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P 070043Z DEC 07
FM AMEMBASSY BEIJING
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INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUCPDOC/USDOC WASHDC
RUEHGV/USMISSION GENEVA 2052
RUEHFR/AMEMBASSY PARIS 4218
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UNCLAS SECTION 01 OF 02 BEIJING 007389 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EINV ENRG PGOV SOCI CH
SUBJECT: NOT-SO-SCIENTIFIC DEVELOPMENT:  LOOKING FOR FAST GROWTH IN 
CENTRAL CHINA 
 
SUMMARY 
------- 
 
¶1. (SBU) Third-tier cities in Central China are aiming for more 
investment and faster growth even as the Central Government promotes 
"Scientific Development" following the 17th Party Congress.  Hu 
Jintao's Scientific Outlook on Development calls for more balanced 
and sustainable development, but a recent visit to Henan Province 
clearly demonstrated the growing economic policy gap between the 
Central Government and the provinces.  A policymaker in Zhengzhou, 
Henan's provincial capital, said the province would follow Beijing's 
dictate, focusing simultaneously on growth and environmental 
protection.  Contacts in two of Henan's third-tier cities, however, 
shared the view that attracting investment and pushing economic 
growth outweigh other considerations.  While they talked about 
Scientific Development, they offered differing opinions on the 
concept's meaning.  Central China continues to be an important 
battleground for the Central Government, as the region struggles to 
close the economic gap with the more developed coast, despite a lack 
of resources, overdependence on state-owned enterprises, and a lot 
of redundant labor.  END SUMMARY 
 
TRAVEL TO HENAN PROVINCE 
------------------------ 
 
¶2. (U) Emboffs traveled to Henan Province November 13-16 with stops 
in Anyang, Kaifeng, and Zhengzhou.  Emboffs met with officials from 
the Municipal Foreign Affairs Office, Development and Reform 
Commission, and Bureau of Commerce in Anyang (an industrial city) 
and Kaifeng (a tourism destination), both of which are considered 
"third-tier" cities in China, and exchanged views with students at 
Henan University in Kaifeng.  Emboffs visited Zhengzhou on November 
16 to meet with Provincial level officials and talk to students at 
Henan Light Industry University.  Zhengzhou is a VPP city, and 
photos from this trip can be found at http://zhengzhou.usvpp.gov. 
 
 
TALE OF TWO CITIES:  ANYANG AND KAIFENG 
--------------------------------------- 
 
¶3. (SBU) Anyang and Kaifeng both are characterized as third-tier 
cities and fit different niches in Henan's overall development plan. 
 Anyang, a city of 5.25 million people in northern Henan, primarily 
is a heavy industry (steel) production base with coal resources. 
Anyang also attracts some tourists as the home of the Oracle Bones 
-- a 3,000-year-old writing system dating from the Shang Dynasty. 
Kaifeng, with a population of 4.5 million, lies east of Zhengzhou 
and is primarily a tourist destination.  Kaifeng was the capital of 
the Song Dynasty and has the second longest city wall in China, but 
also is seeking to diversify its economy by promoting agricultural 
production and food processing.  Both cities lag behind Zhengzhou 
and Luoyang, which are the province's two most developed urban 
centers. 
 
¶4. (SBU) Anyang and Kaifeng miss out on commercial opportunities 
because there is not enough available information on third-tier 
cities in Central China, said Wei Zhiyong, Head of the Foreign 
Economy Department at the Henan Provincial Development Reform 
Commission (HPDRC).  An Honghai, Director of the Kaifeng Municipal 
Development and Reform Commission, added that Kaifeng has few large 
industrial projects, and the city is trying to diversify its 
production to textiles, agriculture, and petrochemicals and also 
become and educational center.  Anyang is in a better situation on 
the industry side, according to an economic policymaker in the city, 
but its service sector is weak. 
 
FULL SPEED AHEAD: GDP AND FDI GROWTH STRONG 
------------------------------------------- 
 
¶5. (SBU) Despite challenges, both Anyang and Kaifeng are growing at 
a brisk pace with Anyang's GDP growth rate hitting 15.6 percent in 
2006 and Kaifeng pushing 13 percent.  An Anyang official boasted of 
250 Foreign Direct Investment (FDI) projects in the city and added 
that Anyang would like to attract more western investors (most FDI 
projects are from Hong Kong or Singapore, he said).  Wei Zhiyong at 
the HPDRC pointed out that Anyang's economic base remains largely 
dependent on Angang, a state-owned steel manufacturer.  In this 
regard, Anyang is a typical third third-tier city in Central China 
due to its overdependence on a large state-owned enterprise (SOE), 
Wei said. 
 
¶6. (SBU) Kaifeng may be lagging farther behind Anyang, but Li Jie at 
the Municipal Commerce Bureau said the city successfully attracted 
110 new foreign companies in 2007.  FDI increased 46 percent 
 
BEIJING 00007389  002 OF 002 
 
 
year-on-year in Kaifeng -- most of which originated in Asia (Hong 
Kong, Taiwan, Japan, Thailand, Singapore, Korea, Malaysia). 
 
THE EMPEROR IS FAR AWAY: VIEW FROM HENAN 
---------------------------------------- 
 
¶7. (SBU) Our contacts in Anyang, Kaifeng, and Zhengzhou emphasized 
the primacy of Scientific Development in their respective economic 
policies, but only one month after the Scientific Development 
concept was enshrined in China's Constitution during the 17th Party 
Congress, they all had different definitions of what Scientific 
Development entails.  In Anyang, an economic policymaker said 
improving energy efficiency and combating pollution are paramount 
considerations of Scientific Development.  A Commerce Bureau 
official in the city argued that the Central Government's Central 
China Rising strategy in pursuit of more balanced regional economic 
growth is part and parcel of the Scientific Development approach and 
therefore to Anyang's advantage.  Nevertheless, contacts in Anyang 
and Kaifeng all agreed that the need for more balanced development 
is subordinate to continuing to attract investment and push growth. 
 
 
¶8. (SBU) The HPDRC's Wei argued that Henan's challenge fundamentally 
is to balance economic growth against environmental protection 
considerations, particularly with regard to conserving water use and 
discouraging polluting industries.  The province's macroeconomic 
control policies must therefore simultaneously promote faster than 
average GDP growth while also pushing for better than average 
reductions on SO2 and CO2.  Jia Huaqiang, a professor at the Central 
Party School who specializes in sustainable development, said it 
will be difficult for Central China to meet Beijing's standards on 
Scientific Development.  Officials in the provinces should know the 
meaning of Scientific Development, Jia said, and the concept does 
not include as many focus areas as put forth in Henan. 
 
AS CENTRAL CHINA GOES... 
------------------------ 
 
¶9. (SBU) Comment:  Central China continues to be an important 
battleground region for the Central Government's efforts to 
implement macroeconomic controls and balance economic growth with 
other considerations such as environmental protection and social 
stability.  Provinces (including Henan) and municipalities (such as 
Anyang, Kaifeng and Zhengzhou) in the region are struggling to 
overcome a lack of resources, overdependence on state-owned 
enterprises, and redundant labor to close the economic gap with the 
more developed coast.  Henan Province, with nearly 100 million 
people and a low GDP per capita, is a prime example of this 
challenge.  The province -- including third-tier cities there -- are 
seeking to open up to outside investors in order to meet its 
economic growth goals, but major western investors likely will wait 
to dive in until after Anyang, Kaifeng, and other third-tier cities 
establish a proven track record with investors from coastal China 
and Asia.  End Comment. 
 
RANDT