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DE RUEHGZ #0832/01 2050537
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R 240537Z JUL 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6296
INFO RUEHOO/CHINA POSTS COLLECTIVE
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UNCLAS SECTION 01 OF 03 GUANGZHOU 000832 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ELAB ECON PINR SENV PGOV CH
SUBJECT: Pearl River Flotsam and Jetsam, July 24, 2007 
 
 
(U) THIS DOCUMENT IS SENSITIVE BUT UNCLASSIFIED.  IT SHOULD 
NOT BE DISSEMINATED OUTSIDE U.S. GOVERNMENT CHANNELS OR IN 
ANY PUBLIC FORUM WITHOUT THE WRITTEN CONCURRENCE OF THE 
ORIGINATOR.  IT SHOULD NOT BE POSTED ON THE INTERNET. 
 
¶1. (U) SUMMARY: This is the first in a series of periodic 
cables that will feature snapshots of the Guangzhou 
consular district.  We expect to cover items that are 
timely for Washington consideration but at this point, do 
not merit fuller treatment.  We are, of course, willing to 
take a second look at some of the matters raised in these 
"miscellany" cables should there be interest.  Highlights 
of this first piece include: labor unrest; the new role of 
public relations firms; American company complaints and 
concerns about technology transfer restrictions; food and 
water; a mass swim in the Pearl River; foreign firms that 
focus on middle-class Chinese; and the change in Haikou 
city leadership. END SUMMARY 
 
Unrest and Apparent Resolution in Heyuan 
----------------------------------------- 
 
¶2. (U) The June 29 labor dispute at a hydroelectric plant 
construction site in Guangdong's Heyuan city appears to 
have been resolved.  Approximately 300 employees of Qiutian 
Construction Company, a contractor of Fuyuan Hydropower 
Development Company, had earlier complained to Fuyuan 
management that they had not been paid for four months. 
When their demands for compensation were turned down, the 
angry migrant workers started to dismantle installations at 
the power station - and not surprisingly, they were 
attacked by roughly three hundred thugs armed with spades, 
axes and steel pipes. Three of the workers died from wounds 
sustained during the melee. 
 
¶3. (U) The Dongyuan county government reportedly resolved 
the situation by forcing the construction company to 
compensate the unpaid workers; more than RMB 140,000 
(roughly USD 18,500) in wages has already been paid to 
eight workers, with the remainder of their colleagues 
expected to be paid soon. 
 
New Roles for Public Relations Firms 
------------------------------------- 
 
¶4. (SBU) The influence of public relations campaigns on 
both government policy and legal rulings is increasing in 
South China.  Coalition-based lobbying (CBL) is becoming a 
popular instrument for companies looking to influence 
government policy in China, particularly in the field of 
intellectual property.  According to Marc Parich, whose 
public relations firm APCO Worldwide pioneered the first 
CBL model, coalition-based lobbying provides investors an 
opportunity to present controversial views to the 
government while insulating them from negative government 
or media reaction.  Parich points to the success of APCO's 
Intellectual Property CBL, the Quality Brands Protection 
Committee (QBPC), as an example of the popularity of the 
CBL method.  As of today, QBPC is comprised of more than 
160 multinational companies representing over USD 70 
billion of investment in China. 
 
¶5. (SBU) When it comes to supporting litigation, public 
relations firms are finding opportunities in South China 
that are unavailable in other parts of the country. 
According to Ouyang Jun, a former government official and 
current associate director for APCO Worldwide, this is 
primarily due to the region's welcoming business climate. 
As part of its litigation support strategy, APCO promotes 
its clients through media conferences and television and 
newspaper interviews.  Although Jun cautions against being 
too critical of the opposition in litigation, he believes 
that the process, when handled sensitively, has influenced 
public opinion and even affected the outcome of several 
litigations.  Jun noted that the media in South China has 
been especially receptive to assisting in this area, as 
commercially-related topics are one of the few subjects 
which the press is relatively free to explore. 
 
Complaints from Across the Sea 
------------------------------ 
 
¶6. (SBU) While the majority of complaints by businesspeople 
in South China relate to local regulatory impediments, many 
companies have also raised concerns about the 
discriminatory treatment of several U.S. regulations.  In 
particular, some companies are worried that technology 
transfer restrictions have put them at a competitive 
disadvantage with their European competitors; the latter 
often face fewer barriers to the types of technology 
 
GUANGZHOU 00000832  002 OF 003 
 
 
allowed for export.  According to APCO Worldwide, clients 
primarily complain when the restriction applies to a 
particular technology which is already openly available in 
the Chinese market.  Nevertheless, this has led many, such 
as Nicholas Blank, Director of Kroll Asia, to counsel U.S. 
clients to err on the side of caution by not selling any 
technology which could conceivably have a dual-purpose use. 
 
