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O 061053Z MAR 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2733
INFO RUEHOO/CHINA POSTS COLLECTIVE IMMEDIATE
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UNCLAS SECTION 01 OF 05 BEIJING 000590 
 
SENSITIVE 
SIPDIS 
 
FOR EAP/CM PAM PARK; FOR EEB ERIK MAGDANZ 
STATE PASS USTR 
USTR FOR STRATFORD/MAIN 
DOC FOR MELCHER, SAUNDERS; CASSEL; LORENTZEN AND 
SHOWERS (5130); HEIZNEN (6510) 
USDA FOR FAS/OSTA/MACKE; FAS/OGA/HOUSE 
 
E.O. 12958:  N/A 
TAGS: ECON EAGR ETRD CH
SUBJECT: CHINA--"BUY LOCAL" POLICIES ON THE RISE 
 
REFS:  A. Beijing 583 
 ¶B. Beijing 433 
 
(U) This cable is Sensitive but Unclassified. 
Please protect accordingly.  It incorporates 
contributions from posts throughout the China 
Mission. 
 
¶1. (SBU) Summary: Some Chinese provincial and sub- 
provincial governments are responding to the 
economic slowdown by adopting "buy local" measures 
designed to boost consumption of their locally- 
produced products.  Measures have included consumer 
incentives as well as directives or preferences for 
governments and state owned enterprises (SOE's). 
These measures appear targeted at intra-China 
competitors rather than international import 
substitution, although implementation details are 
still scarce.  The Chinese official press has 
generally slammed these "buy local" policies.  See 
paragraph 10 for unofficial translated summaries and 
links to publicly available Chinese-language "buy 
local" policy documents and news reports.  End 
Summary. 
 
Buy Local 
--------- 
 
¶2. (SBU) "Buy local" measures have recently been 
adopted or are under consideration in a number of 
localities, including Anhui, Guangxi, Hainan, Henan, 
Hubei, Hunan, and Jilin provinces, as well as 
Changchun, Haikou and Hangzhou municipalities. 
These measures include issuance of coupons for local 
consumers that require purchase of locally-produced 
goods, as well as directives or incentives for local 
government entities and state owned enterprises 
(SOE's) to buy from local companies.  In some cases 
the measures specify that the good must also be 
produced locally. 
 
¶3. (SBU) Targeted products reportedly  include autos, 
auto parts, alcoholic beverages, certain 
agricultural products, home appliances, cell phones, 
computers, steel, coal, construction equipment, as 
well as travel and tourism services.  On February 17, 
for example, the Hubei Provincial Government issued 
an "Opinion on Promoting Wuhan Steel Products for 
Provincial Internal Use" which "encourages" 
provincial government projects involving machinery, 
autos, home appliances, shipbuilding, railroads, and 
construction to use steel produced by Wuhan Steel 
Company.  According to Hangzhou City government 
websites, an 18 percent rebate is available for 
buying locally-produced home appliances.  (See para 
10 for further examples and Ref A on "Appliances to 
the Countryside" programs that may have "buy local" 
features.) 
 
Some Localities Resist 
---------------------- 
 
¶4. (SBU) Some local officials appear aware that 
these measures may not be consistent with China's 
overall liberalization efforts.  People's Congress 
members in Wuhan, according to a Chinese press 
report, recently decided to delete a clause in a 
draft city government work report to develop and 
implement policies to encourage consumers to buy 
local products because they felt the measure 
amounted to regional protectionism. 
 
¶5. (SBU) On February 25 and 26, officials in 
Shandong and Jiangxi told Econoffs in separate 
meetings that their provinces were not using any 
"buy local" measures.  In Jiangxi, the official from 
the provincial Development and Reform Commission 
said these measures are not being adopted "because 
that is local protectionism."  Other officials in 
 
BEIJING 00000590  002 OF 005 
 
 
Jiangxi noted that Jiangxi's industrial sector is 
small, decreasing the motivation to adopt "buy 
local" policies. 
 
Beijing Noncommittal 
-------------------- 
 
¶6. (SBU) Commentators in the official national media, 
including newspapers, radio, and television have 
condemned such regional or local protectionism. 
Some have even cited such "beggar thy neighbor" 
policies as having the potential to stall China's 
overall goal of creating a large domestic demand- 
driven economy. 
 
¶7. (SBU) The Central Government has stated that it 
opposes national "Buy China" policies (Ref B), but 
has not taken an official stand on "buy local" 
measures.  However, as far as we can determine the 
Central Government thus far has not taken action to 
halt the measures already implemented. 
 
