VZCZCXRO8440
RR RUEHCN RUEHVC
DE RUEHGH #0210/01 1271010
ZNR UUUUU ZZH
R 071010Z MAY 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7925
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 8570

UNCLAS SECTION 01 OF 03 SHANGHAI 000210 
 
SENSITIVE 
SIPDIS 
 
STATE ALSO PASS USTR FOR WINTER, ALTBACH 
STATE FOR EAP/CM, EB AND E 
TREASURY FOR OASIA - HAARSAGER, WINSHIP 
USDOC FOR ITA MAC DAS KASOFF, MAC/OCEA -SZYMANSKI 
 
E.O. 12958: N/A 
TAGS: ECON PGOV EINV ETRD ELTN EAIR CH
SUBJECT: CENTRAL CHINA EXPO HIGHLIGHTS ACHIEVEMENTS, DOWNPLAYS 
ECONOMIC SLOWDOWN 
 
REF: SHANGHAI 209 
 
SHANGHAI 00000210  001.2 OF 003 
 
 
¶1. (SBU) Summary.  On April 25-26, Shanghai Deputy Principal 
Officer and ConOff traveled to Hefei, Anhui, to attend the 2009 
Central China Expo.  This annual gathering aims to promote the 
`Rise of Central China' through investment and economic 
development in the six Central Chinese provinces of Hunan, 
Hubei, Anhui, Shanxi, Jiangxi, and Henan.  State Council 
Vice-Premier Wang Qishan and other Chinese government officials 
used the event as a platform to call for transparency and rule 
of law in Central China.  Governors from the six Central China 
provinces highlighted their efforts to build more attractive 
investment environments by improving infrastructure and 
promoting science and technology.  Investors and trade 
representatives who attended the expo expressed mixed views 
about the benefits of investing in Central China.  Deputy 
Principal Officer and ConOff's attendance at this event 
continued increased Consulate outreach to officials, 
organizations and events in Anhui; Consul General's early April 
meetings with provincial and Hefei municipal officials was 
reported reftel.  End Summary. 
 
 
 
Spotlight on Central China 
 
-------------------------- 
 
 
 
¶2. (SBU) Hotels in Hefei were filled to capacity on April 25-28 
as the provincial capital struggled to accommodate the 16,000 
visitors expected to attend the fourth annual Central China 
Expo.  The expo, this year entitled `Innovation, Cooperation, 
Win-Win Rising,' was the largest-scale gathering ever to take 
place in Hefei.  Besides investors and business representatives, 
the expo also attracted cultural associations, sister city 
representatives, and foreign diplomats.  The Anhui Foreign 
Affairs Office hosted the Deputy Principal Officer and ConOff, 
along with Ambassador Madibo Wagidoso of Uganda, the Consul 
Generals from the Romanian, Polish and Nigerian consulates in 
Shanghai, and diplomats from the UK, Russia, and Pakistan, for a 
three-day visit combining the Central China Expo in Hefei and a 
tour of factories in nearby Huoshan County. 
 
 
 
¶3. (SBU) In addition to encouraging a shift of investment and 
industry westward from China's eastern provinces, the Central 
China Expo is intended to showcase the provinces' recent 
economic growth and reinforce self-confidence among the six 
provinces.  An impressive April 25 dance and music performance 
was held in the Hefei Olympic Sports Center to kick off the 
expo.  The April 26 opening ceremony featured China's State 
Council Vice-Premier Wang Qishan, Philippines Vice President 
Noli De Castro, Taiwan's New Party Chairman, the Chief 
Executives of Hong Kong and Macao, and the governors of each of 
the six provinces, all of whom delivered speeches at the opening 
day business summit. 
 
 
 
Calls for Increased Transparency 
 
-------------------------------- 
 
 
 
¶4. (SBU) State Council Vice-Premier Wang's speech outlined the 
measures the six Central Chinese provinces must take in order to 
maintain steady economic growth in the face of the global 
economic crisis.  While the six provinces' GDPs are higher than 
the all-China average and the provinces' transportation 
infrastructure has been steadily improving, Vice-Premier Wang 
called on the Central China provincial governments to accelerate 
efforts toward scientific development, urbanization, and 
industrialization.  At the same time, he emphasized the 
importance of stimulating rural markets and developing the food, 
energy, raw material, equipment manufacturing, and 
transportation sectors.  He stressed the need for accelerated 
institutional reform and an open, uniform market system that 
serves as a stable environment for domestic and foreign 
investors.  Finally, he pointed to the importance of rule of law 
 
SHANGHAI 00000210  002.2 OF 003 
 
 
and coordination between provincial and sub-provincial 
governments in order to create a more pro-business environment 
in Central China. 
 
 
 
¶5. (SBU) The theme of openness and transparency reemerged in 
speeches by Hong Kong SAR Chief Executive Donald Tsang and two 
of the provincial governors.  Chief Executive Tsang said that, 
while Hong Kong companies plan to continue investing in the six 
provinces of Central China, their greatest concern remains the 
local governments' ability to provide proper regulatory 
conditions.  Jiangxi Province Governor Wu Xinxiong cited his 
government's efforts to increase honesty and efficiency in order 
to create a better business environment, and Hunan Province 
Governor Zhou Qiang mentioned that his provincial government had 
`scaled up efforts to deepen reforms and open wider.' 
 
