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RUEHGH/AMCONSUL SHANGHAI 8300

UNCLAS SECTION 01 OF 02 SHANGHAI 000089 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR OASIA/INA/CUSHMAN AND WINSHIP 
 
E.O. 12958: N/A 
TAGS: ECON PGOV EFIN ETRD EINV SOCI CH
SUBJECT: JIANGSU SCHOLARS SEEK CLEARER U.S. POLICIES ON FINANCIAL 
CRISIS, AND QUICK EFFICACY OF SAME 
 
(U) This cable is sensitive but unclassified and for official 
use only.  Not for distribution outside of USG channels or via 
the internet. 
 
Summary 
------- 
 
¶1. (SBU) A desire for greater policy clarity by the United 
States dominated comments regarding the new U.S. administration 
by economists and sociologists at the Jiangsu Academy of Social 
Sciences.  Jiangsu's export-dominated economy has suffered more 
than other parts of China with the global economic downturn, and 
the researchers hoped U.S. economic stimulus measures would soon 
show positive results.  Nevertheless, they suggested China's 
leaders may no longer view the United States as a model for 
economic management.  The researchers also expected ongoing but 
low-intensity frictions over issues like China's foreign 
exchange regime and product safety and counseled patience on the 
part of the U.S. in dealing with China.  End Summary. 
 
Jiangsu More Tied to U.S. Economy Than Other Provinces 
--------------------------------------------- --------- 
 
¶2. (SBU) Jiangsu Province has suffered disproportionately from 
the U.S. economic slowdown, according to Jiangsu Academy of 
Social Sciences (JSASS) World Economy Institute Director Tian 
Boping.  Meeting with Congenoffs February 13 along with other 
JSASS researchers, Tian noted the United States had absorbed 30 
percent of Jiangsu's exports in recent years, 10 percentage 
points greater than the national figure.  Hence, many in the 
province have great expectations for the efficacy of the U.S. 
Government's economic stimulus package as well as concerns over 
"buy American" provisions in the legislation.  He noted Jiangsu 
to date had not sent any researchers of its own to the United 
States to examine the U.S. economic situation but did mention a 
delegation from the Chinese Academy of Social Sciences by 
China's senior leadership to investigate the crisis. 
 
¶3. (SBU) Tian acknowledged that, in Jiangsu's case, 
overdependence on exports had become a problem.  In 2007, 
exports equaled 55 percent of the province's GDP.  Imports had 
largely been sourced from Japan, Taiwan, and South Korea with 
exports flowing primarily to the United States and Europe.  As 
many export industries had relied on labor from outside Jiangsu, 
however, unemployment was not as serious there as in other 
provinces.  Tian estimated about 18 million migrants from 
China's interior provinces had been working in Jiangsu. 
 
¶4. (SBU) Uncertainty about the direction of U.S. policy has many 
Chinese worried, Tian indicated.  The implications of such 
phrases as "We reject as false the choice between our safety and 
our ideals," in the President's inaugural address are unclear, 
he said.  In Jiangsu, the hope is concrete U.S. policies, 
particularly the economic stimulus, will take effect quickly, 
thus helping to stem the decline in the province's own economy. 
U.S. measures to restart economic growth -- with one policy 
following another -- had shown little efficacy, Tian observed. 
 
¶5. (SBU) In dealing with China, however, Tian stressed the need 
for patience.  Chinese attitudes on issues ranging from exchange 
rate flexibility to social acceptance of homosexuality have 
shown steady movement toward those found in the U.S. and other 
developed countries.  Nevertheless, the recent economic crisis 
had undermined the faith of many Chinese in the U.S. model. 
According to Tian, Central Organization Department head and 
former Jiangsu Communist Party Secretary Li Yuanchao had 
recommended China begin to study the European Union's experience 
in economic management as opposed to that of the United States. 
 
Low-intensity Friction Likely to Continue 
----------------------------------------- 
 
¶6. (SBU) Institute of International Social Conflict Deputy 
Director Zhang Wei highlighted President Obama's concerns over 
the welfare of ordinary Americans as stated in his inaugural 
address along with the emphasis on the values of patriotism, 
equality, and common prosperity.  He raised the question of 
where, in light of the massive and sudden drop in U.S. consumer 
demand, the government can best apply resources to stimulate the 
economy so as to avoid the prospect of domestic social unrest. 
 
SHANGHAI 00000089  002 OF 002 
 
 
 
¶7. (SBU) Regarding U.S.-China relations, Zhang believed the 
possibility of ongoing "low-intensity conflict" over issues such 
as China's exchange rate policy, product safety, and other 
economic issues is high.  "Mid-intensity conflict" over access 
to natural resources and environmental protection was also a 
possibility.  Zhang labeled the issues of Taiwan, Tibet, human 
rights, and religious freedom as those with the potential to 
spark "high intensity conflict" between the United States and 
China.  He was comforted that these latter issues had not 
appeared in any of the top ten foreign policy challenges facing 
the new administration. 
 
¶8. (SBU) The United States should strengthen market supervision, 
address growing income inequality, and stress justice in the 
international community, according to World Economy Institute 
researcher Li Jie.  Li, author of a recent book on U.S. 
relations with the "BRICs" (Brazil, Russia, India, China), said 
China welcomes the new U.S. emphasis on listening to other 
countries concerns as expressed in Vice President Biden's 
February 7 speech in Germany.  The question remains, however, as 
to how the United States will, in fact, manage its relations 
with countries such as Russia and China as well as with allied 
states like Japan and Korea.  The substance of cooperation is 
important, Li noted. 
 
Comment 
------- 
 
¶9. (SBU) The common theme among our JSASS interlocutors was the 
desire for clarity, not only in U.S. policy toward China but in 
domestic economic policy as well.  Although some criticism 
emerged of U.S. financial regulation, there was also unequivocal 
acknowledgement of the vulnerability of Jiangsu's economy to a 
sudden slide in its export markets.  So far, the United States 
is not being held responsible for Jiangsu's economic woes. 
Hopes remain high that the United States can turn around its 
declining economy sooner rather than later.  How attitudes might 
shift if those great expectations are not met, however, is an 
open question. 
CAMP