VZCZCXRO5950
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0285/01 1370844
ZNR UUUUU ZZH
R 160844Z MAY 08
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 7173
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC

UNCLAS SECTION 01 OF 02 GUANGZHOU 000285 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM 
STATE PASS USTR 
 
E.O. 12958: N/A 
TAGS: EINT ECON PGOV CH
SUBJECT: GUANGDONG COURTS ALIBABA TO BE THE CANTON TRADE FAIR THAT 
NEVER CLOSES 
 
REF: GUANGZHOU 249 
 
(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. (SBU) Summary: After heavy lobbying from Guangdong's Party 
Secretary, E-commerce giant Alibaba, the largest B2B portal in 
China, recently announced it would set up its South China regional 
headquarters in Guangzhou, an investment that could bolster the 
province's efforts to upgrade local industries.  An Alibaba 
executive told us that Party Secretary Wang Yang's proactive 
courting and guarantees of government support were instrumental in 
the firm's decision to expand in Guangzhou.  In addition, she 
pointed out that Guangdong is home to tens of thousands of 
small-to-medium enterprises (SME's), the company's target customers, 
and that Guangdong entrepreneurs are already relatively tech-savvy 
and should take easily to using Alibaba's online marketing tools. 
End Summary. 
 
 
Alibaba to Pump Money and People into Guangdong 
--------------------------------------------- -- 
 
¶2.  (SBU) Alibaba will invest USD 200 million in Guangdong over the 
next three years and increase the size of its local staff from 700 
to over 1,000 within two, according to Guangdong Marketing Manager 
Luo Yun.  Major initiatives on its agenda include building a data 
center; expanding its Guangdong call center to cover Hong Kong and 
Macao; and rapidly expanding its training session program, which 
aims to teach Guangdong's tens of thousands of SME's how to 
participate in its online marketplace. 
 
Wang Yang Was the Key Proponent in Courting Alibaba 
--------------------------------------------- ------ 
 
¶3.  (SBU) Ms. Luo confirmed that Party Secretary Wang played a key 
role in persuading Alibaba founder Jack Ma to set up his company's 
South China headquarters in Guangdong, and said Wang provided the 
all-important guarantees of government support.  In addition to 
Wang, Luo noted, several other prominent Guangdong government 
officials were also strong advocates, including Governor Huang 
Huahua, Guangzhou Vice Mayor Xu Zhibiao, and Foshan Party Secretary 
Lin Yuanhe.  She explained that Wang's lobbying campaign began in 
February 2008, when he visited Alibaba headquarters in Hangzhou, 
Zhejiang and invited Ma to develop the e-commerce industry in 
Guangdong, offering guarantees of support.  Wang and other delegates 
from Guangdong also met with Alibaba's CEO, Ma Yun, during the 
National People's Congress (NPC) in early March in Beijing.  Local 
officials from Foshan and Zhongshan municipalities have also been 
active in the lobbying effort, signing separate cooperative 
agreements with the firm. 
 
¶4.  (SBU) Luo said that Wang believes Alibaba's business and 
marketing strategies harmonize with his own strategies for 
increasing Guangdong SME's access to domestic and international 
markets through e-commerce.  She described how Alibaba currently 
conducts 40 training sessions per month in Guangdong aimed at 
familiarizing SME's with its e-commerce marketing tools.  In these 
sessions, Alibaba invites entrepreneurs who already benefit from the 
company's services to give presentations on their experiences aimed 
at teaching SME's how to expand their customer base and market 
access using the Internet.  In the process, Alibaba secures more 
paying members.  (Members pay a minimum of 50,000 RMB to have their 
product pictures and video clips of their factories uploaded to 
Alibaba.com).  Luo said Alibaba is planning to dramatically expand 
its training session program in Guangdong. 
 
¶5. (SBU) Luo further explained that Alibaba markets itself as "a 
trade fair that never closes."  It should be no surprise then that 
Wang and other government officials in Guangdong -- home to the 
Canton Trade Fair, China's largest and oldest trade gathering 
(reftel) -- should be interested in expanding its marketing efforts 
into the virtual marketplace.  Luo was careful to add, however, that 
Alibaba would not usurp the Canton Trade Fair or similar events in 
its importance.  She asserted that many buyers rely on Alibaba's 
services to narrow the field of suppliers down to a few candidates 
that they then meet with at the Canton Trade Fair before making 
their final purchasing decisions.  Luo described it as old-world and 
new-world commerce working in harmony. 
 
Numerous SME's and Tech-Savvy Populace Also Attractive 
--------------------------------------------- --------- 
 
GUANGZHOU 00000285  002 OF 002 
 
 
 
¶6.  (SBU) Luo commented that the market potential for Alibaba's 
services throughout Guangdong is huge, another key factor in its 
decision to expand here.  Guangdong has tens of thousands of 
export-oriented SME's, Alibaba's target customers, and Luo's market 
research shows only about 2 percent of them currently market their 
products online.  To summarize her views of Guangdong's market 
potential, Luo quoted Ma as saying, "Alibaba started business in 
Zhejiang, but will prosper in Guangdong." 
 
¶7.  (SBU) Luo also highlighted a third selling point: many of 
Guangdong's entrepreneurs already have a basic understanding of the 
Internet and e-commerce. This minimizes the need for Alibaba to 
nurture the market and educate Guangdong's SME's on how to use the 
company's online marketing tools.  Indeed, according to the "2007 
Internet Development Statistic Report" issued by the China Internet 
Network Information Center, there are 30 million Internet users in 
Guangdong alone, which accounts for 15.9 percent of the total 
Internet users in China.  (Note: much of the recent growth in 
Internet usage in Guangdong is due to WAP network development and 
the associated growth in mobile Internet users.  End note.)  Nearby 
Fujian and Shanghai rank second and third respectively among China's 
provincial-level jurisdictions, each with about 8 million Internet 
users and about 4 percent of the total Internet users in China. 
 
 
GOLDBERG