VZCZCXRO8070
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #5801/01 2480205
ZNR UUUUU ZZH
P 050205Z SEP 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 1524
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 005801 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EAGR PGOV SOCI KPAO KIIP CH
SUBJECT: CENTRAL CHINA RISING:  HENAN PLEASED WITH PROGRESS 
 
REF: (A) BEIJING 3578 
 
(B) BEIJING 3085 
(C) BEIJING 4808 
(D) BEIJING 5578 
(E) BEIJING 5797 
 
SUMMARY 
------- 
 
¶1. (SBU) In a series of meetings with EconMinCouns, Henan Provincial 
Government officials painted a picture of a province whose strategy 
of economic opening has resulted in three years of GDP growth above 
14 percent as well as growing participation of foreign companies in 
local industry.  The Central Government's Central China Rising 
strategy is paying off for Henan and helping the province transition 
from a state-directed to market economy.  A large agricultural 
province, Henan has been affected by national food safety and food 
price concerns, but local officials believe those problems are now 
under ontrol.  END SUMMARY. 
 
TRAVEL TO HENAN 
-------------- 
 
. (SBU) EconMinCouns, Econoff an Econ Assistant Conoff traveled to 
Zhengzhou, Henan Province August 26-28.  Econ Min Couns met with 
Henan's Vice Governor and delivered a speech on bilateral economic 
relations to more than 200 students at Zhengzhou University. 
Econoffs also met with the Provincial Development and Reform 
Commission and Provincial Foreign Affairs Office as well as visited 
the Zhengzhou Commodities Exchange.  Zhengzhou is the site of the 
Embassy's first Virtual Presence Post (VPP) in China, and pictures 
from the visit can be found at http://zhengzhou.usvpp.gov (see also 
Ref A). 
 
VICE GOVERNOR:  HENAN OPEN FOR BUSINESS 
--------------------------------------- 
 
¶3. (SBU) Vice Governor Li Ke said on August 27 that Henan's rapid 
economic growth provides many opportunities for foreign investment. 
Li reiterated that Henan is China's most populous province with 98 
million people, has the fifth largest GDP, and produces more than 
one quarter of the country's wheat output.  GDP increased by 14.1 
percent in 2006, exceeding 14 percent for the third year in a row. 
The province also serves as a transportation hub for rail and air 
links, Li said, and Henan now has more than 4,000 km of highways. 
 
¶4. (SBU) The province's opening (kai fang) strategy already has 
borne fruit, according to Li, with many prominent foreign companies 
investing in Henan's state-owned enterprises (SOEs).  Li pointed out 
that American companies, including Goldman Sachs and Budweiser, 
recently have sought out opportunities in the Province.  A Goldman 
Sachs subsidiary purchased a share of Henan's Shuanghui Investment 
and Development Company in January 2007, and Budweiser recently 
purchased a share of Jinxing Beer.  (Note:  Another American 
company, Amsted Rail, will hold the opening ceremony for its joint 
venture cast steel wheel manufacturing plant, the Xinyang Amsted 
Tonghe Wheel Company, in Henan in September.  End Note.) 
 
HENAN'S PDRC ON THE PROVINCE'S TRANSITION 
----------------------------------------- 
 
¶5. (SBU) Wei Zhiyong, Head of the Foreign Economy Department at the 
Provincial Development and Reform Commission, said the Central 
Government's Central China Rising strategy (Ref B and previous) has 
helped the province attract more foreign investment, albeit it at a 
lower level than the coast.  Wei said the province matched its total 
FDI volume for 2006 in the first eight months of 2007, most of it 
(60 percent) in the manufacturing sector.  Henan's location in the 
central part of the country and an economic structure skewed towards 
the agricultural sector remain the two largest obstacles to 
attracting investment, Wei said. 
 
¶6. (SBU) Despite Henan's rapid economic growth, Wei said Central 
Government macroeconomic cooling measures do not need to be applied 
in Henan.  Central China needs rapid growth to close the gap with 
more developed coastal China, he said, and Henan will need to take 
additional steps to transition from a largely state-owned to market 
economy.  Overall, however, the province's existing infrastructure 
and transportation network, as well as additional support from the 
Central Government, give Henan a good foundation for future 
development, he said. 
 
FOOD INDUSTRY WEATHERING RECENT STORMS 
-------------------------------------- 
 
¶7. (SBU) As a large agricultural province, Henan recently has faced 
challenges on food safety (Ref C) and price increases (Ref D), but 
local officials believe the situation is improving.  On food safety, 
an official at the Foreign Affairs Office said the provincial 
 
BEIJING 00005801  002 OF 002 
 
 
government is taking the problem very seriously and has taken steps 
to improve food quality, including establishing an interdepartmental 
working group.  According to these officials, the problem appears 
manageable (see Ref E for more on the food safety discussion).  With 
regard to food prices, Wei Zhiyong stated that prices are declining 
again after the provincial government took steps to increase the 
pork supply. 
 
PICCUTA