VZCZCXRO5066
RR RUEHDT RUEHPB
DE RUEHGZ #0112/01 0490745
ZNR UUUUU ZZH
R 180745Z FEB 09
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 0216
INFO RUEHGZ/CHINA POSTS COLLECTIVE 0098
RUEHBJ/AMEMBASSY BEIJING 0130
RUEHCN/AMCONSUL CHENGDU 0049
RUEHHK/AMCONSUL HONG KONG 0069
RUEHGH/AMCONSUL SHANGHAI 0049
RUEHSH/AMCONSUL SHENYANG 0049
RUEHIN/AIT TAIPEI 0039
RUEHHI/AMEMBASSY HANOI 0005
RUEHHM/AMCONSUL HO CHI MINH CITY 0005
RUEHUL/AMEMBASSY SEOUL 0008
RUEHKO/AMEMBASSY TOKYO 0005
RUEHOK/AMCONSUL OSAKA KOBE 0005
RUEHBY/AMEMBASSY CANBERRA 0005
RUEHDN/AMCONSUL SYDNEY 0005
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHML/AMEMBASSY MANILA 0006
RUEHBK/AMEMBASSY BANGKOK 0026
RUEHGP/AMEMBASSY SINGAPORE 0005
RUEHKL/AMEMBASSY KUALA LUMPUR 0005
RUEHJA/AMEMBASSY JAKARTA 0005
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC 0057
RUEATRS/DEPT OF TREASURY WASHINGTON DC 0053
RUEHC/DEPT OF LABOR WASHINGTON DC 0007
RUEAIIA/CIA WASHDC 0095
RUEKJCS/DIA WASHDC 0095

UNCLAS SECTION 01 OF 03 GUANGZHOU 000112 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM, EEB/TPP, S/P, INR/EAP 
STATE PASS USTR CHINA OFFICE 
 
 
E.O. 12958: N/A 
TAGS: EFIN EIND ELAB ECON PGOV CH
SUBJECT: China Economic Stimulus Plans: Plentiful But Lacking in 
Details 
 
REF: A) GUANGZHOU 80; B) GUANGZHOU 57; C) GUANGZHOU 54; D) 2008 
GUANGZHOU 714; E) GUANGZHOU 43 
 
GUANGZHOU 00000112  001.2 OF 003 
 
 
(U) This document is sensitive but unclassified.  Please protect 
accordingly. Not for release outside U.S. government channels. Not 
for internet publication. 
 
¶1. (SBU) Summary: Officials in Guangdong Province have been working 
overtime for months on plans to stimulate the local economy, knowing 
that the central government will not be sending much new funding 
their way.  Party Secretary Wang Yang and Governor Huang Huahua as 
well as a cast of thousands of local officials have been bombarding 
print and internet media daily with descriptions of new programs, 
including infrastructure projects, eased credit for companies, and 
incentives designed to spur domestic demand.  Leaders have also 
clearly bought into the National Development and RC's "Plan for the 
Reform and Development of the Pearl River Delta" (with its focus on 
cross-border Hong Kong-Guangdong cooperation), viewing the upfront 
stimulus and the longer term transformation of the "workshop of the 
world" as part of a package that will remove redundancies in 
economic production, lead to the creation of different and higher 
paying jobs and enhance competitiveness and innovation.  Local 
government economists call this evolving packing "the beginning of a 
year-long fiscal surge."  However, academics are quietly raising 
questions about implementation of so many large plans and the wisdom 
of accelerating development plans which were designed for a shelf 
life of five-to-ten years into one- and two-year timeframes. 
Funding details are unrealistic, with the provincial government 
sometimes offering 20-30 percent of project funding and expecting 
private sector sources to fund the remainder.  Social stability 
remains at the top of every agenda, short term and long term.  End 
summary. 
 
Pick a Plan, We've Got Plenty! 
------------------------------ 
 
¶2. (SBU) Guangdong officials are working on their third major 
government investment package in the last year with a growing focus 
on stimulating the local economy.  The province's July 2008 
announcement of its "New 10 Projects" with total investment of RMB 
2.37 trillion (USD 346 billion) over four years went largely 
unnoticed, according to Li Luyun, Deputy Director General of the 
Guangdong Provincial Development Research Center in a meeting with 
econoffs on February 10.  The plan recycled unfinished projects from 
an earlier plan called "10 Projects" (or perhaps better named "not 
so new" projects, perhaps soon to be replaced with even "newer" as a 
description of the next iteration of the plan).  Investment in the 
"New 10 Projects" will go toward energy, infrastructure, 
transportation, public welfare, cultural and education sectors, 
advanced manufacturing, modern services, high tech industries, water 
resources, and environmental projects. 
 
¶3. (SBU) Li also described the "16 Measures to Stimulate Economic 
Development" plan announced in November 2008, which primarily 
focuses on funding major infrastructure projects consistent with the 
central government's stimulus efforts.  The plan's two largest 
components are transportation projects, including railroads, 
highways, ports and airports; and energy infrastructure projects, 
including nuclear power (ref A), improvement of electricity 
distribution networks and increased LNG infrastructure projects. 
 
