VZCZCXRO9225
RR RUEHCN RUEHVC
DE RUEHGH #0211/01 1280230
ZNR UUUUU ZZH
R 080230Z MAY 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7928
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 8573
RUEHOO/CHINA POSTS COLLECTIVE
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 03 SHANGHAI 000211 
 
SENSITIVE 
SIPDIS 
 
EMBASSY BEIJING ALSO FOR PAS, MARY KAY CARLSON 
TREASURY FOR OASIA - HAARSAGER, WINSHIP 
 
E.O. 12958: N/A 
TAGS: ECON EINV ELTN EIND PGOV SOCI CH
SUBJECT: ANHUI SHOWCASES INDUSTRIAL DEVELOPMENT IN LU'AN 
 
REF: A. A  SHANGHAI 210 
     ¶B. B  SHANGHAI 209 
     ¶C. C SHANGHAI 104 
     ¶D. D  SHANGHAI 96 
     ¶E. E  08 SHANGHAI 449 
 
SHANGHAI 00000211  001.2 OF 003 
 
 
Summary 
 
------- 
 
 
 
¶1. (SBU) On April 25-27, Shanghai Deputy Principal Officer and 
ConOff traveled to Anhui to attend the 2009 Central China Expo 
in Hefei (ref A) and visit Lu'an Municipality in western Anhui. 
`Central China Rising' was the theme of the weekend, and 
provincial leaders and Foreign Affairs Office (FAO) officials 
were eager to showcase Anhui's continued economic growth despite 
the global downturn.  Anhui's provincial government has 
increased its 2009 GDP growth target by two percentage points to 
10 percent and is confident that it will meet that objective. 
Lu'an, with a relatively small population, does not send as many 
migrants to coastal regions as other parts of Anhui, and it has 
been successful in fostering its own industrialization. 
Participation of DPO and ConOff in these late April events is 
part of Consulate's ramping up of outreach activities to Anhui 
Province, the least affluent part of our consular district (also 
see ref B).  End Summary. 
 
 
 
Governor Wang Sanyun: `Anhui's Turn to Rise Up' 
 
--------------------------------------------- -- 
 
 
 
¶2. (SBU) In an April 26 meeting with foreign diplomats on the 
margins of the 2009 Central China Expo, Anhui Province Governor 
Wang Sanyun touted Anhui's economic achievements.  Despite the 
economic downturn, Anhui's GDP growth has continued to exceed 10 
percent each year, and infrastructure investment has increased 
by 30 percent annually.  Governor Wang attributes this success 
both to the Central Government's stimulus package and to the 
province's own investment in infrastructure and policy of 
encouraging innovation. 
 
 
 
¶3. (SBU) Acknowledging that growth has slowed in Anhui due to 
the global economic downturn (see Ref C), Wang explained that 
Anhui's provincial government is responding by pouring money 
into infrastructure projects which it hopes will turn the 
province into a transportation hub for Central China and attract 
foreign investment.  Anhui has earmarked RMB 300 billion for 27 
construction projects that include adding 5000 kilometers of 
railway and roads, and the province eagerly anticipates the 
completion of express railways that will reduce travel time from 
Hefei to Shanghai, Hangzhou, and Beijing, putting Shanghai and 
Hangzhou less than two hours away and Beijing two and a half 
hours away.  Governor Wang is optimistic that this improved 
transportation infrastructure, combined with the province's 
mineral and agricultural resources, will position Anhui to 
become one of China's more prosperous provinces.  He pointed to 
China's leading cement manufacturer Conch Group; two of China's 
leading domestic auto manufacturers, the Chery Auto Group and 
Jiang Huai Company (JAC); Ma'anshan Steel; and iFLYTEK as 
examples of Anhui-based companies that are on the cutting edge 
of technology and that function as strong engines for Anhui's 
continued economic growth (See Ref D). 
 
 
 
Huoshan County: The Wenzhou of Anhui 
 
------------------------------------ 
 
 
 
¶4. (SBU) According to Anhui Foreign Affairs Office Deputy 
Director-General Lu Youqin, Anhui's provincial government is now 
targeting 10 percent GDP growth in 2009 and is confident that it 
will meet that objective, although GDP growth will probably not 
exceed 12 percent.  One source of continued GDP growth is 
Huoshan County, part of Lu'an municipality, which DPO and ConOff 
visited after attending the Central China Expo in Hefei.  (Note: 
 Lu'An, 70 kilometers west of Hefei at the foot of the Dabie 
 
SHANGHAI 00000211  002.2 OF 003 
 
 
Mountains, is written with the characters for `six' and `peace,' 
and normally would be romanized, and pronounced, as `Liu'an.' 
However, local signs romanized the place name as `Lu'an,' which 
is evidently the local pronunciation.  End note.)  Lu'an 
Municipal Communist Party Committee Secretary Tang Linxiang 
hosted a dinner featuring a dance and music show to welcome the 
diplomatic delegation to Lu'an.  The next day, Lu'an Vice-Mayor 
and FAO officials showcased the rapid growth of industry in 
Anhui with a tour of several export-oriented companies based in 
Huoshan County.  DPO and ConOff also toured the Foziling 
Reservoir, one of the first dams and hydroelectric power plants 
built after 1949 with assistance from Soviet experts.  (Comment: 
 Easy availability of cheap electricity may have been a 
significant factor in Huoshan's industrialization.  End 
comment.) 
 
