan grows.  Other 
less well-known companies such as Ironman Windmills 
and SMW Automotive said they are pleased by the number 
of U.S. companies in Wuhan, but they registered some 
concerns about competition from French and German 
companies in other parts of Central China (see septel 
on French trade and investment in Wuhan). 
 
¶8. (SBU) Company representatives noted the expanding 
reach of U.S. businesses in Wuhan.  According to 
Alexanian, SMW Auto currently is representing Alcoa in 
a potential deal to establish an aluminum foundry in 
Wuhan that would target the Asian market.  Sun stated 
that Cummins soon will build a new fuel systems plant 
in the Wuhan Economic and Technological Development 
Zone.  David Wu, who previously worked at IBM in New 
York City for six years and serves currently as the 
Assistant Mayor of Chi Bi City outside Wuhan, said 
that Arlington, Virginia-based Friedman Billings 
Ramsey (FBR) Investment Bank likely will open its 
China headquarters in Wuhan in the next few months. 
 
U.S. COMPANIES GRATEFUL FOR USG SUPPORT 
--------------------------------------- 
 
¶9. (SBU) Wuhan-based representatives of U.S. companies 
said they are grateful for Embassy support in recent 
years, including expedited visas through the American 
Chamber of Commerce program and the opening of the 
Foreign Commercial Service's International Partner 
Network in Wuhan.  Sun also singled out the 
possibility of the establishment of a permanent USG 
presence in Wuhan as a positive development that would 
help American companies, in partnership with the USG, 
expand U.S. economic influence in Central China. 
 
RANDT