VZCZCXRO6856
RR RUEHCN RUEHGH
DE RUEHGH #0334/01 2080801
ZNR UUUUU ZZH
R 270801Z JUL 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 8166
INFO RUEHBJ/AMEMBASSY BEIJING 2974
RUEHCN/AMCONSUL CHENGDU 2123
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGZ/AMCONSUL GUANGZHOU 0581
RUEHHK/AMCONSUL HONG KONG 2292
RHEHAAA/NSC WASHINGTON DC
RUEHSH/AMCONSUL SHENYANG 2114
RUEHIN/AIT TAIPEI 1913
RUEHGH/AMCONSUL SHANGHAI 8817

UNCLAS SECTION 01 OF 04 SHANGHAI 000334 
 
SIPDIS 
 
STATE ALSO FOR EAP/CM, INR/EAP, INR/B, ECA/A 
USDOC FOR ITA DAS KASOFF, MAC/OCEA - SZYMANSKI 
TREASURY FOR OASIA - WINSHIP 
 
E.O. 12958: N/A 
TAGS: CH ECON ELAB ETRD PGOV SCUL SENV
SUBJECT: NINGBO ECONOMY HURT BY ECONOMIC CRISIS, OFFICIALS REMAIN 
CONFIDENT 
 
¶1.  (U) Summary. On July 13, the Consul General (CG) met with 
officials at Ningbo University (NU), Ningbo Foreign Trade & 
Economic Cooperation Bureau (NFTECB) and Ningbo Municipal 
Development and Reform Commission (NMDRC), to discuss that major 
port city's economy. Local officials insisted that, despite the 
negative impact of the economic crisis, the economic and 
business environment in the city remains strong. Officials were 
confident that with slight adjustments to Ningbo's economic 
structure, and an eye for new opportunities and cooperation, 
Ningbo will continue to remain an economic engine of Zhejiang 
province and East China.  Septel reports CG's discussions with 
Port of Ningbo officials. End summary. 
 
¶2.  (U) Background on Ningbo:  As Ningbo officials invariably 
point out, the city has been an important trading center for at 
least 2,000 years.  Ningbo was one of the first foreign treaty 
ports in the 1800s and is the original home town of many 
successful Shanghai, Hong Kong, and overseas business people, 
including Hong Kong shipping magnates Sir Y.K. Pao and C.H.Tung. 
  The city of 5.6 million people was granted sub-provincial 
administrative status in 1994, giving it the same authority as 
provincial governments for economic administration.   With 
driving time for Shanghai cut from four to two hours by the 2008 
opening of the 36-kilometer-long Hangzhou Bay Bridge, officials 
are counting on drawing more tourists and businesses from 
Ningbo's better-known neighbor. 
 
--------------------------------------------- - 
Ningbo University: Growing, Internationalizing 
--------------------------------------------- - 
 
¶3.  (U) At Ningbo University (NU), the CG was greeted by 
University President NIE Qiuhua, Assistant President WANG 
Wenbin, and NU Foreign Affairs Director CHEN Yujuan. President 
Nie explained that NU is "a young university," founded in 1986 
with support from Ningbo-born overseas Chinese, such as Hong 
Kong's Sir Y.K Pao.  The university has grown rapidly, with 
28,000 students and an increasing number of international 
cooperative programs, including Purdue University, University of 
Wisconsin-Milwaukee, Pittsburgh State University and Western New 
Mexico University. The university is seeking to cooperate with 
foreign universities in the sciences and sending university 
administrators abroad for training. 
 
¶4. (U) Director Chen noted that the university is closely 
integrated with Ningbo's economy; by training students in the 
fields of human resources, technology, and culture, NU is 
upholding its motto of "Serving the City."  Chen remarked that 
60% of Ningbo graduates work in the local economy and that 70% 
of R&D results completed at NU end up being used by local 
companies. 
 
¶5. (U) Chen emphasized that NU is the youngest university in the 
country to offer PhD programs and explained that NU had adopted 
a policy of "giving the choice of education to students".  In a 
partial step away from the traditional Chinese system that 
places students in a major on entrance, all first-year students 
at NU take general courses, although they are still assigned to 
a department. After entering their second year, students in the 
top 15% of the class are able to choose any major regardless of 
department (eg., a student in the math department could choose 
economics as a major). All other students will be able to choose 
any major within their assigned department (eg., a student in 
the math department could choose calculus, but not economics, as 
a major). NU began this program in 2008 and is the only 
university in China to offer this type of flexibility in 
changing majors. 
 
