VZCZCXRO2450
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0087/01 0190842
ZNR UUUUU ZZH
R 190842Z JAN 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 5704
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHRC/USDA FAS WASHDC 0929
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 03 GUANGZHOU 000087 
 
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: Fujian Province Q3 Economic Report 
 
REF: A) 06 Guangzhou 29114 
     B) 06 Guangzhou 25667 
 
¶1. (U) SUMMARY: Fujian continued its robust economic growth 
in the third quarter (Q3) of 2006 despite the negative 
effects of natural disasters.  Fujian's 12.5% gross 
domestic product (GDP) growth was fueled by the 
manufacturing and service sectors, exceeding the national 
Q3 GDP growth rate of 10.7%.  The Province's main exports 
included machinery (USD 12.9 billion), hi-tech products 
(USD 6.4 billion), garments (USD 4.2 billion), and footwear 
(USD 3 billion).  Exports to Russia, Switzerland, Brazil, 
and Ukraine increased by over 50%.  Foreign direct 
investment (FDI) and fixed-asset investment soared, the 
latter increasing by 36.5% compared to the same period last 
year.  Investments focused on urban areas, especially in 
the real estate and service sectors.  The rural-urban 
income gap continued to widen, due in part to lower farm 
incomes as a result of crop damage from typhoons and 
flooding.  END SUMMARY. 
 
FUJIAN FAST FACTS 
----------------- 
 
GDP, billion USD                              62.6 (12.5%) 
Imports, billion USD                          15.9 (9.1%) 
Exports, billion USD                          29.6 (17.4%) 
FDI, actual use, billion USD                   2.6 (27.6%) 
Fixed asset investment, billion USD           24.5 (36.5%) 
Retail sales, billion USD                     24.4 (14.5%) 
Consumer Price Index                         100.5 (0.5%) 
Disposable income per capita (urban), USD  1,305.4 (11.6%) 
Disposable income per capita (rural), USD    285.9 (11.1%) 
 
(U) Percentages in parentheses represent growth compared to 
the same period in 2005 (according to the Fujian Statistics 
Bureau).  All currency conversions in this report are made 
at the average exchange rate of USD 1 = RMB 8.0071. 
 
¶2. (U) In the first three quarters, Fujian's GDP reached 
RMB 500.98 billion (USD 65.6 billion), up 12.5% from the 
same period of last year.  The value-added of the primary, 
secondary, and tertiary industries was RMB 50.26 billion 
(USD 6.3 billion), RMB 257.48 billion (USD 32.2 billion) 
and RMB 193.24 billion (USD 2.4 billion) respectively, up 
2.1%, 15.6% and 11.3% respectively. 
 
FARMING, FORESTRY, AND HUSBANDRY 
-------------------------------- 
 
¶3. (U) The gross output of the farming, forestry, husbandry, 
and fishery industries totaled RMB 83.49 billion (USD 10.4 
billion), up 2.6% from the same period of last year. 
 
-- Grain production decreased, while the output of cash 
crops like fruit, tea and edible mushrooms increased by 
4.7%, 6.4% and 7.5% respectively. 
-- Bamboo production grew by 25%. 
-- Meat and egg production increased by 2.9% and 1.4% 
respectively; the output of milk decreased by 6.6%. 
-- Output from the fishery industry decreased by 1.1% due 
to high diesel fuel costs, typhoons, and a Ministry of 
Agriculture policy reducing the number of fishing vessels 
and shifting resources to other industries. 
 
INDUSTRIAL PRODUCTION 
--------------------- 
 
¶4. (U) Industrial output reached RMB 709.08 billion (USD 
88.6 billion), up 19.5%.  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 195.96 billion (USD 24.5 billion), up 19.5%. 
 
FIXED-ASSET INVESTMENT 
---------------------- 
 
¶5. (U) Fixed-asset investments reached RMB 196.14 billion 
 
GUANGZHOU 00000087  002 OF 003 
 
 
(USD 24.5 billion), up 36.5%.  RMB 172.45 billion (USD 21.5 
billion) were invested in urban area, up 38.2%. 
 
-- Investment in infrastructure reached RMB 49.49 billion 
(USD 6.2 billion), up 34.9%. 
-- Growth of investment to the manufacturing sector slowed. 
-- Investment in real estate grew by 43.5% to RMB 51.11 
billion (USD 6.4 billion).  Over 63 million square-meters 
of commercial floor space were under construction, up 15.1%, 
and over 13 million square-meters of floor space were sold, 
up 24.1%. 
 
¶6. (U) Real estate prices continued to rise in Fujian.  The 
average price for commercial housing in Fuzhou was RMB 
4,670 (USD 583) per square meter, up 6.3% year-on-year; RMB 
6,986 (USD 872) per square meter in Xiamen, up 6.7%; and 
RMB 3,952 (USD 494) in Quanzhou, up 5.4%.  Despite the 
Central Government's efforts to cool down the real estate 
market, in September 2006, prices of new apartments in 
Xiamen and Fuzhou rose by 11.4% and 10% respectively. 
Economists believe that there is a real estate bubble in 
Fujian, and that the impact of economic control measures 
will likely not be evident until mid-2007. 
 