¶7. (SBU) In contrast, few companies in South China have 
complained about, or received, penalties for violations of 
the Foreign Corrupt Practices Act.  In a business climate 
often fraught with issues of corruption, foreign investors 
have generally maintained compliance with U.S. regulations 
on prohibited payments to government officials.  Similarly, 
U.S. companies in the region have had few complaints 
related to the Alien Tort Statute, which regulates the 
treatment of employees by American companies overseas. 
According to Harley Seyedin, President of AmCham - South 
China and CEO of First Washington Group, which established 
the first Western majority-owned power plant in South China, 
this is a direct reflection of the favorable treatment 
received by local employees of U.S. companies in the region. 
In its 2006 report, AmCham - South China reported that less 
than twenty-five percent of U.S. companies were concerned 
about criticism for operating "sweatshops" in the country. 
Seyedin estimates that figure has dropped below twenty 
percent in the past year. 
 
Man Bites Rat! And Drinks Unsafe Water! 
--------------------------------------- 
 
¶8. (U) Guangdong Party Secretary Zhang Dejiang is concerned 
about news reports that rats from Hunan are being sold in 
Guangdong for food, and has asked relevant government 
agencies to put and end to the rat-selling.  The Guangzhou 
Food Safety Office and the Guangzhou Food and Drug 
Administration have warned citizens against eating rats, 
but reports of truckloads of the vermin making their way to 
Guangdong persist. This is one of those delicacies that the 
Chinese used to (but no longer necessarily) enjoy putting 
on a platter in front of a visiting guest and joking about 
the disposition of Mi Lao-shu (or Mickey Mouse). 
 
¶9. (U) The Guangdong Water Resource Department reported on 
July 18 that 16.65 million people in the province drink 
water with excessive fluorine, excessive arsenic, or water 
with a bitter and salty taste.  According to the Eleventh 
Five-Year Plan, Guangdong's goal is to solve the unsafe 
drinking water problem for 7.5 million people.  Presumably, 
the remaining 9.15 million people hope to be included in 
the next Five Year Plan. 
 
Human Flotsam 
-------------- 
 
¶10. (SBU) Weeks in the making!  A pivotal moment in the 
environmental clean-up of the once heavily-polluted Pearl 
River!  Imagine, if you will, the image of 3,600 people, 
including senior city officials, from "danweis" large and 
small, swimming between Sun Yat-sen University and the 
Xinghai Conservatory?  What could better demonstrate the 
commitment to a "green" water system?  Well, start with the 
fact that three weeks before the big swim, the flow of 
water from other polluted rivers was blocked off.  Then 
every day, for 21 days running, a fleet of small vessels 
with large nets trawled the area where the swim would take 
place, removing everything from leaves and Styrofoam 
containers to the odd fish or tennis shoe floating on the 
surface.  Of course, while removing the "debris," the boats 
left behind an oil slick that was hardly "environmentally 
friendly." 
 
¶11. (SBU) And then the big day:  pomp (speeches and skiing 
and racing boats) and ceremony (more, but better speeches 
because they were read out by "higher ups.").  The big 
moment came when, flashbulbs a-poppin', city officials 
jumped in for the all-important photo - only to jump out 
and be replaced by others in the big swim.  Well, "float" 
would be more like it.  It is unclear whether there really 
were 3,600 participants, but there were enough to make it 
look that way; surrounding the signs (suspended on pontoons) 
of the various organizations were hordes of people, in 
circles or oblongs, perched on top their floats, paddling 
along from one side of the river to the other.  And then it 
was over, a great success! 
 
¶12. (SBU) Day two: the water was a curious brackish green 
and brown.  We asked why.  Well, the water from the other 
rivers was flowing back in and adding a bit of "color." 
And besides, the swim (float) was over, the Pearl River 
 
GUANGZHOU 00000832  003 OF 003 
 
 
saved (for one day at least) and next year would see a 
bigger and better event, for sure. 
 
Major Companies Shifting Focus Toward Domestic Market 
--------------------------------------------- -------- 
 
¶13. (SBU) Production of goods or services for the China 
market currently ranks first among the top company goals 
for foreign invested enterprises (FIEs) in South China. 
Many businesspeople in the region attribute this to the 
increased purchasing power of China's rising middle class. 
Proctor & Gamble, for instance, no longer produces a single 
bottle of shampoo in South China for export to the United 
States, and instead invests solely in the production of a 
lower-quality good directly targeting middle-class Chinese. 
Similarly, IBM recently has invested millions of dollars in 
research and development to uncover new strategies for 
tapping into China's middle markets.  According to the 
local American Chamber of Commerce, the fact that China's 
burgeoning middle class remains mostly untapped will 
continue to invite large amounts of investment from a wide 
range of industry sectors. 
 
New Acting Mayor for Haikou 
--------------------------- 
 
¶14. (SBU) The Haikou Foreign Affairs Office notified post 
on July 17 that Xu Tangxian had recently been elected 
Acting Mayor of Haikou City. NOTE: Haikou, with a 
population in excess of 600,000, is the capital of Hainan 
Province. END NOTE. Xu, most recently the Executive Vice 
Mayor of Haikou, has held a series of jobs in both local 
government and the Communist Party since 1999.  Prior to 
that, he taught at Zhongnan University of Finance and 
Economics.  On leave from the university, Xu studied 
accounting in the United States from 1992-1995.  Xu was 
born April 1954, in Hubei province. 
 
 
GOLDBERG