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RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0795/01 1940814
ZNR UUUUU ZZH
R 130814Z JUL 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6258
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHRC/USDA FAS WASHDC 0973
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 04 GUANGZHOU 000795 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE ALSO PASS USTR 
PACOM FOR FPA 
 
E.O. 12958: N/A 
TAGS: EAGR PREL ECON ETRD TW CH KIPR
SUBJECT: Bountiful Harvests: A Look at Cross-Strait Agricultural 
Trade 
 
¶1. (U) SUMMARY: Agricultural goods produced in Taiwan?  Produced in 
China with Taiwan seeds by Taiwan farmers?  Produced in China with 
Taiwan seeds by Chinese farmers claiming to be Taiwan farmers? 
Produced in China with Chinese seeds claiming that the produce was a 
Taiwan product or "Grown in Taiwan"?   We've encountered all of 
these explanations about the quality or lack thereof of Taiwan ag 
products, many of which are too expensive for Chinese consumers, on 
the mainland market.  On the other hand, China is reaping the 
extensive benefits of Taiwan agricultural investments, including 
higher productivity, higher quality products, higher rural incomes, 
and a certain amelioration of the political disdain that some Taiwan 
farmers, especially those with DPP affiliations, have with mainland 
politics.  Increasingly, they prefer not to rock the boat or make 
waves in China in ways that could have an impact on their ability to 
do business.  In contrast, Taiwan does not appear to be experiencing 
much benefit of closer agricultural ties.   END SUMMARY 
 
The Promised Land 
------------------ 
 
¶2. (U) Taiwan investment in agricultural projects is continuing on a 
large scale.  Over the past fifteen years, according to the 
Guangdong Provincial Government, 1,000 Taiwan agricultural 
enterprises have been set up in the province, withtotal investments 
surpassing USD 1 billion.  In Fujian, the Provincial Government 
claims to have 1,783 Taiwan agricultural enterprises with 
investments exceeding USD 1 billion. 
 
¶3. (U) In October 2006 at the Boao Cross Straits Agricultural 
Cooperation Forum in Hainan, members of the Kuomintang and the 
Chinese Communist Party pledged to support a number of measures 
aimed at improving cross strait agricultural trade. 
 
¶4. (U) Econoff conducted interviews with Taiwan farmers in the 
consular district, including Shunde, Dongguan and Zhanjiang in 
Guangdong province, Zhangzhou in Fujian province, Haikou in Hainan 
province, and Guilin, in Guangxi province.  The farmers grow a 
variety of cash crops, such as fruits, hot peppers, flowers, and 
shrimp. 
 
Profiling a Taiwanese Farmer 
---------------------------- 
 
¶5. (U) The Taiwan growers, particularly fruit growers, tended to be 
from southern areas of Taiwan, in particular Tainan and Pingtung 
County.  Some farmers moved to China during the 1990s; others were 
more recent arrivals.  The more recent arrivals tend to keep their 
families in Taiwan and commute back and forth from Taiwan.  Those 
that came to mainland China earlier tended to have either moved 
their families to China or married mainland women and remained on 
the mainland. 
 
¶6. (U) All of the farms visited were small or medium sized.  In most 
cases, their products were destined for domestic consumption in 
China.  Only in certain instances , such as orchids, were products 
meant for export.  None of those interviewed would openly admit that 
their products were for export to Taiwan.  All claimed that it was 
currently illegal or too difficult to export their products to 
Taiwan.  In addition, the farmers said that Taiwan was trying to 
export Taiwan agricultural products to China, implying that there 
would be no market for their products in Taiwan. 
 
Show Me The Money 
----------------- 
 
¶7. (U) Always afraid of the tax man, those interviewed were vague 
about their revenues and their profits.  One farmer in Zhangzhou, 
Fujian, claimed that his farm lost money almost every year. 
However, he also admitted that the farm had doubled in size since 
its establishment in 2001.  In Dongguan, one farmer stated that 
nearly 70% of all agricultural enterprises fail to make money in the 
first 5 years.  However, in Guilin, another farmer said that 
although there were high initial costs, it was easy to break even 
within three years; everything afterward was profit.  He stated that 
farmers investing in China were usually successful and wealthy 
farmers in Taiwan. 
 
