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R 050930Z JUN 09
FM AMCONSUL GUANGZHOU
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RUCPDOC/DEPT OF COMMERCE WASHDC
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RUEKJCS/DIA WASHDC 0166

UNCLAS SECTION 01 OF 02 GUANGZHOU 000354 
 
SIPDIS 
 
STATE FOR H, EAP/CM, INR/EAP 
 
E.O. 12958: N/A 
TAGS: ECON PGOV CH
SUBJECT: Rep. Larsen Meeting with Guangzhou Mayor: Ten Percent GDP 
Growth the Target, but Hard to Hit 
 
¶1. SUMMARY: The global economic crisis will make it difficult for 
Guangzhou to achieve its goal of 10 percent GDP growth this year, 
according to Mayor Zhang Guangming in a May 26 meeting with 
Congressman Larsen.  The municipal government hopes that growth in 
the services sector will offset slowed growth in manufacturing.  The 
Guangzhou Government officially boasts of low unemployment rates, 
but the statistics likely do not account for significant job losses 
among migrant workers.  END SUMMARY. 
 
Front Row and Front Lines 
------------------------- 
 
¶2.  Guangzhou Mayor Zhang Guangming told Congressman Larsen that he 
had had a front row view of the spreading subprime crisis in 
September 2008 while attending training at Stanford University. 
Zhang claimed to have predicted the negative impact of the subprime 
crisis on Guangzhou's economy, saying that he subsequently called 
for local government agencies to take measures to prepare for the 
economic recession as soon as he returned to Guangzhou.  He proudly 
stated that Guangzhou had taken action earlier than both the Central 
Government and the Guangdong Provincial Government. 
 
¶3.  Guangzhou adopted measures to deal with the recession in 
November 2008, Zhang told Larsen.  This included an economic 
stimulus package focusing on infrastructure development investment 
such as the construction of highways, harbors, airports, and subway 
lines.  Local government also took the initiative to provide small 
grants to small and medium-sized enterprises (SMEs) and to reduce 
local taxes and fees to ease the financial burden for enterprises. 
Mayor Zhang claimed that these measures had significantly helped 
enterprises continue operation without large-scale layoffs.  In 
addition, the Guangzhou Government streamlined administrative 
procedures to improve essential services to enterprises.   Zhang 
also said he viewed the 2010 Asian Games, to be hosted in Guangzhou, 
as an opportunity to further develop the economy and expand 
Guangzhou's influence in Asia. 
 
Services Key to Hitting Short-term Targets 
------------------------------------------ 
 
¶4.  Although many cities would be delighted with Guangzhou's 8.1 
percent GDP growth in the first four months of 2009, it was 
nonetheless the city's lowest in 30 years.  The municipal government 
is now gambling that service industry development can mitigate the 
losses in manufacturing (which Zhang referred to as "secondary 
industries").  Mayor Zhang said the service industry normally 
contributes 60 percent of GDP, and from January through April 2009, 
Guangzhou's service industry realized 11.7 percent growth in output. 
 If that continues and the output of manufacturing achieves 6 
percent growth, Guangzhou should be able to top 10 percent GDP 
growth this year, said Zhang. 
 
¶5.  To ensure 6 percent growth in manufacturing, the Guangzhou 
Government will focus on the automobile, information technology and 
petrochemical industries.  According to Zhang, these three 
industries contribute approximately 39 percent of the city's GDP. 
Zhang said that Guangzhou's automobile manufacturing industry showed 
positive signs with 9.4 percent growth during the first four months 
of 2009.  Meanwhile, the government will also encourage local 
export-oriented enterprises to explore new markets, such as 
Southeast Asia and Africa as well as the Chinese domestic market 
(this sounds very much like Party Secretary Wang Yang's vision for 
Guangdong's growth reported septel).  Zhang said that Guangzhou's 
Bureau of Foreign Trade and Economic Cooperation had recently 
organized several seminars to assist local enterprises in this 
regard. 
 
Unemployment not a Problem (Officially) 
--------------------------------------- 
 
¶6.  Mayor Zhang said the unemployment problem was under control, 
claiming that municipal government policies had reduced the April 
2009 unemployment rate to only 2.28 percent -- down from the 
previous month.  (Comment: Zhang's unemployment numbers almost 
certainly include only Guangzhou's officially registered population, 
and do not account for the millions of migrant workers -- a 
considerable number still searching for jobs -- within Guangzhou's 
city boundaries.  End comment.)  Using his methodology, Zhang said 
 
GUANGZHOU 00000354  002 OF 002 
 
 
the Guangzhou Municipal Government was confident that it could limit 
Guangzhou's 2009 unemployment rate to 3.6 percent. 
 
¶7.  In his extensive briefing on the city and its economy, Zhang 
pointed out that its GDP of RMB 821 billion (approximately USD 12 
billion) accounted for 23 percent of the province's GDP in 2008. 
With a population of 11.2 million as well, Guangzhou bills itself as 
the core city in the Pearl River Delta. 
 
¶8.  The delegation did not have an opportunity to review this cable 
before transmission. 
 
GOLDBERG