¶6. (U) In answer to a question about unemployment among recent 
graduates, the hosts expressed confidence that NU students had 
not and would not encounter any serious problems.  As we have 
heard from other universities, officials explained that they 
have made efforts to "lower student expectations of high-paying 
jobs" upon graduation, while implementing other policies and 
measures to better prepare students to enter the job market. 
 
-------------------------------------- 
Opportunity within the Economic Crisis 
-------------------------------------- 
 
SHANGHAI 00000334  002 OF 004 
 
 
 
¶7. (U) The CG visited the Ningbo Foreign Trade & Economic 
Cooperation Bureau (NFTECB), meeting Director YU Danhua and 
Section Chief WEI Rencan.  Emphasizing Ningbo's important export 
role, Director Yu, noted that "for every 100 dollars" of goods 
that China exports, "five dollars" of it comes from Ningbo.  Yu 
claimed that 25% of Ningbo's population is involved with import 
and export businesses, and that Chinese hailing from Ningbo are 
conducting business around the world. 
 
¶8. (U) In 2008, Ningbo's total trade volume was USD 67.8 
billion, with  export volume  double that of imports.  Total 
trade volume with the United States reached USD 9.2 billion in 
¶2008.  Ningbo currently has over 12,000 foreign-invested 
enterprises with accumulated FDI of over USD 20 billion.  There 
are 1,456 U.S.-invested projects in Ningbo, including fifteen by 
Fortune-500 companies.  Yu asserted that in the first half of 
2009, the cargo throughput of Ningbo Port exceeded the Port of 
Shanghai's. 
 
¶9. (U) Within Zhejiang province, Ningbo consistently achieves 
high marks.  Foreign investment in Ningbo accounts for 60% of 
the province's total foreign investments.  Ningbo's export 
volume is ranked first in Zhejiang province, accounting for 30% 
of the provincial total, while Ningbo's import volume accounts 
for 25% of Zhejiang's total. Nationally, Ningbo leads the 
country with the most "famous national export brands" for a 
single city (20).  Ningbo currently has 900 enterprises 
operating in 60 foreign countries, including 179 in the United 
States. 
 
¶10. (U) Yu readily admitted that the global financial crisis has 
slowed Ningbo's economy, citing a 17% decline in exports to the 
U.S. and a 32% decline in imports from the U.S. as examples. Yu 
insisted, however, that Ningbo has not been hurt as badly as 
elsewhere in Zhejiang province, and that the global financial 
crisis provided Ningbo an opportunity to improve standards for 
product quality.  Despite the financial crisis, Ningbo has still 
achieved 56% of its FDI target in 2009 through the first half of 
the year. 
 
¶11. (U) The Ningbo Municipal Government is urging local 
enterprises to improve the quality of their products and to use 
innovative technologies in order to emerge from the crisis more 
competitive.  The government has started to offer free training 
programs for importers and exporters in order to strengthen 
Ningbo's business environment, with the goal of training 3,000 
persons per year. Advanced manufacturing and modern service 
industries are the sectors the city hopes to develop in the 
future.  Additionally, Ningbo's low labor and operating costs 
will help the city to facilitate its outsourcing industry, which 
is already ranked eleventh in China based on revenues. 
 
¶12. (U) Ningbo will continue to adhere to its general strategy 
which emphasizes "winning not only in exports, but also in 
foreign investments."  Yu said the quality of foreign 
investments was more important than quantity at this time, 
noting that environmental protection was a concern.  Ningbo has 
started to reject FDI that does not meet the city's 
environmental standards, the first city in China to take such a 
measure. 
 
¶13. (U) When asked, Yu said that IPR cases within the city are 
few and that the city has a "very mature strategy" to deal with 
and settle all cases. 
 
---------------------------- 
Ningbo's Economic Challenges 
---------------------------- 
 
¶14. (U) The CG also visited the Municipal Development and Reform 
Commission (NMDRC), which Vice Director Zhan Rongsheng described 
as a "comprehensive department" responsible for designing and 
planning Ningbo's development strategies.  The key tasks for the 
commission are maintaining economic growth, making adjustments 
to the economic structure of Ningbo, and improving citizens' 
livelihood. 
 