¶8. (U) Common elements attracting Taiwan farmers to invest in China 
include access to the mainland domestic market, cheap land, and tax 
holidays.  All of the farmers complainedabout labor, ranging from 
the laziness of the farmhands in Hainan, to workers failing to come 
 
GUANGZHOU 00000795  002 OF 004 
 
 
back after holiday in Fujian, language and cultural issues.  These 
issues "forced" one farmer in Guangdong to import workers from 
southern Fujian.  Another frustration was the lack of direct 
transportation links to Taiwan and access to Taiwan media, such as 
TV or newspapers. 
 
I Am from the Government and I Am Here To Help 
------------------------ --------------------- 
¶9. (U) In the interviews, Taiwan farmers generally expressed 
satisfaction  with local government officials.  All had 
concerns/complaints/problems expedited by local government 
officials.  In several cases, such as in Shunde, government 
officials, including customs and quarantine officials, visited the 
farmers and asked if they needed any assistance. 
 
¶10. (U) All of the farmers were aware of the announcement made at 
the 2006 Boao Cross-Straits Agricultural Co-Op Forum which promised 
preferential treatment to Taiwan farmers.  Most were unable to 
comment whether the announcement encouraged more Taiwan investors to 
come to China.  Farmers from Guangdong and Fujian commented that 
since the announcement, local government officials appeared to be 
more accommodating to Taiwan investor needs. 
 
You Reap What You Sow 
--------------------- 
¶11. (U) In all cases, the farmers used Taiwan seeds and farming 
techniques in China, leading to a dramatic increase in productivity 
and quality of the products.  In local markets, agricultural 
products raised from Taiwan seeds usually have a 10-20 percent 
premium over local products.  Although this does not match the 50 
percent premium of imported Taiwan products in China, it does 
translate into significantly higher revenues as imported seed also 
produces more fruit. 
 
¶12. (U) In some cases, Taiwan farmers  train Chinese farmers to grow 
agricultural products in return for a guaranteed price upon harvest. 
 By doing this, the Taiwan farmers avoid the bureaucratic pitfalls 
of purchasing Chinese real estate.  The Chinese farmer learns better 
farming techniques and earns substantially more income.  In 
Dongguan, one Taiwan farmer said a typical Chinese farmer growing 
fruit may earn RMB 3000 (USD 395) from his own crop, but if he grew 
for a Taiwan farmer, he could earn RMB 5000 (USD 670). 
 
¶13. (U) Econoff inquired about the protection of technology, such as 
seed or farming techniques.  In Guangxi, Taiwan farmers admitted 
that advanced technology, including the ability to research and 
produce better seeds, can not be transferred to the mainland.  In 
contrast however, Zhanjiang local officials were quick to brag about 
how local farmers were able to copy the techniques of the Taiwan 
farmers and go into business themselves.  In Fujian, the Taiwan 
farmers dismissed this worry, stating that local farmers lacked the 
knowledge and the capital to compete against Taiwanese farmers.  In 
addition, local farmers generally do not have independent access to 
Taiwanese seed, which hampers their ability to compete against 
Taiwan products. 
 
Slow Boat to China 
------------------ 
 
¶14. (U) In April 2006, the Mainland Affairs Council in Taipei 
complained that Taiwan's intellectual property rights were abused by 
Chinese farmers, claiming their products wer from Taiwan.  In 
addition, the Mainland Affairs Council complained of the slowness 
and inefficiency of China Customs, which in turn, reduces the 
overall value of Taiwanese agricultural products being exported to 
China, which in 2005 was a miniscule $1.3 million. 
 
¶15. (U) Based on interviews with two major supermarket chains, 
Wal-Mart in Shenzhen and Park N' Shop in Guangzhou, Taiwan 
agricultural products, primarily fruits, remain at a disadvantage in 
the Chinese market.  Both chains sell some Taiwan fruits, but the 
cost of the fruit and shipping make them prohibitively expensive 
compared to locally-grown fruits.  Delays in delivery due to slow 
customs clearance also cause fruit to deteriorate in quality, making 
it harder to sell produce at already high prices.  Both chains 
expressed a preference to purchase locally grown Taiwan fruits 
rather than import directly from Taiwan. 
 
¶16. (U) These responses mirror interviews with Taiwan fruit growers 
in China.  All of them grow primarily for the domestic market; those 
with farms still in Taiwan do not export from them to China, 
 
GUANGZHOU 00000795  003 OF 004 
 
 
preferring to use domestically-grown Taiwanese fruit.  The farmers 
cited lower input costs and good transportation to far flung major 
cities such as Beijing, Shanghai, Chengdu, and even Urumqi where 
their products fetch good prices.  They cited both high costs and 
customs issues. 
 
