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RR RUEHCN RUEHGH
DE RUEHGH #0189/01 1140820
ZNR UUUUU ZZH
R 240820Z APR 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7872
INFO RUEHBJ/AMEMBASSY BEIJING 2732
RUEHCN/AMCONSUL CHENGDU 1939
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGZ/AMCONSUL GUANGZHOU 0395
RUEHHK/AMCONSUL HONG KONG 2107
RHEHAAA/NSC WASHINGTON DC
RUEHSH/AMCONSUL SHENYANG 1930
RUEHIN/AIT TAIPEI 1726
RUEHGH/AMCONSUL SHANGHAI 8517

UNCLAS SECTION 01 OF 02 SHANGHAI 000189 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/CM 
STATE PASS USTR FOR STRATFORD, WINTER, MCCARTIN, ALTBACH 
DOC FOR ITA/MAC - DAS KASOFF, MELCHER, SZYMANSKI, COUCH, LEHRMAN 
TREASURY FOR OASIA - DOHNER/HAARSAGER/CUSHMAN 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD ELAB CH
SUBJECT: WUXI: YANGTZE RIVER CITY REMAINS OPTIMISTIC IN FACE OF 
ECONOMIC SLOWDOWN 
 
REF: A. (A) 08 SHANGHAI 522 
     ¶B. (B) SHANGHAI 156 
     ¶C. (C) SHANGHAI 149 
     ¶D. (D) SHANGHAI 118 
     ¶E. (E) SHANGHAI 74 
     ¶F. (F) SHANGHAI 28 
 
(U) Sensitive but unclassified.  Not for dissemination outside 
USG channels; not for Internet distribution. 
 
Summary 
------- 
 
¶1. (SBU) Local government officials in Wuxi, a major exporting 
city in East China, told PolOff on April 20 that while the 
global financial crisis and China's economic downturn have hurt 
exporters, Wuxi is optimistic it will weather the economic 
downturn, particularly given its 10 percent growth during the 
first quarter of 2009.  One official claimed that as a result of 
government intervention, small- and medium-sized enterprise 
development, and foreign investment, there have been no factory 
closures in Wuxi.  Professors at Wuxi's top university said they 
are optimistic about the YRD's economic recovery, but they 
argued that China still has significant economic structural 
problems to address.  End Summary. 
 
Travel to Wuxi 
-------------- 
 
¶2. (SBU) PolOff and LES Political Assistant traveled to Wuxi (45 
minutes west of Shanghai by train) on April 20.  They discussed 
the global financial crisis and China's economic slowdown with 
local government officials and business professors at the 
Southern Yangtze (Jiangnan) University.  Wuxi, located on the 
northern bank of Lake Tai, is a major manufacturing center in 
East China and exporter of textiles and electronic goods.  In 
recent years, Wuxi has taken steps to move up the value chain to 
develop its software and solar energy industries.  Illustrating 
Wuxi's importance to the Central Government, Premier Wen Jiabao 
visited the city in January 2009 for the second time in less 
than six months to assess Wuxi's economic prospects. 
 
Local Officials: Big Impact on Exporters... 
------------------------------------------- 
 
¶3. (SBU) Wuxi's exporters have been hit hard by the economic 
downturn, local officials said.  Cui Jianmin, Vice Director of 
the Wuxi Municipal Economic and Trade Commission, said that 
exports began to decline in September 2008.  In February 2009, 
Wuxi's exports fell by 7.9 percent year-on-year.  The city's 
electronics manufacturers have been particularly affected by the 
economic slowdown in the United States, Cui said, as U.S. 
consumption of Chinese electronic goods has fallen.  Wuxi's 
textile industry also has felt the impact, he said, but has been 
somewhat insulated because of its higher value production line. 
(Note: Cui acknowledged that low-end textile producers in 
neighboring Zhejiang Province have been forced to close 
factories or temporarily stop production as a result of the 
downturn (Ref A), but he said Wuxi's decision a few years ago to 
"move up the textiles value chain" and produce machine-woven 
high-end products and close down its low-end labor and dyeing 
operations has helped the city's textile industry survive the 
downturn.  End Note.) 
 
...But Recovery is Around the Corner 
------------------------------------ 
 
¶4. (SBU) Officials expressed optimism that Wuxi's economic 
recovery is "right around the corner."  Cui noted that after 
February's export drop, statistics indicated a slight recovery 
in March with exports rising by 1.4 percent year-on-year.  The 
Central Government's stimulus measures are starting to have the 
desired effect, Cui said, and while Wuxi is not receiving 
stimulus funding from the Central Government, many of the 
municipality's infrastructure projects that previously were on 
hold (such as Wuxi's subway line) recently were approved by the 
National Development Reform Commission (NDRC) in order to 
encourage fixed asset investment (FAI) growth.  As a result, Cui 
 
SHANGHAI 00000189  002 OF 002 
 
 
said, Wuxi's GDP for the 1st quarter of 2009 grew by more than 
10 percent -- well above the 6.1 percent national average -- 
spurred by a 27 percent year-on-year increase in FAI. 
 
Gauging the Social Impact of the Economic Slide 
--------------------------------------------- -- 
 
¶5. (SBU) Wuxi factories have been told by the municipal 
government to be "socially responsible" and not layoff workers, 
Cui said, and many companies have elected to offer training or 
rest days to compensate for the falling workload.  Cui claimed 
there have been no factory closures in Wuxi; the city's 
transformation in recent years towards the high-tech sector has 
been a major reason for keeping companies open, as high-tech 
investments require a significant commitment of funding, and 
investors are reluctant to give up on their investments.  Cui 
also credited the contributions of private small- and 
medium-sized enterprises (SMEs) for helping to absorb excess 
laborers, as well as foreign companies (which he said make up 70 
percent of Wuxi's investors) for helping "keep Wuxi stable." 
Caterpillar is the latest foreign company to open a new facility 
in Wuxi, he said. 
 
Academics: The Trend is our Friend...We Think 
--------------------------------------------- 
 
¶6. (SBU) Professors at the Southern Yangtze (Jiangnan) 
University on the outskirts of Wuxi were upbeat on Wuxi's 
economic direction.  Yang Xianzu, Vice Dean of the School of 
Foreign Studies, told PolOff that the Chinese economy is on the 
road to recovery, and university officials are optimistic they 
will be able to find good jobs for graduates because of Wuxi's 
plethora of foreign-invested enterprises (FIEs).  Professor Xu 
Liqing, Vice Dean of the Business School, however, was realistic 
about the economic challenges facing China in the long-term. 
"China already had structural economic problems that we need to 
address," Xu stated.  "The global financial crisis just made 
those problems worse." 
 
Wuxi's Views on the "G-2" 
------------------------- 
 
¶7. (SBU) While optimistic about Wuxi's economic recovery, the 
professors strongly insisted that the "G-2" (U.S.-China) 
concept, which they said arose from the early April London G-20 
meetings and President Obama's meeting with President Hu, is 
seriously flawed.  China still has "a long way to go to compete" 
with the United States, Xu said, throwing out a laundry list of 
China's domestic economic ailments, including migrant worker and 
university graduate unemployment, a weak social safety net, 
overdependence on exports, low consumption, and inadequate 
access to credit.  Lu Feng, one of the business school's younger 
professors, later emailed PolOff to sum up China's problems as 
"the nation is rich but the people are poor" (guofu minqiong), 
writing that China's domestic economic problems make the G-2 
concept "unworkable." 
CAMP