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UNCLAS SECTION 01 OF 02 GUANGZHOU 000030 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM 
 
E.O. 12958: N/A 
TAGS: PGOV ECON CH
SUBJECT: A Political and Economic Miscellany: For Guangdong 
Political Experiments, Beijing Taking the Lead; Economics in Command 
 
This report is sensitive but unclassified.  Please protect 
accordingly. 
 
¶1. (SBU) Summary: If one ever had to be reminded of the primacy of 
economics in Guangdong, Provincial Governor Huang Huahua's response 
to a question from the Consul General should seal the deal: Beijing, 
Huang averred, is taking the lead in directing political reforms in 
the province's cities and Guangdong officials will take their 
direction from the center. 
-- On another note, reports of disagreement between Premier Wen 
Jiabao and Guangdong Party Secretary Wang Yang on the province's 
economic strategy were characterized by a senior Guangdong economic 
official as an unfortunate misinterpretation of the two leaders' 
shared vision; in fact, this official said that the double transfer 
policy was first thought up by Huang Huahua (though we have no 
indications that he ever mentioned it before Wang Yang's arrival). 
 
-- While Guangdong clearly remains focused on trying to come up with 
an economic game plan for the future, getting through the short term 
is preoccupying everyone's time, with issue of what kind of 
assistance, if any, to provide small and medium-sized enterprises in 
the Pearl River Delta currently the top research priority at the 
Guangzhou Academy of Social Science. 
-- The same senior economic official dismissed China's high savings 
rate as a contributing factor to the global financial crisis, while 
a prominent Guangzhou academic separately assessed that the recovery 
of China's export sector depends on the U.S. economy and that 
China's government should focus on increasing rural consumption. 
End summary. 
 
Governor says Beijing in Charge of New Political Experiment 
------------------------------- --------------------------- 
 
¶2. (SBU) Beijing is "giving direction" to political reform 
experiments in five Guangdong cities, Guangdong Governor Huang 
Huahua said in response to a question asked by the Consul General at 
a January 13 session the provincial leader had with Consuls General. 
 Huang, who was visibly reluctant to discuss the project, stated 
flatly and with a brief touch of asperity that Beijing -- and not 
Guangdong -- was in charge of implementing programs announced in 
November 2008 to streamline government structure, emphasize the rule 
of law and promote official transparency in Shenzhen, Zhuhai, 
Shantou, Guangzhou and Zhanjiang.  Comment: for those who hold out 
hope that Shenzhen and other places in the south are going to be the 
centers of "gaige kaifang" (reform and opening) in the political 
sphere, we would caution that economics has -- and will continue -- 
to trump anything remotely resembling greater popular participation 
in local decision making. 
 
Are Wen Jiabao and Wang Yang Really on the Same Page? 
---------------------------- ------------------------ 
 
¶3. (SBU) In a separate meeting, Guangdong Province Department of 
Foreign Trade and Economic Cooperation (DOFTEC) Deputy Director 
General Cao Xiangnong claimed that Wen Jiabao's three recent visits 
to Guangdong were an effort to show that Provincial Party Secretary 
Wang Yang enjoyed close support from the central government. 
According to Cao, reports that Wen and Wang were at odds over what 
level of assistance, if any, should be provided SMEs misread the 
situation: both Wen and Wang share the same vision of a future Pearl 
River Delta, with the two differing only in how to achieve that 
vision in the short and medium term.  (Comment: Cao's comments on 
Wen-Wang harmony struck us as somewhat disingenuous, considering 
that Wang probably did not appreciate the multiple high-level visits 
that have occurred in recent months, each of which publicly called 
into question his ability to manage the province.  End comment.) 
 
¶4. (SBU) In a refrain of "where you stand on an issue depends on 
where you sit," Cao said that the decisions Wang Yang takes as 
provincial party secretary to address the current economic 
difficulties may be quite different from those he would make if he 
were viewing the issue from a position in Beijing.  In following a 
philosophy of "Guangdong for the Cantonese" Wang's responsibility 
was to put the well-being of the province first, said Cao.  When 
pressed by the Consul General that Wang's career aspirations clearly 
extended beyond provincial borders and that three high-level visits 
in six months could be considered not reassuring, but in fact 
critical, of Wang's stewardship, Cao claimed that leaders in Beijing 
 
GUANGZHOU 00000030  002 OF 002 
 
 
understood that Wang's Guangdong-centric policies would sometimes 
conflict with the central government's priorities.  It was an 
admission somewhat at variance with what he had earlier argued. 
 
SME Issue now Top Priority at Academy of Social Science 
------------------------------------- ----------------- 
 
¶5. (SBU) City leadership has directed the Guangzhou Academy of 
Social Science (GZASS) to find a solution to the financial 
difficulties of small and medium enterprises (SMEs), according to 
GZASS Party Secretary Li Jiangtao.  Li told the Consul General at a 
separate meeting that Wang Yang is determined to continue with the 
"double transfer" policy, which aims to move labor-intensive firms 
and their migrant labor workforces out of the Pearl River Delta 
(PRD) and into less-developed regions of Guangdong Province.  Though 
a top priority, Li said the SME problem was basically a short-term 
obstacle.  Pointing out that Guangdong now has China's largest 
income gap between developed and less-developed regions, Li said the 
"double transfer" policy would proceed and address those inequities 
while creating an environment for the next stage of the PRD's 
development. 
 
Looking to America to Fix the Export Economy 
-------------------------------------------- 
 
¶6. (SBU) China's dependence on foreign trade -- especially on 
exports to the United States -- means that America's economic health 
bears directly on China's chances for recovery, according to GZASS's 
Li.  Li said that many export-oriented products were ill suited for 
China's domestic market and that the savings rate of average Chinese 
remained high because of continued worries about future pension, 
medical care and education needs.  In Li's view, Chinese government 
stimulus priorities should focus on enhancing domestic consumption 
-- especially in rural areas -- suggesting that, "The recovery of 
China's economy does not necessarily mean the recovery of its 
exports."  Li also spent considerable time urging Beijing to adopt a 
more expansive educational policy, seeing the inculcation of new 
ideas and more creative approaches that only come with critical 
thinking as the best guarantee of China's future. 
 
¶7. (SBU) Separately, DOFTEC's Cao rejected Treasury Secretary 
Paulson's recent comments that global trade imbalances played a role 
in precipitating the current economic situation.  Laying the blame 
squarely on the United States, Cao dismissed the suggestion that 
China's high savings rate was a cause of the global financial 
crisis. 
 
GOLDBERG