¶17. (U) Growers in  Hainan and Fujian complained of local farmers 
passing off their own fruit as from Taiwan.  Growers also complained 
of the lack of regulations controlling the origin of fruits.  While 
one farmer in Hainan sold fruit in boxes stating "Taiwan Pineapple; 
Grown in Hainan", he admitted that local farmers simply labeled 
their boxes as "Taiwan Pineapple" with no indication where the fruit 
was grown. 
 
From Green to Blue 
------------------ 
 
¶18. (SBU) Econoff inquired about the Taiwan farmers' political 
affiliations.  In all cases, they claimed to be apolitical. 
However, in Hainan, one farmer expressed strong feelings against 
Taiwan's current president, Chen Sui-bian.  In Zhanjiang, another 
farmer said that all of the parties in Taiwan were corrupt so it was 
simply choosing the least corrupt.  In Dongguan, one farmer said 
that those who were blue (Kuomintang supporters) stayed blue; those 
who were green (DPP supporters) usually became less green.  He 
admitted that his family members were ardent DPP supporters, but 
said in the next election he intended to vote for the Kuomintang. 
However, his parents would still vote for the DPP due to large 
pensions allegedly being lavished on rural retirees. 
 
Two-Way Trade?  Only the Shadow Knows 
------------------------------------- 
 
¶19. (SBU) Although superficially it appears that agricultural trade 
is one way, with Taiwan agricultural products being exported to 
China and Taiwan farmers investing in farms on the mainland, there 
are  indications that some products are being exported to Taiwan via 
back channels.  In Hainan, local officials openly admitted that 
Taiwan fishing boats often met with Chinese fishing boats to 
purchase their catch rather than catching it themselves.  In 
Guangdong, a flower farmer said that some of his mainland-raised 
Taiwan orchids were exported to Taiwan, though they were first 
transshipped via South Korea and Vietnam and there certified as 
Korean or Vietnamese origin.  However, Taiwan farmers in China 
continue to hide some aspects of their investments.  In one instance 
in Guangxi, two Taiwan farmers spoke in Taiwanese among themselves 
about not revealing the extent of Taiwan agricultural technology 
transferred to the mainland, not knowing Econoff understood their 
dialect.  In another case in Fujian, it appeared that the Taiwan 
farmer wanted to say more but not in the presence of local 
government officials. 
 
What Is Good For The Goose... 
--------------------------- 
 
¶20. (SBU) In the areas that Econoff visited that had Taiwan 
agricultural investment, he noted good transport systems and 
relatively good incomes based on the quality of housing visible from 
the road, compared to other rural areas with no Taiwan investments. 
Farms located in Taiwan investment zones appeared to be well run and 
well maintained.  Both farmers and local officials bragged about the 
large increases in productivity due to better seeds and superior 
farming techniques.  Local officials, working through both word of 
mouth as well as organized groups visiting from Taiwan, continue to 
encourage investors from Taiwan to visit and offer assistance in 
setting up their farms in China, clearly recognizing the beneficial 
impact of Taiwan agricultural investment. 
 
...May Not Be Good For the Gander 
------------------------------- 
 
¶21. (SBU) Taiwan products grown on the mainland appear to be 
limiting any effective entry of Taiwan agricultural products into 
China.  Products grown in both the mainland and Taiwan from Taiwan 
seed are usually similar in quality but with signficant differences 
in price.  While demand for Taiwan fruit is great, the average 
Chinese cannot afford products imported from Taiwan.  However, 
mainland grown-Taiwan fruit provides a cheaper and reliable 
alternative that is growing more popular with Chinese shoppers. 
Finally, the growing agricultural ties appear to be affecting a key 
constituency of the DPP, the farmer.  While rural southern Taiwanese 
 
GUANGZHOU 00000795  004 OF 004 
 
 
are among the key supporters of the DPP, the lack of enthusiasm by 
Taiwan investors in the mainland of any moves to upset the status 
quo is quite striking.  The farmers with whom we spoke all voiced 
their desire for a stable, peaceful environment to conduct business 
here in China and their intention to vote for whoever can deliver 
this. 
 
GOLDBERG