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UNCLAS SECTION 01 OF 02 GUANGZHOU 000346 
 
SIPDIS 
 
STATE FOR H, EAP/CM, INR/EAP, DRL 
 
E.O. 12958: N/A 
TAGS: ECON PGOV CH
SUBJECT: Rep. Larsen Meeting with GD Party Secretary Wang Yang: 
Though Difficult, Economic Crisis also an Opportunity for Guangdong 
 
¶1.  (U) SUMMARY: Guangdong remains highly dependent on exports, so 
higher savings rates in the United States could adversely affect the 
province's economy, Guangdong Party Secretary Wang Yang told 
Congressman Rick Larsen in a May 26 meeting.  His plan for surviving 
the current economic downturn: continued emphasis on traditional 
export markets and the search for new ones, improved product 
quality, expansion into China's domestic market and a shift from 
manufacturing to more high-tech industries.  Congressman Larsen 
reviewed for Wang measures taken by Congress to stimulate the U.S. 
economy.  Wang also pointed out that Guangdong provides migrant 
workers left unemployed by the downturn free transportation to their 
hometown; there they are expected to farm or rely on savings and the 
largess of family to weather the economic storm.  END SUMMARY. 
 
Americans' Savings Rate Could Still Hurt Guangdong 
----------------------- -------------------------- 
 
¶2.  (U) Guangdong Province's economy remains very much 
export-oriented, Guangdong Party Secretary and Politburo Member Wang 
Yang told Congressman Rick Larsen at their meeting on May 26.  Wang 
expressed concern about economic conditions in the United States, 
noting -- as Nobel Prize-winning economist Paul Krugman had told him 
during a visit to Guangzhou just two weeks earlier -- that American 
consumers might alter their economic strategies and prefer saving 
rather than spending in the future.  Wang worried that this would 
lead to further complications in Guangdong's export economy. 
According to Wang, 2008 trade with the United States accounted for 
40 percent of the province's total.  Due to the global financial 
crisis, Guangdong saw a 21.7 percent decline in foreign trade in the 
first four months of 2009, with trade between the province and the 
United States falling by 17 percent. 
 
¶3.  (U) Congressman Larsen told Wang that the economic stimulus deal 
of USD 787 billion passed by Congress was aimed at rescuing the U.S. 
economy.  He also said that some of America's consumer habits had 
already begun to change, noting that the current savings rate in 
America was 4.2 percent, which was very high for Americans and 
indicated a shift from spending to saving. 
 
Five Steps to a Better Economy 
------------------------------ 
 
¶4.  (U) Though Wang acknowledged that the current economic downturn 
had a negative effect on Guangdong's economy, he also pointed out 
that the recession was a good opportunity for local enterprises to 
confront pre-existing problems and make needed changes.  In the long 
term, said Wang, this would be a turning point for the development 
of Guangdong's economic structure; the province could transition 
from labor-intensive to high-value-added industries.  Larsen 
commented on the difficult decisions Guangdong had to make in order 
to realign its economy, comparing this short-term pain/long-term 
gain to removing an adhesive bandage: the quicker, the better. 
 
¶5.  (U) Wang enumerated five measures taken by Guangdong in response 
to changing world economic conditions, claiming that they had helped 
Guangdong suffer less of a drop in its foreign trade than the 
national average. 
 
-- Guangdong is taking steps to maintain its competitive edge in its 
traditional export markets, including the United States and Europe. 
Wang was confident that China's textile products, garments, shoes 
and suitcases -- to name a few -- were still competitive in 
international markets. 
 
-- Guangdong is exploring new markets such as the Middle East, 
Russia, Southeast Asia, and Central Asia.  In the first four months 
of 2009, trade between Guangdong and Southeast Asia showed minor 
growth, which Wang called "encouraging." 
 
-- Guangdong is making every effort to improve the quality of its 
products. 
 
-- Guangdong seeks to increase its presence in China's domestic 
market.  Wang recounted how, several days prior to his meeting with 
Congressman Larsen, he and Guangdong Governor Huang Huahua led a 
delegation to neighboring Guangxi and Hunan Provinces to promote 
Guangdong products. 
 
GUANGZHOU 00000346  002 OF 002 
 
 
 
-- Guangdong must accelerate the upgrade of its industrial 
structure.  Wang said the provincial government now encouraged local 
enterprises to improve innovation and expand research and 
development and logistics and services.  In addition, attracting 
high-tech, new energy, biotech and bio-pharmaceutical industries was 
a high priority. 
 
If They're Out of Work, We Give Them a Free Ride Home 
----------------------- ----------------------------- 
 
¶6.  (U) Central to Guangdong's strategy to weather the rise in 
unemployment is the return of out-of-work migrants to their 
villages.  In response to Congressman Larsen's interest in the 
impact of the recession on labor, Wang said that many migrant 
workers still had land in their hometown and could return home to 
farm; workers could also live on their savings or the income of 
family members while between jobs.  For jobless people who could not 
afford to go home, the policy was for local governments to provide 
free shelter and food for ten days and then to arrange free 
transportation home. 
 
¶7.  (U) Wang appeared confident that Guangdong's approach to the 
unemployment issue would minimize any serious unrest, saying that, 
even with the closure of many factories, "Guangdong will be able to 
maintain social stability despite the higher unemployment rate 
caused by the economic recession." 
 
¶8.  (U) Representative Larsen's delegation has cleared this cable. 
 
GOLDBERG