Comment 
------- 
 
¶8. (SBU) Although many of the measures appear to 
lack enforcement measures, the powerful role of 
government in shaping business decisions makes this 
a worrisome trend for China's ongoing reforms and 
efforts to break down local protectionism.  Now that 
local governments are facing tighter economic times, 
old habits may reemerge as they perceive an 
environment where their neighbors' success takes 
from their own piece of China's economic growth pie. 
 
¶9. (SBU) The implementing regulations and other 
details for China's "buy local" policies, as well as 
official translations, are not available, so Post is 
not able to make a determination as to whether these 
measures constitute prohibited subsidies in terms of 
the WTO Agreement on Subsidies and Countervailing 
Measures (ASCM).  It is also difficult to tell how 
much U.S. trade will be affected.  Statistics are 
not available on sales of key U.S. products for 
different Chinese localities, but for many of the 
covered purchases, U.S. market share is relatively 
small, particularly in the specific localities where 
a "buy local" measure may be in force.  We suspect 
that most "buy local" programs will hurt other 
provinces more than foreign imports.  End Comment. 
 
Appendix 
-------- 
 
¶10. (U) To assist Washington agencies further 
evaluation of the "buy local" measures, we are 
providing brief summaries and Internet links below 
to available Chinese language official documents and 
news reports.  The legal status and accuracy of 
measures reported in the local media in many cases 
have not been confirmed. 
 
Anhui Province: 
 
--Anhui Provincial Government's 31 October 2008 
"Opinion on Promoting Stable and Relatively Fast 
Growth" Article 9 says every level of the Anhui 
Government should give preference to Anhui-made 
goods, such as automobiles, cigarettes, alcohol, 
home appliances, etc. 
(http://www.ahjw.gov.cn/Info/file/20081151027 500.pdf) 
 
--According to a news report in the Nanyang Post 
(http://www.nanyangpost.com/news/china/1715.h tml) 
the Anhui measures stipulate that:  1) auto 
manufacturers "must" buy steel from Anhui steel 
producers, 2) starting in March, construction and 
home appliance companies "must cooperate" with 
Ma'anshan Steel, 3) starting in April, all power 
 
BEIJING 00000590  003 OF 005 
 
 
plants "must cooperate" with the four big coal mines 
in Anhui, 4) starting in May, to help increase sales 
of locally-produced Chery and JAC automobiles in 
Anhui Province, government agencies and Anhui taxi 
companies are encouraged to buy their vehicles from 
Chery and JAC. 
 
Fujian Province: 
 
--Fujian Provincial Government's 21 November 2008 
"General Office Suggestions on Supporting Market 
Development for Industrial Products" states that 
products made in Fujian should be given priority in 
all procurement for government stimulus projects. 
(http://www.fzda.gov.cn/wjzxshow.asp?id=5840) 
 
Guangxi Zhuang Autonomous Region: 
 
--According to a 16 February 2009 report on the 
Liuzhou City Small and Medium Enterprises Service 
Center website, the Guangxi Government organized a 
meeting on 12 February 2009 with Guangxi Liugong 
Group, a construction machinery manufacturer with 
six major state-owned construction companies and 
government economic agencies.  At the meeting the 
six major construction companies signed a long-term 
agreement to encourage use of Liugong's products in 
their construction projects. (Note: Liugong competes 
with Caterpillar. End Note.) 
(http://www.smelz.gov.cn/news/165413.htm) 
 
--The Liuzhou Municipal Government issued a policy 
to encourage local companies, government agencies 
and other entities to buy local equipment for 
projects carried out in Liuzhou, according to a 30 
November 2008 news story listed on the Guangxi 
Government website.  The measures include cash 
awards for automakers that make progress in using 
local auto parts.  For automakers that used 60 
percent or more local auto parts last year, if they 
can use 1 percent more local auto parts this year, 
leaders from the enterprises can win a RMB 150,000 
(USD 22,000) cash award from the government. 
Similar awards are available to automakers with 
lower percentages of local content and local auto 
parts suppliers whose sales revenue exceed RMB 800 
million (USD 117 million).  (Note: Liuzhou City is 
home to a GM joint venture auto factory as well as a 
number of other car manufacturers.  End Note.) 
(http://www.gxi.gov.cn/jjyw/jjyw_gx/jjyw_gx_j jyw/200 
811/t20081130_93555.htm) 
 
Hainan Province: 
 
--According to a 16 January 2009 story from the 
Haikou Evening News listed on the Hainan Provincial 
Government website 
(http://www.hainan.gov.cn/data/news/2009/01/6 8396/), 
since last year, the Haikou Municipal Government 
(provincial capital of Hainan) has encouraged all 
government agencies to purchase local products in 
order to help local companies weather the global 
economic crisis.  Starting in 2009 Haima automobiles 
made in Haikou will be given priority in government 
procurement and for new taxies.  Locally produced 
alcohol will be used in meals hosted by government 
agencies.  In a 15 January 2009 session of 
Provincial People's Congress a Hainan Provincial 
Government party official said other cities in 
Hainan should learn from Haikou and many 
representatives supported the adoption of "buy 
local" measures. 
 
