VZCZCXRO7119
RR RUEHCN RUEHGH
DE RUEHGH #0074/01 0411010
ZNR UUUUU ZZH
R 101010Z FEB 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7630
INFO RUEHBJ/AMEMBASSY BEIJING 2506
RUEHCN/AMCONSUL CHENGDU 1738
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEHC/DEPT OF LABOR WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGZ/AMCONSUL GUANGZHOU 0194
RUEHHK/AMCONSUL HONG KONG 1905
RUEHUL/AMEMBASSY SEOUL 0371
RUEHGH/AMCONSUL SHANGHAI 8261
RUEHSH/AMCONSUL SHENYANG 1727
RUEHGP/AMEMBASSY SINGAPORE 0226
RUEHIN/AIT TAIPEI 1528
RUEHKO/AMEMBASSY TOKYO 0541

UNCLAS SECTION 01 OF 02 SHANGHAI 000074 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM, DAS DAVIES 
TREASURY FOR OASIA/INA -- DOHNER/HAARSAGER/WINSHIP/CUSHMAN 
TREASURY FOR IMFP -- SOBEL/MOGHTADER 
USDOC FOR ITA DAS KASOFF, MELCHER, MAC/OCEA 
NSC FOR WILDER/LOI 
STATE PASS CEA FOR BLOCK 
STATE PASS USTR FOR STRATFORD/WINTER/MCCARTIN/KATZ/MAIN 
STATE PASS CFTC FOR OIA/GORLICK 
 
E.O. 12958: N/A 
TAGS: BEXP CH EFIN ELAB ETRD
SUBJECT: (SBU) U.S. CORPORATIONS LIMITING LAYOFFS DESPITE GLOBAL 
CRISIS 
 
¶1.  (SBU) Summary.  Major U.S. corporations are limiting 
layoffs, even though they are feeling the effects the economic 
downturn, said the chief Shanghai representative of the 
U.S.-China Business Council.  U.S. corporations are handling 
layoffs differently in China than they would in the United 
States, with managers quietly approaching employees.  U.S. 
corporations are feeling indirect pressure from Beijing to keep 
layoffs to a minimum, but also wish hold onto professional staff 
who have not been easy to recruit in recent years.  U.S. 
corporations are having difficulties determining what 
opportunities current Chinese government efforts to stimulate 
the economy may offer them, said our contact.  End summary. 
 
============================ 
Keeping Workforce Largely in Place 
============================ 
 
¶2.  (SBU) The major U.S. corporations that comprise the 
U.S.-China Business Council are limiting layoffs even though 
they are feeling the effects the economic downturn, Godfrey 
Firth, Chief Shanghai Representative of the U.S.-China Business 
Council told Econoff on February 10, 2009.  In contrast to 2001 
when--following the burst of the tech bubble--U.S.-based 
multinationals did not include China operations in their 
planning for worldwide workforce downsizing, over the past 
several months China operations have been part of the 
calculation, Firth said.  Nonetheless, the layoffs have been 
limited, said Firth, in the range of hundreds of employees out 
of a workforce of thousands for a typical company. 
 
¶3.  (SBU) U.S. corporations are handling layoffs differently in 
China than they would in the United States, said Firth.  In 
China, companies do not announce job cuts, and then send out 
pink slips.  Instead, managers quietly go around to employees 
and discuss options--for instance, early retirement. 
 
 
¶3.  (SBU) Firth suggested that U.S. corporations are feeling 
indirect pressure from Beijing to keep layoffs to a minimum.  He 
cited high-profile press coverage given to Premier Wen Jiabao's 
State Council meeting on employment of college graduates as an 
example of signaling this message to Chinese and foreign 
enterprises. 
 
¶4.  (SBU) While local governments are clearly aligned with the 
top leadership's employment concerns, said Firth, they had "done 
a 180" on national energy efficiency goals.  Whereas a 
year-and-a-half ago, local governments were insisting that new 
foreign investment should meet high energy efficiency targets, 
these days "they could care less," said Firth.  Environmental 
issues are also "out the window," he said. 
 
============================ 
Employee Retention Less of a Problem 
============================ 
 
¶5.  (SBU) Firth said that U.S. corporations are seeing at least 
one silver lining to the current crisis, in that a top concern 
in recent years--hiring and retention of qualified professional 
staff--has been alleviated.  Companies are less concerned that 
employees will be poached by competitors, and can spend more 
time grooming and training employees, said Firth.  And companies 
tell Firth that they believe their workforces will demand 
lower--or no--bonuses this year. 
 
¶6.  (SBU) In this way, government pressure to support 
employment, and company and employee preferences are aligned, 
said Firth.  Companies want to hold onto their staff, as they 
are loath to slice into the talent pool that they have spent 
 
SHANGHAI 00000074  002 OF 002 
 
 
such great effort to build up in recent years. 
 
============================ 
Mixed Outlook for Benefits of Chinese Fiscal Stimulus 
============================ 
 
¶7.  (SBU) U.S. corporations are having difficulties determining 
what opportunities current Chinese government efforts to 
stimulate the economy may offer them, said Firth.  There is 
little public information on which projects local governments 
are pushing forward as their part of the stimulus package, let 
alone the recently announced support programs for various 
industries, said Firth, such as automobiles and textiles.  On 
the other hand, U.S. corporations may find now a propitious time 
to ask for reinstatement of higher value-added tax rebates, 
which were trimmed over the past couple of years as concerns 
about China's global trade surplus grew. 
CAMP