VZCZCXRO6735
RR RUEHCN RUEHGH RUEHVC
DE RUEHBJ #1083/01 1130415
ZNR UUUUU ZZH
R 230415Z APR 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 3607
INFO RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 02 BEIJING 001083 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EPET PGOV CH
SUBJECT: INNER MONGOLIA GROWTH GOAL "ONLY" 13 PERCENT, 
SLEEPY AG EXPO REFLECTS TOUGH TIMES FOR CHINA'S DAIRYLAND 
 
Sensitive but Unclassified, please protect 
accordingly.  Not for Internet publication, not for 
distribution outside USG. 
 
Summary 
------- 
 
¶1. (SBU) Inner Mongolia Autonomous Region (IMAR) 
officials claimed March 30 that, while the IMAR's 
resource-based economy was faring better than that 
of China's export-oriented regions, the province was 
still feeling the ill effects of the global 
financial crisis.  Some VIPs present at the opening 
of the 2009 Inner Mongolia Agricultural Expo 
expressed doubt that the IMAR would achieve its GDP 
growth target of 13 percent given dropping demand 
for coal and electricity.  Expo organizers told 
PolOff the slow economy had made it difficult to 
attract companies to this year's event and foot 
traffic was sharply down.  Interlocutors claimed the 
IMAR's dairy industry had almost fully recovered 
from last fall's tainted milk scandal, with one 
official claiming that demand was back to 90 percent 
of pre-scandal levels.  Local contacts said the 
economic slowdown offered an opportunity for the 
IMAR to boost investment in clean energy, such as 
wind and converting coal into less-polluting liquid 
fuels.  One official said China's stimulus package 
had already created more orders for the IMAR's heavy 
truck manufacturers.  End Summary. 
 
Background 
---------- 
 
¶2. (U) PolOff traveled to Hohhot, Inner Mongolia 
Autonomous Region (IMAR) March 29-30 as part of 
Embassy Beijing's Virtual Presence Post (VPP) Hohhot 
program.  In Hohhot, PolOff attended the opening 
ceremony of the 4th Inner Mongolia International 
Agricultural Expo. 
 
¶3. (SBU) Expo organizers said the slowing economy 
had made organizing this year's fair particularly 
difficult.  Expo officials told PolOff they managed 
to maintain the same number of participating 
companies as 2008 only by discounting the cost of 
exhibit space.  Nevertheless, they lamented that 
foreign agricultural companies stayed away this year 
because overseas firms have cut back sharply on 
travel budgets.  Of the 140 exhibitors, most were 
based in Northeast China and roughly half were 
headquartered in the IMAR.  A single Japanese 
veterinary pharmaceutical firm was the only non- 
mainland Chinese or Hong Kong company present. 
Exhibitors were mainly firms selling processed food, 
alcoholic beverages, seeds and livestock feed and 
equipment.  After a surge of visitors immediately 
after the morning opening ceremony March 30, foot 
traffic dropped sharply by early afternoon and expo 
officials told PolOff crowds were noticeably smaller 
than last year. 
 
Dairy Industry Recovering from Tainted Milk Scandal 
--------------------------------------------- ------ 
 
¶4. (SBU) IMAR officials were eager to portray the 
IMAR's dairy industry as mostly recovered from the 
melamine tainting scandal of fall 2008.  At the 
expo, IMAR's two largest dairy companies, Yili and 
Mengniu, occupied prime exhibit space right beside 
one another.  The scandal (which resulted in a life 
sentence for Tian Wenhua, the former chairman of the 
Sanlu Group, a now defunct dairy firm in 
Shijiazhuang, Hebei Province) had hit IMAR's dairy 
farmers hard, according to Lu Manshan, the head 
organizer of the expo.  Lu said for several weeks, 
IMAR farmers were simply dumping milk down the drain 
because consumer demand for dairy products had 
collapsed.  The IMAR government, Lu added, had 
provided income subsidies to dairy farmers to help 
them weather the scandal.  The farmers, Lu said, 
were innocent victims as it was milk wholesalers who 
were guilty of watering down milk and then adding 
melamine to show higher protein levels.  Chen 
Ruiqing, the former deputy chairman of the IMAR 
People's Congress and current head of the IMAR 
Socialism Institute (neimenggu shehui zhuyi 
xueyuan), told PolOff that demand for milk had 
returned to 90 percent of pre-scandal levels. 
 
IMAR 2009 Growth Target "Only" 13 Percent 
 
BEIJING 00001083  002 OF 002 
 
 
----------------------------------------- 
 
¶5. (SBU) Chen and other officials with whom PolOff 
spoke on the margins of the expo described the 
IMAR's economy, based largely on resource extraction 
and agriculture, as fairing much better than that of 
export-oriented coastal provinces.  For the past 
decade, IMAR's economic growth rates have been among 
the highest in China.  Inner Mongolia enjoyed 17.2 
percent GDP growth in 2008. IMAR leaders have set a 
target of 13 percent for 2009.  Yin Zhengye, retired 
Party Secretary of the IMAR Finance and Economics 
College (caijing xueyuan), told PolOff he thought 
achieving the 13 percent target would be 
"difficult."  Yin noted that on March 18 the World 
Bank reduced its overall 2009 GDP growth prediction 
for China to just 6.5 percent, meaning China's 
economy is slowing considerably.  While the IMAR has 
few exports, Yin said, the reduction in energy 
demand in the rest of China would impact Inner 
Mongolia's growth rate (note: the IMAR is a major 
provider of coal and electricity to other 
provinces).  Chen Ruiqing, however, said the 13 
percent target was achievable despite the global 
financial crisis.  Chen said the IMAR should use the 
slowdown as an opportunity to encourage development 
of clean energies industries such as wind.  Chen 
also viewed the global financial crisis as a chance 
for IMAR to put more resources into developing 
organic food, tourism, and other "green industries" 
that would encourage better environmental 
protection. 
 
Stimulus Already Helping IMAR 
----------------------------- 
 
¶6. (SBU) In Hohhot, PolOff met separately with Sun 
Baoshan, Deputy Director of the IMAR Foreign Affairs 
Office.  Sun said IMAR was already benefiting from 
the central government's RMB four-trillion stimulus, 
mainly because the anticipated increase in 
infrastructure projects had led to a surge in orders 
for earth moving equipment and heavy trucks produced 
by IMAR companies, especially Baotou North-Benz 
Heavy-Duty Truck Ltd.  Sun added that the IMAR 
government also anticipated that construction would 
begin on a new high-speed rail link between Hohhot 
and Beijing, which would also give a boost to the 
economy.  Sun stressed IMAR's desire to develop 
"clean energy" and noted the IMAR was investing 
heavily in new technology to convert coal (IMAR has 
the largest coal reserves of all of China's 
provinces) directly to diesel and other liquid 
fuels.  Sun noted, however, that this technology 
would only become cost effective if crude oil prices 
were to rise sharply from present levels. 
PICCUTA