VZCZCXRO3512
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #2394/01 3470520
ZNR UUUUU ZZH
R 130520Z DEC 06
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 5565
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHRC/USDA FAS WASHDC 0922
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 03 GUANGZHOU 032394 
 
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: Guangdong Province Q3 Economic Report 
 
REF: A) Guangzhou 18102 
 
 B) Guangzhou 26903 
 C) Guangzhou 29114 
 
¶1. (U) SUMMARY: Guangdong Province registered double-digit 
gross domestic product (GDP) growth in the third quarter 
(Q3) of 2006 despite government control measures and an 
emphasis on increasing domestic consumption.  Fixed asset 
investment did not grow as rapidly compared to the same 
period in 2005, and investment in certain industries 
(cement and metallurgy) and new construction projects 
declined.  Real estate prices and sales volume rose 
significantly.  Exports of mechanical, electrical, and 
high-tech products were particularly strong.  The gap 
between urban and rural incomes widened.  Guangdong's 
energy consumption remained high, but there was a greater 
emphasis on energy efficiency; energy consumption per unit 
of GDP decreased slightly.  Guangdong's GDP and other key 
economic indicators will continue to rise in the fourth 
quarter.  END SUMMARY. 
 
(U) GUANGDONG FAST FACTS 
------------------------ 
 
GDP, billion USD   226.7 (up 14.1%) 
GDP, percentage of national GDP  12.83% 
FDI, actual use, billion USD  108.1 (up 16.7%) 
Imports, billion USD   162.6 (up 20.2%) 
Exports, billion USD   213.3 (up 28.8%) 
Fixed-asset investment, billion USD 64.4 (up 15.6%) 
Retail sales, billion USD  836.3 (up 15.8%) 
Consumer Price Index   101.8 (up 1.8%) 
Disposable income per capita (urban), USD 1,525.8 (up 8.4%) 
Disposable income per capita (rural), USD 538 (up 7.7%) 
 
¶2. (U) All currency conversions in this report are made at 
the average exchange rate of USD 1 = RMB 8.0071. 
Percentages in parentheses represent growth compared to the 
same period in 2005 (according to the Guangdong Statistics 
Bureau). 
 
¶3. (U) Led by a strong industrial production and export 
sector, Guangdong maintained a "steady economic 
development," according to the Guangdong Statistics Bureau. 
The Province's GDP reached RMB 1,815.36 billion (USD 226.7 
billion), an increase of 14.1%.  The value-added of the 
following sectors in the third quarter was: 
 
Primary sector  RMB 90.57 billion (USD 11.3 billion) 
Secondary sector RMB 962.53 billion (USD 120.2 billion) 
Tertiary sector  RMB 762.26 billion (USD 95.2 billion) 
 
This represents an increase of 3.2%, 16.9% and 12.1%, 
respectively. 
 
NINE MAJOR INDUSTRIES CONTINUE TO PLAY LEADING ROLE 
--------------------------------------------- ------ 
 
¶4. (U) Growth in industrial production accelerated.  In the 
first three quarters, the value-added of industrial 
enterprises with annual sales revenue of RMB 5 million (USD 
624,000) or more (enterprises "above designated size," 
according to the Statistics Bureau) was RMB 772.34 billion 
(USD 96.5 billion), up 18.3%.  Guangdong's nine major 
industries (electronics and IT, machinery and home 
appliances, petrochemical, textile and apparel, food 
processing, building materials, wood products and paper, 
pharmaceuticals, and automobile manufacturing) continued to 
play a leading role in this growth, with an income of RMB 
557.01 billion (USD 68.8 billion), up 22.1%.  Hi-tech 
manufacturers recorded particularly robust growth of 30.1%. 
 
FIXED ASSET INVESTMENT 
---------------------- 
 
¶5. (U) According to the Guangdong Statistics Bureau, the 
volume of fixed-asset investment is under control, and the 
investment structure is "optimized."  Fixed-asset 
investment rose by 15.6% to RMB 515.29 billion (USD 64.4 
 
GUANGZHOU 00032394  002 OF 003 
 
 
billion). 
 
-- Investments in agriculture reached RMB 100.78 billion 
(USD 12.6 billion), up 40.7%. 
-- Industrial investments reached RMB 206.07 billion (USD 
25.7 billion), up 21.5%. 
-- Investments in real estate reached RMB 117.53 billion 
(USD 14.7 billion), up 19.6%. 
 
The government sought to limit investments in energy- 
intense and highly-polluting industries, such as cement, 
steel, aluminum, and copper. 
 
-- Investment in the cement industry was RMB 3.04 billion 
(USD 0.4 billion), down 21.9%. 
-- Investment in metallurgical industries was RMB 5.35 
billion (USD 0.7 billion), down 9.1%. 
-- Investment in new construction projects totaled RMB 
340.6 billion (USD 42.5 billion), down 25.2%. 
 
REAL ESTATE 
----------- 
 
¶6. (U) The weighted average price for commercial housing 
for the first three quarters of 2006 in Guangdong was RMB 
5,325 (USD 665) per square meter, up 12% year-on-year. 
Sales of commercial building space were also brisk.  While 
the total floor space sold only increased 7.3% to 31.9 
million square meters, the sales value increased 20.1% to 
RMB 160.42 billion (USD 20 billion).  The Central and 
Provincial Governments have taken steps to cool down the 
property market, yet these efforts have had little effect. 
Housing prices in Shenzhen and Guangzhou soared to RMB 
9,691 (USD 1,210) and RMB 6,388 (USD 798) per square meter, 
up 31.9% and 19.7% respectively year-on-year. 
 