RETAIL SALES 
------------ 
 
¶7. (U) Retail sales reached RMB 194.71 billion (USD 24.3 
billion), up 14.5%.  The price index rose 0.5%.  Sales of 
motors reached RMB 12.32 billion (USD 1.5 billion), up 
34.8%; sales of petroleum and its byproducts amounted to 
RMB 11.46 billion (USD 1.4 billion), up 52.3%. 
 
FOREIGN TRADE 
------------- 
 
¶8. (U) Fujian's foreign trade volume reached USD 45.5 
billion in the first three quarters, up 14.38%.  Imports 
reached USD 15.9 billion, up 9.1%; exports reached USD 29.6 
billion, up 17.44%. 
 
-- Private enterprises' foreign trade volume grew to USD 
9.2 billion.  Foreign-invested enterprises contributed 
63.9% of the total foreign trade volume, reaching USD 29.1 
billion, up 11.18%.  State-owned enterprises' foreign trade 
volume only grew 4.4% to reach USD 7.2 billion. 
-- Fujian's top five export markets were the United States 
(USD 7.7 billion, up 17.2%), the EU (USD 5.6 billion, up 
15.19%), Japan (USD 4.5 billion, up 4.96%), Hong Kong (USD 
2.2 billion, up 9.9%), and ASEAN (USD 2.1 billion, up 
23.61%).  Exports to Russia, Switzerland, Brazil, and 
Ukraine increased by over 50%. 
-- Fujian's major exports included machinery (USD 12.9 
billion, up 15.7%), hi-tech products (USD 6.4 billion, up 
14.34%), garments (USD 4.2 billion, up 21.88%), and 
footwear (USD 3 billion, up 13.36%). 
-- The top five exporters to Fujian were Taiwan (USD 3.1 
billion, up 17.2%), Japan (USD 1.9 billion, up 3.44%), 
ASEAN (USD 1.8 billion, up 6.13%), Korea (USD 1.6 billion, 
up 4.66%), and the United States (USD 1.6 billion, up 
2.95%). 
-- Major imports included machinery (USD 8.5 billion, up 
12.36%), hi-tech products (USD 4 billion, up 8.96%), 
agricultural products (USD 980 million, up 8.68%), plastic 
(USD 994 million, down 5.41%), and steel (USD 381 million, 
down 26.97%). 
 
FOREIGN DIRECT INVESTMENT 
------------------------- 
 
¶9. (U) Top investors to Fujian were Hong Kong, the Virgin 
Islands, Taiwan, ASEAN, and Japan, which accounted for 
81.2% of the total contracted foreign investment in the 
Province.  The utilized foreign direct investment (mainly 
in the manufacturing sector) amounted to USD 25.8 billion, 
up 27.6%.  The average size of a foreign invested project 
was USD 3.7 million.  USD 1.2 billion was invested in the 
service sector, up 79.1%. 
 
 
GUANGZHOU 00000087  003 OF 003 
 
 
RESIDENTS' INCOME AND EMPLOYMENT 
-------------------------------- 
 
¶10. (U) Urban residents' per capita disposable income was 
RMB 10,452.74 (USD 1,305.4), up 11.6%; rural residents' per 
capita cash income was RMB 3,612.91 (USD 451.2), up only 
8.6%. 
 
¶11. (U) A total of 494,600 new employees entered the 
workforce in the first three quarters in 2006.  Of this 
total, 339,000 were from the rural population and joined 
the manufacturing sector.  Companies in Xiamen, Fuzhou, 
Quanzhou, and Zhangzhou were the top recruiters.  The 
official unemployment rate for registered residents 
remained around 3.95% in the Province. 
 
PROBLEMS IDENTIFIED BY THE PROVINCE 
----------------------------------- 
 
¶12. (U) Natural disasters, such as Typhoons Chanchu, Kaemi, 
and Prapiroon, caused a decrease in agricultural growth. 
The gross output and value-added of the agricultural sector 
decreased by 1.5% in the first three quarters.  The 
Statistics Bureau noted the pressure to increase farmers' 
income became more intense due to the widening rural-urban 
income gap.  The Bureau also claimed that a widening 
industrial price scissors gap (an economic phenomenon 
wherein changing world price levels cause a country's 
exports to decline in value, while the valuation of its 
imports remains relatively stable) caused profits to 
decline.  The newly released tax reimbursement policy, 
international trade conflicts (such as the EU shoe dumping 
case against China), and barriers set by foreign countries 
were challenges to Fujian's foreign trade development. 
 
PREDICTION OF ANNUAL ECONOMIC PERFORMANCE 
----------------------------------------- 
 
¶13. (U) The Statistics Bureau predicted that Fujian's year- 
end GDP growth will be 12%.  The gross output of farming, 
forestry, husbandry, and fishery will grow by 2.8%.  The 
output of industries "above designated size" will increase 
by 22%.  Retail sales will grow by 14.5%.  Urban residents' 
per capita disposable income will reach USD 1,698.5; rural 
residents' per capita cash income will reach USD 599.5, up 
10.4% and 8% respectively.  The consumer price index will 
be 100.6. 
 
GOLDBERG