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UNCLAS SECTION 01 OF 03 GUANGZHOU 000559 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV ELTN KTDB CH
SUBJECT: Transportation Infrastructure in the Pearl River Delta 
(Part 1 of 2): Government Plans and Foreign Participation 
 
¶1. (U) SUMMARY: Guangdong planners hope to spur development in the 
western Pearl River Delta (PRD) and create a more sustainable 
development model by expanding and integrating the PRD 
transportation network.  They aim to create an A-shaped network that 
links both sides of the delta and integrate the transportation 
systems of seven municipalities.  U.S. companies have provided 
technology for metro systems, heavy machinery for road construction, 
and environmental designs for airports and metros.  This cable 
discusses the overall development plans and the role of foreign 
companies; septel describes specific projects.  END SUMMARY 
 
The Big Picture: A Linked Region 
--------------------------------- 
 
¶2. (U) The PRD, located in south-central Guangdong, covers an area 
of 41,700 km sq and includes seven major cities: Shenzhen, Dongguan, 
Guangzhou, Foshan, Zhongshan, Jiangmen, and Zhuhai.  The PRD is 
Guangdong's (and South China's) economic engine, accounting for 83 
percent of the province's GDP with 27 percent of its population; 
those not in the PRD are engaged in largely rural pursuits.  It is 
also a center of the province's transportation infrastructure, with 
57 percent of Guangdong's expressways, 91 percent of its container 
business, and 97 percent of its air passenger business. 
 
¶3. (U) In its 11th Five-Year Plan (2006-10), Guangdong set aside an 
estimated investment of RMB 550 billion (USD 71.5 billion) -- most 
for the PRD -- for 62 major transportation projects.  The plan is to 
integrate the PRD cities' transportation systems, linking them to 
major cities in other provinces such as Hunan, Fujian, and Guizhou. 
Some of the projects reflect network designs found in U.S. cities, 
according to Professor Fu Xinsha of South China Normal University. 
He said the Guangdong government has sent experts to the United 
States since the 1980s to study transportation linkages. 
 
¶4. (U) The 11th Five-Year Plan proposes 2,000 km of new expressway, 
1,100 of railway, 270 km of light rail, and 262 km of metro rail for 
the province.  The Guangdong government has announced that it will 
spend RMB 48.5 billion (USD 6.3 billion) to improve transportation 
infrastructure in 2007, up from RMB 46.2 billion (USD 6 billion) in 
2006, which was 13 percent more than 2005. 
 
Linking East to West in the PRD 
------------------------------- 
 
¶5. (U) Thus far, most of the PRD's infrastructure investment has 
been in the eastern cities of Shenzhen, Dongguan, and Guangzhou -- 
where the bulk of the PRD's factories are located.  However, with 
shortages of land, energy, and labor becoming more acute in the 
eastern PRD, the provincial government and investors are looking to 
the western PRD as an area to expand.  The Guangdong Development and 
Reform Commission (DRC)'s Director of Transportation Zhang Zhulin 
said that his office has emphasized transportation infrastructure 
projects, particularly railways, which link eastern and western PRD 
cities.  Panyu, located 14 km south of central Guangzhou and in a 
central location within the PRD, has been designated as the 
transportation hub for rail and expressway networks, according to 
Chen Sanliu, Director-General of the Guangzhou DRC. 
 
¶6. (U) The long-term goal of PRD planners is to create a 
transportation network that forms an A-shape, with Guangzhou at the 
top and Shenzhen and Zhuhai at the lower ends, according to a March 
statement by Guangdong DRC Director-General Chen Shanru.  Across the 
middle will be a series of bridges linking Zhongshan and Dongguan. 
However, Guangdong DRC's Zhang said the Zhongshan-Dongguan link is 
an ambitious proposal and is unlikely to be completed by 2010. 
Nevertheless, Zhang characterized the PRD's transportation 
infrastructure plans as among the most ambitious in China, 
supporting a larger and more interconnected network than Shanghai's 
Yangzi River Delta. 
 
Shifting Low-Cost Manufacturing Out of the PRD 
----------------- ---------------------------- 
 
¶7. (U) PRD infrastructure planning also points to a gradual shift 
that is taking place in the region's economy toward higher 
value-added and high-technology industries.  Behind this shift are 
market forces, such as higher land and labor costs and an 
appreciating RMB, as well as government efforts to establish a 
long-term, sustainable economy.  Low-end, highly polluting factories 
are being forced to other parts of Guangdong as well as interior 
provinces. 
 
