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C O N F I D E N T I A L SECTION 01 OF 02 SHENYANG 000127 
 
SIPDIS 
 
DEPARTMENT FOR EAP/CM, INR 
 
E.O. 12958: DECL: 07/17/2019 
TAGS: CH ECON PGOV PREF PREL RS
SUBJECT: XI JINPING'S JOURNEY TO THE EAST 
 
Classified By: Consul General Stephen B. Wickman.  Reasons 
1.4(b/d). 
 
¶1.  (C) Summary.  On July 8-10 Chinese Vice-President Xi 
Jinping paid a stealthy and unusual visit to Dalian and 
Yingkou, two key areas of strength and support for First Vice 
Premier Li Keqiang.  The visits were characterized by 
witnesses as "unfriendly."  We also learned that two major 
Liaoning State-Owned Enterprises (SOEs) are under substantial 
pressure to merge with centrally- owned SOEs.  Such mergers 
would serve to dilute Li Keqiang's power base in Liaoning. 
Several contacts intimated that a key Li ally, Lu Lin, may 
have struck a deal with Xi's supporters.  Chongqing Party 
Secretary and princeling Bo Xilai,s supporters, were in 
Dalian coordinating Bo's real estate interests.  Bo's 
supporters appeared to be allied with Li's.  End summary 
 
¶2. (C) According to long-standing, reliable contacts in 
Dalian's port, Vice-president Xi Jinping paid a brief visit 
July 8-10 to Dalian and Yingkou, two of the five points in 
Liaoning's "Five Points-One Line" economic development area. 
The visit was unusual for a number of reasons.  First, no 
local or provincial press coverage was allowed for the 
visits..  Additionally, &in-house8 photographers who 
normally record visits to the Port for display in the 
reception center, had their cameras seized and the memory 
cards removed.  Although the cameras, absent their memory 
cards, were returned, the photographers were told to depart 
the area and not to discuss the events with anyone.  Our 
contacts said one local reporter insisted that he had the 
right to cover events at the port.  In response, Mr. Xi's 
handlers seized the reporter's press credential and destroyed 
it on the spot, telling the reporter that he no longer had 
the right to cover any events whatever. 
¶3.  (C) Contacts present for the Dalian event reported that, 
when Mr. Xi arrived at the meeting room, Xi's staff directed 
everyone but Dalian Port Authority (PDA) Chairman Sun Hong to 
leave.  Again, the departing staff were instructed not to 
discuss the events.  After a private meeting with the PDA 
Chairman, Mr. Xi and his entourage departed the area. 
Contacts told Econoff there were none of the customary 
dinners or niceties.  Mr. Xi left and traveled by motorcade 
to the airport. According to various reports, every street 
between the airport and the Port of Dalian was completely 
closed to normal traffic for both the arrival and departure 
of Mr. Xi's group. Contacts told Econoff it was odd that, at 
least to their knowledge, Xi did not meet with Dalian Party 
Secretary Xia Deren. 
¶4.  (C) One contact in Dalian said that Mr. Xi's visit to 
Yingkou's Bayuquan Development Zone was similarly strange, 
with a no-press, closed-door meeting with the Development 
Zone Director and one with the Chairman of the newly opened 
AnSteel plant.  The source said that he had also heard that 
Xi visited Anshan, but that he had been unable to confirm 
this due to a lack of confidants there... 
SOE Mergers: 
¶5.  (C) Our contacts said that another brewing power struggle 
is the pressure on two high profile Liaoning SOEs to complete 
mergers with nationally-owned SOEs.  BenSteel continues to 
resist a forced marriage with centrally owned AnSteel. 
BenSteel was, until the recent economic downturn, Liaoning's 
most profitable business.  While the merger was announced in 
2005, there is absolutely no cooperation between the 
companies, and Li Keqiang's help has facilitated the 
resistance for several years. 
¶6.  (C) Similarly, Huachen Motors is trying to sidestep a 
renewed takeover attempt by First Auto Works, according to 
our industry contacts.  The company successfully resisted a 
previous attempt near the end of Li's tenure in Shenyang, 
reportedly with direct assistance from Li.  However, company 
officials recently told Econoff the company has been unable 
to secure assistance from "anyone in Beijing," and is taking 
the unusual approach of trying to ward off the merger by 
selling off the only truly valuable asset controlled by the 
group, the publicly traded Brilliance Automotive Company. 
Brilliance will begin talks next week to negotiate sale of a 
controlling interest to an American investor.  We were told 
that Huachen Chairman, Qi Yumin, previously close to Bo Xilai 
and currently a Li ally, will not be involved in the talks, 
primarily to afford him deniability in the event that the 
deal is not well-received should word of the talks leak. 
¶7.  (C) In the midst of these events, our contacts said 
several people close to Bo Xilai are working behind the 
scenes, apparently in concert with those closely tied to Li. 
These people control several major real estate developments 
in Dalian and are major shareholders in the PDA Group.  One 
of them warned Econoff that another contact, Mr. Lu Lin, 
 
SHENYANG 00000127  002 OF 002 
 
 
Director of the Dalian Bonded Port Area, had suddenly become 
"very ambitious" and was making "new friends."  Lu is a 
rapidly rising young leader, who was appointed to his 
position by Li Keqiang.  The implication was that Lu may have 
forged a new relationship with Xi.  Lu's lead assistant, Luan 
Haitao has recently been spending a great deal of time at the 
Central Party School, which our sources said is very close to 
Xi. 
Comment: 
¶8.  (C)  These visits are highly unusual and may be 
indicative of a power struggle between Xi and First 
Vice-premier Li Keqiang.  The "Five Points-One Line" plan is 
Li's personal project and a key source of both his income and 
support.  The PDA Chairman has long been close to Li, as has 
the Director of Bayuquan Development Zone.  PDA is by far the 
most successful company in the region and has been extending 
its influence throughout the region, with major investments 
in Shenyang, Harbin, Dandong and Jinzhou.  That Xi would be 
surreptitiously visiting Li's key supporters for closed door 
meetings that were reportedly unpleasant (one witness 
described the PDA Chairman as looking "like a ghost" after 
the meeting) fits in with other indicators of a developing 
tussle. 
WICKMAN