 
 
The Path to Prosperity: Infrastructure and Science 
 
--------------------------------------------- ----- 
 
¶6. (SBU) Infrastructure development remains one of the top 
priorities of the six Central China provinces, and five of the 
provincial governors made reference to infrastructure in their 
speeches.  Anhui Province Governor boasted of the rapidly 
improving express railway network connecting Anhui to Shanghai 
and other regional capitals.  Shanxi Province Governor Wang Jun 
cited plans to invest RMB 650 billion in the construction of 
6000 additional kilometers of railway and highway, as well as 6 
airports, 20 million kilowatts of power plants, and 9000 
kilometers of power grids. 
 
 
 
¶7. (SBU) Five of the provincial governors emphasized science and 
technology as the other essential component for Central China's 
rise.  Henan Province Governor Guo Gengmao said that scientific 
development in the provinces is crucial but that Central China 
must first tackle the challenges of industrial modernization, 
urban modernization, and human resources.  Hubei Province 
Governor Li Hongzhong spoke of his province's efforts to develop 
advanced manufacturing and high-tech industries as evidence of 
its `scientific outlook on development.' 
 
 
 
¶8. (SBU) Within the broader theme of economic development, four 
governors stressed the importance of environmental protection. 
According to Hunan Province Governor Zhou Qiang, his province is 
making special efforts to attract investment in resource 
conservation and environmental protection projects, particularly 
in the Changsha-Zhuzhou-Xiangtan city cluster.  Hubei Provence 
Governor Li Hongzheng boasted that his provincial capital, 
Wuhan, has been selected as `a pilot region for building a 
resource efficient and environment friendly society.' 
 
 
 
Still a Hard Sell 
 
----------------- 
 
 
 
¶9. (SBU) Barry Nicholson, Consul in UK Trade and Investment at 
the British Consulate in Shanghai, said that the enthusiasm for 
Central China is not matched by UK investors.  Although the 
British retail giant Tesco has opened a store in Hefei and is 
currently negotiating to open additional stores in Anhui 
Province, other big UK firms have not yet made large-scale 
investments in Anhui.  According to Nicholson, most UK companies 
prefer to concentrate their investments in large coastal cities 
that have already experienced foreign investment and learned how 
to accommodate foreign firms.  UK firms still see ample 
opportunity in eastern China and are not inclined to try to 
`reinvent the wheel` in less developed and lesser-known parts of 
China. 
 
 
 
SHANGHAI 00000210  003.2 OF 003 
 
 
 
But Some Small Fish Do Fare Better in Small Ponds 
 
--------------------------------------------- ---- 
 
 
 
¶10. (SBU) For other foreign companies, Central China offers 
opportunities that are unavailable or inaccessible in East 
China.  Jouni Kahkonen has recently begun working as general 
manager in charge of China operations at a small Finnish 
renewable energy company called The Switch.  In China, his 
company manufactures and sells generators and convertors for 
wind turbines.  He expects that The Switch will capture a large 
part of the Chinese wind energy market, which has already grown 
quickly and is positioned for continued rapid growth thanks to 
China's Renewable Energy Law (REL) and the target the Chinese 
government has set to produce 15 percent of the country's energy 
from renewable sources by 2020.  While his company's China 
headquarters are in Beijing, he has had difficulty gaining 
access to officials and company executives there and often have 
neither the time nor the interest to hear about the business 
activities his company is trying to pursue in China.  The small 
size of his firm is one of the factors that he took into 
consideration when deciding to place its China manufacturing 
facility in Anhui rather than in Zhejiang or Jiangsu.  For him, 
the biggest benefits of doing business in Anhui are location and 
access.  Most of the parts used to build his generators and 
convertors are manufactured in nearby Zhejiang and Jiangsu and 
are easily transported to Anhui, and as an added bonus, he gets 
preferential access to Anhui provincial and local government 
officials, who are pleased that his firm has chosen Anhui as its 
China manufacturing base. (Note: Kahkonen said that his company 
has sought but not obtained reduced tax rates despite the 
preferential tax policies Anhui advertises to attract foreign 
investors.  End Note.) 
 
 
 
Comment: What about the Global Slowdown? 
 
---------------------------------------- 
 
 
 
¶11. (SBU) Chinese government officials at the Central China Expo 
all noted the current global economic downturn as a factor in 
their economic planning, but they all claimed to be optimistic 
about prospects for continued growth.  Perhaps because they were 
competing for inbound investment, they did not raise social 
stability issues such as unemployment or the problems of 
displaced migrant laborers, although in other contexts Anhui 
officials at least have been willing to discuss these issues. 
It appears that money from the Chinese government's stimulus 
package has relatively quickly trickled down to the provincial 
level and the six Central China provinces have off-the-shelf 
plans to draw on these resources, particularly through 
infrastructure investment.  Whether or not Central China can 
gain from the global economic slowdown by attracting East China 
companies looking to cut costs remains to be seen.  End Comment. 
CAMP