¶8. (U) Railways and highways are currently under construction to 
link Guangzhou and Guiyang, Guizhou.  The rail project, which will 
include RMB 68 billion (USD 8.8 billion) in investment and take four 
years, will cut the travel time from 21 hours to less than five. 
The 890 km expressway will reduce driving time from 24 hours to 8 
hours.  Guizhou Governor Lin Shusen commented in a recent article 
 
GUANGZHOU 00000559  002 OF 003 
 
 
that the projects will help move labor-intensive industries (and 
likely attendant environmental problems) westwards from the Pearl 
River Delta region.  Similar hopes are being pinned on a planned 
560-kilometer high-speed railway connecting Guangzhou and Nanning, 
Guangxi that will be completed in 2008.  The Guangzhou-Guilin 
expressway scheduled for completion at the end of this end or early 
next will cut travel time between the two cities to a bit more than 
five hours. 
 
Division of Responsibility 
-------------------------- 
 
¶9. (U) Guangdong DRC's Zhang said government funds for 
transportation infrastructure projects are typically divided 50-50 
between central and provincial government budgets.  Municipal 
governments are in turn responsible for obtaining land and 
compensating farmers.  (Note: to state the obvious, this has at 
times led to what amounts to confiscation, rather than compensation, 
with opportunities for enrichment of private contractors and 
construction companies and local government officials.  (End Note) 
In general, central-level ministries take the lead in planning, 
closely coordinating with provincial DRC offices.  Zhang 
acknowledged that planning for projects that cross multiple 
jurisdictions can be difficult to coordinate. 
 
U.S. Success in PRD Projects 
---------------------------- 
 
¶10. (U) According to Guangdong DRC's Zhang, foreign companies are 
primarily involved in road, light rail, and airport projects in the 
PRD.  Most foreign investment in port infrastructure comes from Hong 
Kong.  U.S. companies have found the strongest foothold in selling 
technology and heavy machinery for road, metro, and airport 
projects. 
 
¶11. (U) U.S. companies, including Caterpillar as well as a number of 
SMEs, are key suppliers of heavy-duty machinery used in road 
construction, such as paving equipment and excavators.  PRD 
governments also rely on U.S. expertise in road maintenance, 
according to Professor Fu, who himself recently visited road 
maintenance firms in Michigan for training. 
 
¶12. (U) Though European firms dominate the market in high-speed rail 
technologies, U.S. companies supply more rail maintenance equipment 
and service vehicles than their European competitors.  U.S. 
high-tech companies such as IBM, Cisco, and HP have won contracts 
for many of the computer hardware and software contracts for metro 
systems in the PRD.  U.S. companies have also found success in 
supplying air conditioning systems and general engineering for the 
Guangzhou and Shenzhen metro systems. 
 
Foreign Expertise in Management and Environmental Design 
------------------------------- ----------------- 
 
¶13. (U) As recently as the early 1990s, PRD governments rarely hired 
consulting companies on major infrastructure projects, as they were 
considered too expensive.  In recent years, however, officials have 
increasingly looked to professional engineering and planning firms. 
PRD governments will send a team of experts to Britain in 2007 to 
study management and planning concepts, according to Professor Fu. 
One of the aims of the trip is to incorporate modern safety 
standards into PRD work sites.  In addition, Guangzhou's Baiyun 
Airport is reportedly looking for foreign firms to help improve the 
airport's management.  Already, the airport has accommodated Fedex's 
interest in handling certain air traffic control operations for its 
cargo flights into Baiyun. 
 
¶14. (U) As the PRD focuses on a greener growth model and better 
energy efficiency, foreign services firms are also finding an 
expanding market for their services.  The central government 
recognized Guangzhou for the energy efficiency of its metro in 2006. 
 U.S. firm ITT provided air conditioning equipment for the metro, 
and Booz Allen designed its passenger interchanges.  The main 
terminal at Guangzhou's Baiyun Airport, which has a design that 
utilizes natural light, was designed by U.S. architectural firm 
Parsons.  Clearly, the key question for PRD planners is can they 
keep up with the service and infrastructure needs of a region whose 
economic development strategies are changing from a manufacture base 
to one that will require greater focus on services. 
 
Comment: An Opportunity for U.S. Companies 
----------------------- ------------------ 
 
¶15. (U) PRD governments are eager to build a world-class 
transportation system in Guangdong, and are looking to Hong Kong and 
western countries for models.  U.S. companies can continue to play a 
key role in both the design and construction phases of these 
projects.  With the central government's push for improved energy 
 
GUANGZHOU 00000559  003 OF 003 
 
 
efficiency, environmental awareness, and safety, U.S. companies with 
the right expertise and equipment are well positioned to benefit. 
U.S. firms will face ever greater competition from domestic 
consultants and machinery suppliers, however, as Chinese companies 
gain experience in the country's fast-paced development. 
 
GOLDBERG