Henan Province: 
 
--The Henan Provincial Government's 19 January 19 
2009 "Opinions on Promoting the Stable and 
Relatively Fast Growth of the Industrial Economy" 
states that locally produced buses, subsidized farm 
 
BEIJING 00000590  004 OF 005 
 
 
equipment and other materials will receive 
preference by government purchasing bodies.  The 
measure also covers purchases of government cars, 
environmental equipment, medicine, subsidized rural 
appliances, goods for government meetings and 
receptions, and materials for provincial fixed asset 
investment projects. 
(http://www.henan.gov.cn/zwgk/system/2009/02/ 09/0101 
17869.shtml) 
 
Hubei Province: 
 
--Hubei Provincial Government's 17 February 2009 
"Opinion on Promoting Wuhan Steel Products for 
Provincial Internal Use" encourages provincial 
projects involving machinery, auto, home appliances, 
shipbuilding, railroads, and construction to use 
steel produced by Wuhan Steel Company. 
(http://www.hubei.gov.cn/xwfbh/xwfbh2009/0901 /xwfbc0 
901/200902/t20090217_91122.htm) 
 
Hunan Province: 
 
--Hunan Provincial Government's 23 January 2009 
"Opinion on Promoting the Stable and Relatively Fast 
Development of Industrial Enterprises" states that 
government entities should actively purchase 
automobiles as well as other goods produced in the 
province.  The document also "encourages" other 
entities and residents to purchase passenger and 
commercial vehicles made in the province and says 
locally produced goods should be used for key 
engineering and construction projects. 
(http://www.hnjmw.gov.cn/prog/infor/publish/M sgView_ 
kxfzg.jsp?MsgID=10733) 
 
Jilin Province: 
 
--Jilin Provincial Government's 5 February 2009 
"Opinions on the Current Promotion of Economic 
Development by the Financial Sector" states that 
financial institutes/banks can promote the sales of 
First Auto Works vehicles by adjusting loan terms 
and required collateral. 
(http://www.jl.gov.cn/btxw/200902/t20090220_5 25018.h 
tm) 
 
Sichuan Province: 
 
--According to a 10 February 2009 online news report, 
the Chengdu municipal government issued consumption 
coupons valued in RMB 37.91 million to 379,100 low- 
income people, RMB 100 per person, on 20 December 
¶2008.  They were required to use all coupons by 31 
January 2009.  Consumers were required to buy rice, 
vegetable oil and other basic necessities with the 
coupons in designated department stores.  Department 
stores encouraged consumers to buy "Chengdu 
products."  According to the story, "local factories 
and enterprises benefited from the measure." 
(http://business.sohu.com/20090210/n262141295 .shtml) 
 
 
--According to a 5 February 2009 online news report, 
the Sichuan Provincial Government has launched an 
"electric appliances for rural areas" 
campaign.  Local products were encouraged, 
especially Sichuan-made products.  According to the 
report, of all color TV sets and cell phones sold to 
the rural areas in Sichuan, over 50 percent were 
made by the Changhong factory in Sichuan.  Changhong 
is one of the biggest color TV factories in China. 
( http://wwww.stockcity.cn/auto/qcpl/2009-02- 
05/auto_20090205110306_1301916.html) 
 
Zhejiang Province: 
 
--The Hangzhou City Government Finance and Local Tax 
Bureau 10 February 2009 "Explanation of Consumer 
 
BEIJING 00000590  005 OF 005 
 
 
Spending Coupon Policy" (Part II, Article 3, second 
paragraph) states that an 18 percent rebate is 
available to certain lower income, handicapped, and 
elderly residents to purchase locally produced goods. 
http://www.hzft.gov.cn/jpm/portal?action=info DetailA 
ction&eventSubmit_doInfodetail=doInfodetail&i d=29285 
 ).  The Hangzhou Finance and Tax Bureau press 
conference lists the four types of Hangzhou-made 
goods that qualify for the 18 percent rebate -- TVs, 
refrigerators, washing machines, and cell phones. 
(http://www.hzft.gov.cn/jpm/portal?action=inf oDetail 
Action&eventSubmit_doInfodetail=doInfodetail& id=2926 
8) 
 
Others: 
 
We have also seen reports mentioning "buy local" 
measures in Guangdong and Shandong Provinces, but 
have not yet been able to locate specific 
information. 
 
PICCUTA