VZCZCXRO0791
RR RUEHGH RUEHVC
DE RUEHCN #0237/01 3000510
ZNR UUUUU ZZH
R 270510Z OCT 09
FM AMCONSUL CHENGDU
TO RUEHC/SECSTATE WASHDC 3477
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEHCN/AMCONSUL CHENGDU 4171

UNCLAS SECTION 01 OF 04 CHENGDU 000237 
 
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E.O. 12958: N/A 
TAGS: ECON ETRD EINV EFIN ENRG EMIN PGOV PREL CH
SUBJECT: WEN JIABAO ON DEVELOPING CHINA'S WESTERN PROVINCES: 10 YEARS 
OF SUCCESS, AND FUTURE PLANS FOR EXPANDED REGIONAL TRADE AND 
FINANCIAL COOPERATION 
 
REF: CHENGDU 222 
 
CHENGDU 00000237  001.2 OF 004 
 
 
¶1. (U) Summary and Comment.  Over the last 10 years, China's 
central government has made huge transfer payments and 
infrastructure investments that have helped 12 western provinces 
grow faster than its already booming coastal provinces, Premier 
Wen Jiabao said in an October 16 speech in Chengdu.  Beijing 
plans to increase fiscal transfers and preferential tax and 
other policies in a new 10-year western China development plan. 
From 2000-2008, GDP in western China grew annually at 11.7 
percent, and fixed capital investment rose annually by 22.9 
percent; in the first half of 2009, GDP grew 11.8 percent, and 
urban fixed asset investment surged by 42.1 percent - all 
figures higher than the national averages.  Much of this 
investment led to large improvements in western China's road, 
rail, and airport networks, gas pipelines, and electricity grid. 
 
 
 
 
¶2. (U) Wen also made proposals to deepen cooperation with the 
"14 countries bordering western China" in the areas of: 
 
 
 
-- energy development and conservation, e.g. developing coal-bed 
gas; 
 
-- international transportation arteries such as a new "Eurasian 
land bridge"; 
 
-- timely completion of the China-ASEAN free trade zone; 
 
-- deepened economic ties with central Asia and Russia through 
the Shanghai Cooperation Organization (SCO), and with the 
"Lancang-Mekong River" sub-region of southeast Asia; 
 
-- strengthened regional financial cooperation, including: the 
establishment of a China-ASEAN Investment Cooperation Fund, 
offering credit to SCO member-countries, and participation in 
building an East Asia Foreign Currency Reserve. 
 
 
 
¶3. (SBU) Comment: The phenomenal growth of western China, and in 
particular that of Chengdu's consular district in southwest 
China, is an important mega-trend.  A second mega-trend apparent 
in President Wen Jiabao's speech is that China is increasingly 
emphasizing economic and infrastructure ties with its neighbors 
to the north, west, and south, not just its traditional partners 
in northeast Asia and the West.  Bilateral trade with Southeast 
Asia, for example, has multiplied several times over the past 
decade.  We encourage U.S. businesspersons and policy makers, 
who all too often just visit China's prosperous coastal areas, 
to come and learn about these growing and important inland 
markets.  End Summary and Comment. 
 
 
 
Introduction: 
 
Western Trade Fair Part of Great Western Development Strategy 
 
--------------------------------------------- ---------------- 
 
 
 
¶4. (U) In a keynote speech at the opening of the Western Trade 
Fair October 16 in Chengdu, Premier Wen Jiabao provided a useful 
overview of the last 10 years of efforts by China's central 
government to spur growth in its poorer, western provinces in 
order to close the gap with booming coastal provinces.  The 
Fair, whose opening day was attended by Consul General and 
Senior Commercial Officer, was started in 2000, and is 
co-sponsored by the central government and 12 western provinces, 
autonomous regions and municipalities running from Yunnan 
Province in the south, to Inner Mongolia in the north.  The fair 
is also part of the central government's Great Western 
Development Strategy --adopted by the Chinese Government in 
January 2000 to help under underdeveloped western regions. 
 
 
 
CHENGDU 00000237  002.2 OF 004 
 
 
 
¶5. (U) The following points are all from Premier Wen Jiabao's 
speech. 
 
 
 
Western China's Growth: 
 
Heavy Investment, Large Transfers By Central Government 
 
--------------------------------------------- ---------- 
 
 
 
¶6. (U) In the last 10 years, the Central Government financed 
more than 3.5 trillion RMB (512.4 billion USD) in transfer 
payments and special subsidies to support development of western 
China, and distributed more than 730 billion RMB for 
infrastructure investment.  Since last year, in response to the 
global financial crisis and an earthquake (which affected the 
three western provinces of Sichuan, Yunnan, and Shaanxi), over 
43 percent of the central government's fiscal stimulus package 
has been spent in western China.  (Note: This year alone, China 
plans to invest 468.9 billion RMB in projects to develop western 
China, the National Development and Reform Commission said 
recently.  End Note.) 
 
