VZCZCXRO5410
RR RUEHCN RUEHVC
DE RUEHGH #0444/01 1990014
ZNR UUUUU ZZH
R 180014Z JUL 07
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 6033
INFO RUEHOO/CHINA POSTS COLLECTIVE
RHEHAAA/NSC WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAEPA/EPA WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 6469

UNCLAS SECTION 01 OF 03 SHANGHAI 000444 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR AMB. HOLMER, WRIGHT, TSMITH, AND OASIA - DOHNER, 
HAARSAGER, CUSHMAN 
USDOC FOR ITA MAC DAS KASOFF, MELCHER, MCQUEEN 
NSC FOR WILDER AND TONG 
 
E.O. 12958: N/A 
TAGS: ECON PGOV ETRD CH
SUBJECT: TREASURY'S DAN WRIGHT VISITS NANJING, DISCUSSES ECONOMY, 
ENERGY, AND ENVIRONMENT 
 
 
SHANGHAI 00000444  001.2 OF 003 
 
 
This cable is Sensitive But Unclassified (SBU) and for official 
use only.  Not for transmission outside USG channels. 
 
¶1.  (SBU) Summary.  In a meeting with Treasury's Managing 
Director for China and the Strategic Economic Dialogue (SED) Dan 
Wright on June 25, Jiangsu academics and officials said the 
province had adopted a "One Two Three Four Five" development 
framework that relied on the Scientific Development Concept and 
had an eye toward establishing a Harmonious Society-current 
ideological buzzwords.  Jiangsu was heavily reliant on foreign 
direct investment and exports from foreign invested firms to 
drive growth but was trying to shift to a consumer-led growth 
model.  It was also concerned about increasing energy efficiency 
and reducing its dependency on coal, looking into promising 
developments in wind technology.  Equally important, Jiangsu was 
trying to clean up the environment and lower polluting emissions 
and was one of the few provinces to actually meet 
nationally-mandated targets.  Wright's Shanghai meetings will be 
reported Septel.  End summary. 
 
¶2.  (SBU) During a June 25 discussion with Jiangsu academics and 
government officials, Wright discussed Jiangsu's economic 
strategy, and energy and environment situations.  Attendees 
included: Jiangsu Academy of Social Sciences (JASS) Research 
Coordination Office Director Sun Keqiang; JASS's Economic 
Research Institute Director Ge Shoukun; Jiangsu Environmental 
Protection Bureau (EPB) Foreign Affairs and Foreign Economy 
Office Director Huang Yibin; and Jiangsu Provincial Development 
and Reform Commission Energy Division Director, Mr. Chen (Note: 
No further information is available regarding Chen's name.  End 
note.) 
 
------------------------ 
Countdown to Development 
------------------------ 
 
¶3.  (SBU) Sun Keqiang told Wright that Jiangsu's economic 
program was summarized by a "One Two Three Four Five Six" 
formulation, which served as the basis for the provincial 
five-year plans and was seen as the overarching framework for 
development.  Sun said that Jiangsu had "one goal" of having a 
wealthy people and a strong province (fumin qiangsheng).  It 
also had "two leadings," namely taking the lead in fully 
developing a moderately well-off society, and taking the lead in 
basically realizing modernization.  Somewhat redundantly, the 
"three developments" included: leading development; scientific 
development; and "harmonious" development, or ensuring that all 
of the people received real benefits from economic development 
instead of just a select few (Ref A).  (Comment: In fact, 
science and harmony played a large role in all aspects of 
Jiangsu's "One Two Three Four Five Six" framework, likely 
reflecting the party's ideological focus on the Scientific 
Development Concept and Harmonious Society.  End comment.) 
 
¶4.  (SBU) The "four priorities" of the province were: 
conservation; enriching the people; science and education; and 
environmental protection.  The "five strategies" included: 
reinvigorating Jiangsu through science and education; economic 
globalization; regional coordinated development between 
southern, central, and northern Jiangsu; urbanization 
development; and sustainable development, meaning coordinating 
all aspects of economic development.  All of these were meant to 
establish the "six Jiangsus": a peaceful Jiangsu, where there 
were no disturbances in the social order; a "rule of law" 
Jiangsu; a "green" Jiangsu; a "cultured" Jiangsu; a "credible" 
Jiangsu, meaning that the people could trust their leaders; and 
a "harmonious" Jiangsu. 
 
---------------- 
The Safety Dance 
---------------- 
 
¶5.  (SBU) Poloff asked about a propaganda sign he had read 
regarding "safe development" (anquan fazhan) being used to 
establish a Harmonious Society.  Sun explained that "safe 
development" was a Jiangsu construct and that it referred both 
to safety in production and also strengthening societal safety. 
"Safety," Sun said, was both part of and a prerequisite for 
Scientific Development.  Wang Yan with the Jiangsu Foreign 
Affairs Office, added separately that "safe development" was 
also a manifestation of the "putting people first" slogan of the 
 
SHANGHAI 00000444  002.2 OF 003 
 
 
party. 
 