FOREIGN TRADE 
------------- 
 
¶7. (U) The volume of foreign trade grew 25% to USD 375.9 
billion.  Of that total, exports accounted for USD 213.3 
billion, up 28.8%.  Imports stood at USD 162.6 billion, up 
20%.  The trade surplus reached USD 50.7 billion, up 67.2%. 
Mechanical and electrical product exports reached USD 143.5 
billion, up 27.9%; imports of these products reached USD 
100.5 billion, up 26.3%.  Hi-tech product exports reached 
USD 71.4 billion, up 27.8%; imports of these products 
reached USD 63.6 billion, up 30.5%.  Rising commodity 
prices slowed the rate of import growth of crude oil, fuel, 
steel, and copper. 
 
FOREIGN DIRECT INVESTMENT 
------------------------- 
 
¶8. (U) The contracted value of Guangdong's foreign direct 
investment (FDI) totaled USD 17.5 billion, representing 
growth of 6.7%.  The actual use of FDI reached USD 10.8 
billion, up 16.7%. 
 
INCOME 
------ 
 
¶9. (U) Urban and rural incomes both rose in Guangdong, but 
the gap between them widened.  The average per capita 
income in urban areas reached RMB 12,217 (USD 1,525.8), up 
8.4%.  However, rural residents saw their average income 
rise to RMB 4,308 (USD 538), up only 7.7%. 
 
RETAIL SALES, CPI, SAVINGS, AND EMPLOYMENT 
------------------------------------------ 
 
¶10. (U) Retail sales of consumer goods reached RMB 669.66 
billion (USD 83.6 billion), up 15.8%.  The consumer price 
index (CPI) rose by 1.8%.  The food price index rose 1.9%, 
the transportation and communication index rose 0.5%, 
clothing index rose 1.3%, and the real estate index rose by 
5.1%. 
 
¶11. (U) Savings deposits by residents grew steadily, 
 
GUANGZHOU 00032394  003 OF 003 
 
 
topping RMB 2,224.17 (USD 277.8 billion), up 13.5%.  By the 
end of September, RMB and foreign currency deposits in all 
financial institutions reached RMB 4,202.42 billion (USD 
524.8 billion), up 14.6%.  Loans reached RMB 2,507.95 
billion (USD 313.2 billion), up 13.5%. 
 
¶12. (U) The Statistics Bureau credited a decline in 
unemployment to the peak industrial production season and 
the "One Package Employment Policy" (a combination of job 
creation incentives, loans to small businesses, and skills 
training programs).  The unemployment rate for registered 
residents decreased from 2.72% in the second quarter to 
2.67% in the third quarter.  The unemployment statistics do 
not take into consideration migrant workers.  In the city 
of Guangzhou alone, the Municipal Labor Department 
estimates that there are approximately 1.5 million migrant 
workers.  Government and Chinese press estimates of the 
number of migrant workers in Guangdong Province vary from 
19-22 million (Guangdong Province Vice Governor Lei told 
HHS Secretary Leavitt on December 12 that the figure was 21 
million migrant workers); but international media estimate 
the figure at closer to 30 million. 
 
ENERGY SAVINGS 
-------------- 
 
¶13. (U) Guangdong's energy consumption remained high, but 
there was a greater emphasis on energy efficiency; energy 
consumption per unit of GDP decreased slightly.  In the 
first half of 2006: 
 
-- Energy consumption per unit of GDP decreased 2.7%. 
-- Electricity consumption per unit of GDP dropped 2.2%. 
-- Energy consumption per unit of industrial value-added 
declined 2.7%. 
 
PROBLEM AREAS 
------------- 
 
¶14. (U) The Statistics Bureau identified five main problems 
affecting the Province's economic performance: 
 
-- rising real estate prices despite the government's 
control measures; 
-- a slow increase in farmers' income due to natural 
disasters and high production costs; 
-- a net accounts receivable surge in industrial 
enterprises; 
-- pressure on foreign trade due to "increasing trade 
friction" (i.e. trade disputes and litigation); and 
-- rising prices of raw materials, and pressure to revalue 
the RMB. 
 
PREDICTIONS FOR YEAR END 2006 
----------------------------- 
 
¶15. (U) The Guangdong Statistics Bureau also provided 
predictions for several year end figures: 
 
GDP growth     14% 
Export growth     25% 
Fixed-asset investment growth   15% 
Retail sales growth    15.6% 
Consumer Price Index    2% 
Growth in disposable income per capita (urban) 9% 
Growth in disposable income per capita (rural) 6.8% 
 
¶16. (U) The Province will continue to face challenges in 
balancing the need for economic development and protecting 
arable land.  With China's National Day holiday and Mid- 
Autumn Festival, the fourth quarter is traditionally the 
peak season for consumption, and growth will continue to be 
robust.  More emphasis will be placed on developing the 
recycling industry.  The provincial government will also 
follow a number of national economic reform strategies, 
including calls to eliminate excess capacity in energy- 
intensive and highly-polluting industries. 
 
GOLDBERG