GUANGZHOU 00000112  002.2 OF 003 
 
 
Another high priority is Guangdong's "double transfer" policy to 
move labor-intensive, energy inefficient industries out of the Pearl 
River Delta to less-developed parts of the province.  Funding for 
the plan is allocated in the following amounts: 
 
--Transportation Infrastructure - RMB 105 billion (USD 15.4 
billion) 
--Energy Infrastructure - RMB 68 billion (USD 9.9 billion) 
--"Double Transfer Policy" - RMB 40 billion (USD 5.9 billion) 
--Support of Manufacturing - RMB 30 billion (USD 4.4 billion) 
--Service Industry Development - RMB 20 billion (USD 2.9 billion) 
--Environmental Protection Projects - RMB 15 billion (USD 2.2 
billion) 
--Irrigation Projects - RMB 12.7 billion (USD 1.9 billion) 
--Agriculture projects - RMB 8 billion (USD 1.2 billion) 
 
¶4. (SBU) Yet another plan will be announced by the end of February, 
according to Li.  This new plan will roll November's "16 Measures" 
into its first plank, and extend the provincial government's 
stimulus efforts to eleven other non-infrastructure areas of the 
economy.  The plan tentatively includes assistance for small and 
medium enterprises (SMEs) like the establishment of a re-guarantee 
corporation to increase their access to financing.  It also has 
programs to help unemployed migrant workers and university graduates 
find jobs.  In addition, it increases benefits for certain social 
insurance programs and expands investment in the health sector.  The 
new plan appears to address criticism that stimulus measures so far 
have focused too much on infrastructure projects.  However, Li's 
description lacked specific funding details for all but three of the 
twelve new measures.  Even for the "16 Measures" from the November 
plan, Li said, the provincial government would provide RMB 400 
billion directly over two years and look for RMB 1.3 trillion in 
financing from other sources. 
 
¶5. (SBU) Li emphasized that the Guangdong provincial government 
places a high priority on these stimulus plans because it believes 
that the central government stimulus will not be enough.  Provincial 
and local governments must design their own plans to address local 
conditions, she said.  The province expects relatively little 
funding from the central government plan, which will offer more 
benefits to poorer provinces. 
 
New Ideas? Efficacy? 
-------------------- 
 
¶6. (SBU) Economics Professor Lin Jiang of Sun Yat-sen University 
told us that many people have raised questions about the provincial 
government's stimulus plans, arguing they include very little in the 
way of new ideas.  Instead, the government is recycling 
previously-announced plans, and accelerating funding for five- and 
ten-year infrastructure plans into one- and two-year plans.  Lin 
questioned whether such an approach would generate the desired 
effects of stimulating the economy, and ultimately, of stimulating 
domestic demand.  Professor Ding Li of Guangdong Academy of Social 
Sciences (GDASS) separately told econoffs that government stimulus 
plans focused so heavily on previously-planned infrastructure 
projects that they may not achieve the government's stimulus goals. 
 
 
¶7. (U) South China's online community has also raised concerns about 
 
GUANGZHOU 00000112  003.2 OF 003 
 
 
whether the recently announced central government economic stimulus 
policy to encourage residents of rural areas to purchase household 
appliances will be effective.  One online posting expressed the view 
that spending RMB 30 billion (USD 4.39 billion) on this program 
would benefit manufacturers and retailers more than rural residents 
who bring home too little disposable income to purchase big-ticket 
items being sold as part of the program.  The online post said the 
people could instead benefit from direct government funding through 
vouchers and social welfare projects, rather than accepting a 13 
percent discount on certain household appliances.  Professor Peng 
Peng of Guangzhou Academy of Social Sciences (GZASS) raised similar 
concerns, expressing the view that the rural poor do not have the 
extra money to spend on consumer products, and that the urban middle 
class (those "who have money," but as wary as those in less 
prosperous circumstances about the future) would save any extra 
income they received as part of government efforts to stimulate 
domestic demand. 
 
Social Stability is Everything 
------------------------------ 
 
¶8. (SBU) Peng pointed out that every measure of the government's 
stimulus plans is designed with one over-arching goal in mind - 
social stability.  Maintaining stable economic growth, minimizing 
the number of factory closures, improving services for unemployed 
workers and college graduates, each contributes to preserving social 
stability, according to Peng.  The problem, he said, is that details 
are lacking, with each plan "sounding good", but perhaps one not 
coordinated with another, and all lacking sufficient detail about 
funding and implementation to assess effectiveness.  In addition, 
Peng admitted that the focus on short-term stability may ultimately 
be short-sighted, as certain long-term priorities will be ignored 
and difficult to address the longer it takes to strategize about 
them.  (Refs D and E). 
 
GOLDBERG