 
 
¶5. (SBU) Anhui Shilin Lighting Co. Ltd. employs over 3000 Lu'an 
residents and makes incandescent light bulbs, 85 percent of 
which it exports to 80 different countries.  In the factory, DPO 
and ConOff noticed a slogan exhorting workers to pay close 
attention to quality, or else `the company will become another 
San Lu,' referencing the Hebei dairy firm that was bankrupted by 
the melamine milk scandal.  Anhui Yingliu Group is a foundry and 
casting company that makes valves and other metal parts for the 
oil, automobile, and construction industries and for ships, 
electrical machinery, and trains.  Headquartered in Hefei, its 
manufacturing base is in Huoshan, where its founder, a 
demobilized PLA officer, got his start with a small trucking 
firm.  It exports its products to 56 countries and is a major 
supplier for U.S. firms such as Fisher Controls.  Anhui Yingjia 
Group, China's fifteenth largest liquor producer, is one of 
Huoshan County's most profitable companies with annual sales 
revenue topping RMB 1 billion. 
 
 
 
¶6. (SBU) The Guoya Group, headquartered in Huoshan County, is 
the largest bamboo flooring manufacturer in China, producing up 
to 5 million square feet of flooring per month.  It exports 
flooring and furniture to North America, Europe, and Australia. 
All the wood used in Guoya's products comes from Anhui province, 
and 90 percent of the employees at the company's Huoshan 
headquarters are from Lu'an.  Interestingly, despite the 
economic downturn, Guoya anticipates U.S. sales to reach USD 20 
million in 2009, up from USD 13 million in 2008.  This 
optimistic projection is based on the belief that U.S. consumers 
will increasingly turn to bamboo furniture because bamboo is 
more environmentally friendly than other types of wood. 
 
 
 
Guang-what?  Jobs in Huoshan mean fewer migrants moving eastward 
 
--------------------------------------------- ------------------- 
 
 
 
¶7. (SBU) According to Lu'an FAO Deputy Director Zheng Shuhua, a 
disproportionately low percentage of laborers leave Lu'an for 
Guangdong and other eastern industrial centers because the 
strong industrial presence in Huoshan County provides more 
employment opportunities than are available in other parts of 
Anhui.   Zheng estimates that approximately 50,000 of Lu'an's 
366,000 inhabitants, or one out of seven people, travel outside 
Anhui to look for work.  (Note: Anhui Foreign Affairs Office 
Deputy Director-General Lu Youqin estimates that 20 million of 
Anhui province's 67.41 million inhabitants are migrant laborers, 
of whom 6 million have come back to Anhui since the start of the 
economic downturn.  This number seems high and, in any case, is 
higher than the estimate an official from Anhui Provincial 
Bureau of Labor and Social Security gave Poloff in October 2008 
(see Ref E).  End Note.)  Although Lu'an's industry draws both 
manual laborers and high-level employees working in management 
and R&D, Lu'an and Huoshan have small populations relative to 
other municipalities and counties in Anhui.  Huoshan County 
Communist Party Member Li Yuwu told DPO and ConOff that 
unemployment is not a major concern in Huoshan and estimates 
that the companies operating in the area have a short- to 
mid-term hiring capacity for 10,000 additional employees.  The 
president of a vocational school in Lu'an said that, even now, 
90 percent of its graduates find work shortly after graduating. 
 
 
 
 
SHANGHAI 00000211  003.2 OF 003 
 
 
Comment: A Model for the Rest of Anhui? 
 
--------------------------------------- 
 
 
 
¶8. (SBU) Huoshan County has been successful at attracting 
investment and making productive use of its local workforce, but 
much of Anhui's population still lives in areas where job 
opportunities are sparse.  While Anhui is actively working to 
develop its infrastructure, promote investment, advance science 
and technology, and cultivate local talent, the lack of job 
opportunities in Anhui, particularly in the northern part of the 
province, will continue to push people eastward in search of 
jobs.  Huoshan, at least in the short-term, is likely to remain 
an exception.  End Comment. 
CAMP