 
 
¶7. (U) January 1, 2010 will mark the 10th anniversary of the 
Great Western Development Strategy; the Chinese Government is 
now studying a follow-on policy to promote the region's 
development over the next 10 years.  The Government recently 
published "An Opinion Regarding Responding to the Global 
Financial Crisis and Maintaining Western China's Economic 
Stability and Relatively Rapid Economic Growth."  The Government 
plans a step-by-step increase in the scale of fiscal transfer 
payments to western China, and will continue to give it 
preferential treatment in terms of expanding domestic demand and 
increasing investment, as well as favorable fiscal policies 
regarding taxation, finance, land, environment, and 
manufacturing. 
 
 
 
Economic Growth Since 2000: 
 
Numbers Even More Impressive Than National Averages 
 
--------------------------------------------- ------ 
 
 
 
¶8. (U) From 2000 to 2008, GDP in western China jumped from 1.66 
trillion RMB to 5.82 trillion RMB, i.e. an annual average growth 
rate of 11.7 percent; local tax revenues increased from 112.7 
billion RMB to 515.9 billion RMB, an annual increase of 19.6 
percent; fixed capital investment increased from 611.1 billion 
RMB to 3.58 trillion RMB, an annual increase of 22.9 percent - 
all three annual growth indicators exceeded their national 
averages. 
 
 
 
¶9. (U) From 1999 to 2008, in western China, urban per capita 
disposable income (chengzhen jumin renjun kezhipei shouru) and 
farmer per capita net income (nongmin renjun chunshouru) 
increased, respectively, by 105 and 74 percent.  9.54 million 
rural residents were lifted out of poverty, leading to a 1.6 
percent drop in the poverty incidence rate. 
 
 
 
¶10. (U) In the first half of 2009, gross domestic product in the 
western regions grew by 11.8 percent, urban fixed asset 
investment (chengzhen guding zichang touzi) grew by 42.1 
percent, local fiscal revenues grew by 12.1 percent, and retail 
sales of consumer goods rose by 19 percent - all of these 
figures were greater than the national average. 
 
 
 
CHENGDU 00000237  003.2 OF 004 
 
 
 
Greatly Expanded Infrastructure and Private Investment 
 
--------------------------------------------- --------- 
 
 
 
¶11. (U) During the last 10 years, in western China: roads 
increased by 888,000 kilometers of which 13,900 were highways; 
new rail lines in operation increased by more than 8,000 km; 
there are now more than 79 civilian airports representing 49.4 
percent of the national total.  Major infrastructure projects 
completed or being built include the Qinghai-Tibet railroad, the 
East-West gas pipeline, and the East-West electricity grid 
connection. 
 
 
 
¶12. (U) (In the 30 years) since China's reform and opening 
policy began, 200,000 state-owned enterprises and private 
companies have invested 2.2 trillion RMB in western China; in 
2008, total foreign investment in western China was 6.62 billion 
USD, total trade (exports and imports) was 106.8 billion USD. 
 
 
 
Four Proposals for Cooperation with Neighboring Countries 
 
--------------------------------------------- ------------ 
 
 
 
¶13. (U) Premier Wen Jiabao also presented a four-point proposal 
to deepen future cooperation with the "14 countries bordering 
western China": 
 
 
 
1) Energy and Transportation:  Western China has strong 
complementarity with neighboring counties.  China welcomes 
international energy companies to enter western China and help 
the region improve its energy efficiency, prevent and control 
the damage from coal mining, and develop coal-bed gas.  China 
will build large international transportation arteries in its 
southwest and northwest border areas, and expects to reach a 
consensus with the relevant foreign governments on building a 
new "Eurasian land bridge."  (Comment: Premier Wen Jiabao is 
likely referring to, for example, building more modern rail and 
road links from China through Central Asia to Europe (See 
reftel).  End Comment.) 
 
 
 
2) Trade and Investment: Western China already has a network of 
over 100 ports of every kind (air, road, rail, river) near 
border areas.  The Chinese government will support western 
China's efforts to expand border trade, promote "international 
cooperation centers," construct development zones in border 
areas, and strengthen cooperation in the construction of 
infrastructure.  In terms of managing the trade in goods, it 
will simplify and loosen procedures concerning quotas, permits, 
and personnel transfers.   Western China and its neighbors have 
rich tourism resources and could work jointly to develop 
international tourism and a tourism corridor of ancient world 
civilization. 
 
 
 
3) Energy Conservation and Environmental Cooperation: The 
Chinese Government will support western China's cooperation with 
neighboring countries on energy conservation, alternative and 
renewable energy, pollution prevention, ecological restoration, 
water and soil conservation, and disaster prevention. 
 
 
 
4) Regional and International Cooperation:  The Chinese 
Government hopes for: 
 
 
 
 
CHENGDU 00000237  004.2 OF 004 
 
 
-- timely completion of a China-ASEAN free trade zone; 
 
-- further economic and trade cooperation with countries of the 
Shanghai Cooperation Organization (i.e., China, Russia, 
Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan); 
 
-- deepened cooperation in the "Lancang-Mekong River" 
sub-region; 
 
-- success of the ASEAN International Expo to be held in Nanning 
(Guangxi Province), Western Trade Fair, and the China-South Asia 
Commercial Forum; 
 
-- strengthened regional financial cooperation, including: the 
establishment of a China-ASEAN Investment Cooperation Fund, 
offering credit to SCO member-countries, and participation in 
building an East Asia Foreign Currency Reserve (dongya quyu 
waihui chubeiku). 
BROWN