¶15. (U) Zhan outlined several challenges that Ningbo is facing, 
 
SHANGHAI 00000334  003 OF 004 
 
 
all of which were due to the economic crisis.  As external 
demand shrinks, profits are squeezed and incomes become stagnant 
or shrink.  As a result, domestic consumption is unable to grow. 
Small and medium enterprises (SME) face problems of shrinking 
markets, difficulties in attaining new loans and a shortage of 
funds to upgrade technology and equipment. 
 
¶16. (U) Ningbo has received RMB 80 billion from the provincial 
and central governments in stimulus money, which Zhan believed 
would drive up to RMB 300 billion worth of investments in 
Ningbo.  The investments would primarily focus on housing, 
infrastructure, environmental and transportation projects, and 
improving the social safety net. Ningbo received solid support 
from the central government, Zhan said. The central government 
has also accelerated approval of Ningbo's projects and loosened 
monetary policy so banks can provide funding and financing more 
easily. 
 
------------------------------------- 
Balancing Environment and Development 
------------------------------------- 
 
¶17. (U) Asked about environmental protection, Zhan responded 
that priority is given to balancing environmental protection and 
economic development.  However, the key drivers of Ningbo's 
growth (petrochemicals, steel, paper making and shipbuilding), 
are also highly polluting industries.  The NMDRC therefore 
requires these industries to use advanced equipment and 
technology to prevent pollution and to meet carbon dioxide 
emission standards. 
 
¶18. (U)  In a 5-year reform plan (2006-2010), the Ningbo 
government is seeking to reduce negative environmental impact 
through four mechanisms: 1) upgrading technology and equipment, 
2) industrial restructuring and regulating high energy consuming 
projects, 3) developing waste treatment projects and other 
environmentally beneficial construction projects, and 4) 
assessing fees for polluting enterprises. 
 
¶19. (U) Zhan said that Ningbo's fee-based system was copied from 
a cap-and-trade proposal in the United States.  Zhan explained 
that there is a complete monitoring system for water and air 
quality, including both sample monitoring systems and mobile 
units, and that this information is available to the public 
(Note, during our three-day visit the skies were consistently 
blue. According to government data available online, the Air 
Pollution Index in Ningbo generally falls within Class II and 
Class III, which are classified as "Good" and "Slight Pollution" 
respectively, end note). 
 
¶20. (U) Asked to explain how Ningbo deals with providing social 
welfare, Zhan confidently responded that Ningbo is "the best in 
Zhejiang province" in dealing with this critical issue.  He said 
there is a "complete system" that balances pensions, medical 
insurance, unemployment, injury and maternity leave. In 2008, 
the Ningbo government upgraded its pension benefits system to 
expand coverage and raise standards. 
 
¶21. (U) Zhan said that the 2010 World Expo in Shanghai would 
have a positive impact on Ningbo businesses because: local 
companies would inevitably be involved in construction projects 
in Shanghai, local businesses could establish pavilions, at the 
Expo, and there would likely be a spillover of tourists to 
nearby destinations, including Ningbo. 
 
-------------------------------------- 
Sports Exchange with the United States 
-------------------------------------- 
 
¶22. (U) At a dinner hosted by Ningbo Party Secretary BAYIN 
Chaolu with municipal officials on July 13, the Secretary noted 
that Ningbo is eager to promote exchanges with U.S. sports and 
cultural institutions. Given the growing popularity of the NBA 
in China, Ningbo officials specifically expressed an interest in 
cooperating with the NBA. Ningbo is in the planning stages of 
expanding its downtown area towards the east side of the city, 
creating a 17 square kilometer "New Downtown" for sports and 
cultural institutions.  Ningbo officials toured the U.S. in 
April, studying financial systems in New York, sports and 
 
SHANGHAI 00000334  004 OF 004 
 
 
culture in Los Angeles, and visiting Atlanta, building their 
hopes for U.S. partners in these endeavors. 
 
¶23.  (U) The CG was accompanied to Ningbo by State summer intern 
and LES Economic Assistant (note takers). 
CAMP