------------------------------------------ 
Foreign Investment and the Five Strategies 
------------------------------------------ 
 
¶6.  (SBU) Keying in on economic globalization--one of the "five 
strategies"--Ge Shoukun said that Jiangsu has relied heavily on 
trade and foreign investment for development.  The province's 
top foreign investors were Taiwan followed by the United States. 
 Foreign invested companies also accounted for a large 
percentage of exporters in the province.  For instance, in 
Suzhou, 93 percent of the municipality's exports were produced 
by foreign-invested companies, compared to the national average 
of 57-58 percent.  Jiangsu planned to utilize more foreign 
investment in the future in, especially in the areas of energy 
and environment.  Ge noted that the province's overall trade 
surplus was declining. 
 
¶7.  (SBU) Ge said that Jiangsu needed to stimulate consumer 
spending in order to shift from an export-led economic growth 
model to a consumer-led model.  To do that, Ge said, Jiangsu 
needed to increase people's income.  It would then be natural 
for people to spend more.  Ge explained that increased incomes 
needed to be coupled with social safety guarantees, to prevent 
people for saving their extra income for a rainy day.  He 
specifically mentioned education and health care as two major 
issues that were traditionally major causes of concern and that 
the central government was tackling.  He noted that credit 
consumption was new to most Chinese and was just starting to 
catch on.  Having a good social safety net would also help 
people feel comfortable to engage in credit consumption, Ge 
opined. 
 
------------------------------------ 
Finding the Energy Needed to Develop 
------------------------------------ 
 
¶8.  (SBU) Director Chen noted that Jiangsu's energy development 
had two challenges: supply and the environment.  The 11th Five 
Year Plan (FYP) had several goals to meet both challenges.  Chen 
said that Jiangsu currently consumed 160 million tons of 
standard coal per year, much of which came from other provinces. 
 Chen said that currently, coal accounted for 68 percent of 
Jiangsu's primary energy consumption.  The goal within the 11th 
FYP was to reduce coal as a percentage of energy consumption to 
65 percent and then to 60 percent by the year 2020.  Chen noted 
that under the WTO framework, China and the United States had 
agreed to discuss trade in clean coal technology and was 
interested in integrated gasification combined cycle technology 
(which turns coal into gas to generate power) to help improve 
energy efficiency. 
 
¶9.  (SBU) Under the 11th FYP, Jiangsu was also seeking to 
develop new, cleaner energy sources, such as nuclear, natural 
gas, biomass (including agricultural residuals and garbage), and 
wind.  In addition, the FYP dictated energy conservation and 
energy structure adjustment measures to reduce overall energy 
consumption.  Nationwide the goal was to close small power 
plants totaling 10 gigawatts worth of power.  Jiangsu's goal was 
to close plants totaling 1.5-2 gigawatts of power. 
 
¶10.  (SBU) Focusing on wind, Chen said that Jiangsu would 
develop 1.5 gigawatts of wind power capacity during the 11th 
FYP.  The province had a large area of shoals, perfect for 
constructing wind turbines.  Chen estimated that the wind 
harnessed there could eventually produce up to 10 gigawatts of 
power per year-the equivalent of the power produced by the Three 
Gorges Dam.  However, this would require a lot of work both to 
construct the power grid and to protect the eco-system. 
Technology was currently still the major bottleneck. 
 
¶11.  (SBU) In terms of energy efficiency, Chen said Jiangsu was 
doing well in reaching its targets.  Jiangsu's energy efficiency 
was only 60 percent of the national average and it was only one 
of two provinces to reach the 4 percent reduction target 
mandated by Beijing.  Chen noted that Jiangsu had new strict 
energy efficiency requirements for new projects. 
 
--------------------------- 
The Sweet Stench of Success 
 
SHANGHAI 00000444  003.2 OF 003 
 
 
--------------------------- 
 
¶12.  (SBU) According to the EPB's Huang Yibin, strides were not 
only being made in energy efficiency and emissions reductions, 
but in environmental protection as well.  Over the past two 
decades, Jiangsu increased its sewage treatment capacity from 
700,000 tons in 1990 to 4.3 million tons in 2005.  Jiangsu had 
received loans from the World Bank to increase its sewage 
treatment capacity and had begun raising prices on sewage 
producers to pay back the loans.  Fees had increased from 0.10 
RMB per cubic meter in 1998 to 1.05-1.15 RMB for southern 
Jiangsu and 0.80 RMB for central and northern Jiangsu today. 
Huang said that as sewage treatment became more profitable, it 
would encourage the building of more plants. 
 
--------------------- 
Green Gas is Good Gas 
--------------------- 
 
¶13.  (SBU) Huang said that Jiangsu had invested 3.5 billion RMB 
in improving emission standards compliance.  Major power plants 
were required to install desulphurization units and provided 
subsidies for so doing.  They were charged penalties for failing 
to comply.  According to the PDRC's Chen, Jiangsu was one of 
only four provinces to reach the nation-wide emission reduction 
goal in 2006.  Chen said that Jiangsu's sulfur dioxide emissions 
have dropped 30 percent over the past five years and that they 
would drop a further 15 percent during the current FYP. 
KJARRETT