VZCZCXRO1916
RR RUEHCN RUEHGH
DE RUEHGH #0436/01 3010232
ZNR UUUUU ZZH
R 280232Z OCT 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 8345
INFO RUEHBJ/AMEMBASSY BEIJING 3131
RUEHCN/AMCONSUL CHENGDU 2254
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGZ/AMCONSUL GUANGZHOU 0711
RUEHHK/AMCONSUL HONG KONG 2419
RUEHML/AMEMBASSY MANILA 0114
RHEHAAA/NSC WASHINGTON DC
RUEHUL/AMEMBASSY SEOUL 0586
RUEHSH/AMCONSUL SHENYANG 2245
RUEHIN/AIT TAIPEI 2046
RUEHKO/AMEMBASSY TOKYO 0797
RUEHGH/AMCONSUL SHANGHAI 9001

UNCLAS SECTION 01 OF 03 SHANGHAI 000436 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR OASIA/INA DOHNER/HAARSAGER/WINSHIP 
DEPT FOR EAP/CM, INR 
USDOC PASS BUREAU OF ECONOMIC ANALYSIS 
USDOC FOR ITA DAS KASOFF, MELCHER, OCEA 
STATE PASS USTR FOR STRATFORD, WINTER, KATZ 
NSC FOR LOI 
MANILA FOR USADB 
 
E.O. 12958: N/A 
TAGS: ECON PGOV EFIN ETRD ELAB PREL CH
SUBJECT: ANHUI'S 2009 ECONOMIC ROLLER COASTER RIDE 
 
REF: A. (A) 08 SHANGHAI 449 
     ¶B. (B) SHANGHAI 104 
     ¶C. (C) SHANGHAI 96 
     ¶D. (D) SHANGHAI 210 
     ¶E. (E) SHANGHAI 209 
     ¶F. (F) SHANGHAI 211 
 
(U) This cable is sensitive but unclassified and for official 
use only.  Not for distribution outside of USG channels or via 
the internet. 
 
 
 
SUMMARY 
 
------- 
 
 
 
¶1. (SBU) Anhui Province boasted robust economic growth through 
the first three quarters of 2009 despite concern earlier in the 
year of a slowdown.  Much of the province's growth is due to the 
Central Government's economic stimulus measures, including 
investment in infrastructure.  Most of Anhui's migrant workers 
have been able to find jobs in coastal China during the year, 
while others have launched new businesses at home.  End Summary. 
 
 
 
TRAVEL TO ANHUI 
 
--------------- 
 
 
 
¶2. (SBU) Deputy Principal Officer (DPO), PolOff, and Pol 
Assistant visited Hefei, Anhui's provincial capital, on October 
¶22.  They met with officials from the Provincial Development and 
Reform Commission and Provincial Foreign Affairs Office, as well 
as professors at Anhui University's Economic Institute. 
 
 
 
GROWTH REBOUNDS IN FIRST HALF 
 
----------------------------- 
 
 
 
¶3. (SBU) Anhui's provincial GDP increased 11.8 percent in the 
first half of 2009 and 12.9 percent through the first three 
quarters of the year.  Anhui's rapid GDP growth through the 
first half of the year was the seventh fastest pace among 
China's provinces, said Anhui Provincial Development and Reform 
Commission Deputy Director General Wu Jinsong.  The province's 
industrial growth has rebounded, and Wu boasted that Anhui's 
year-on-year industrial growth rate for the month of September 
ranked first in China.  The current rate of economic growth is 
"better than expected," Wu stated. 
 
 
 
¶4. (SBU) Anhui's resurgence follows a period of uncertainty 
during the winter of 2009-10.  Wu admitted the provincial 
government was in a "panic mode" between October 2008 and March 
2009 when it was not yet clear if the province would emerge 
unscathed from the global financial crisis and China's own 
economic downturn, especially after the price of coal and steel 
(both produced in Anhui) dropped dramatically in November 2008. 
Although officials (including Wu) initially had expressed 
optimism in October 2008 that Anhui's low level of dependence on 
exports would help the province deal with the crisis (Ref A), 
there was considerable concern in late February that Anhui would 
 
SHANGHAI 00000436  002 OF 003 
 
 
face significant economic challenges in 2009 due to secondary 
effects on the steel and auto sectors resulting from declining 
exports (Refs B, C). 
 
 
 
¶5. (SBU) By April, high-level provincial officials had begun to 
express cautious optimism about Anhui's prospects.  At the 4th 
Central China Expo in Hefei on April 25-26, Anhui provincial 
government officials said they believed the province was 
recovering, and Anhui would focus on improving infrastructure to 
build a more attractive investment environment (Ref D).  In 
addition, Governor Wang Sanyun told the Consul General during an 
early April visit the Central Government's economic stimulus 
measures would provide employment and expand the transportation 
network in the province (Ref E). 
 
 
 
ECONOMIC STIMULUS IN ANHUI 
 
-------------------------- 
 
 
 
¶6. (SBU) Anhui's recent provincial investment statistics reflect 
the success of the Central Government's economic stimulus 
measures.  Anhui relied heavily on fixed asset investment (FAI) 
to spark its recent growth, as FAI grew by 32.7 percent 
year-on-year during the first half of 2009.  Wu credited the 
Central Government's economic stimulus policy for Anhui's 
resurgence.  For the first nine months of 2009, the growth rate 
for bank loans in Anhui was 34.7 percent year-on-year under the 
Central Government's less restrictive monetary policy.  Of that 
increase, Wu said, 60 percent of the loans supported 
infrastructure and investment projects in the province. 
 
 
 
¶7. (SBU) Rail infrastructure has been a key component of Anhui's 
FAI.  Wu pointed out that the Beijing-Shanghai high-speed 
railway soon will pass through eastern Anhui, and the province 
also is building a high-speed rail from Hefei to Bengbu.  A new 
Liu'an-Fuyang rail line will facilitate coal transportation. 
The provincial government plans to build an inter-city railway 
to connect Ma'anshan, Wuhu, and Tongling with Nanjing and 
Shanghai.  The Beijing-Fujian high-speed railway also will cross 
Anhui, Wu stated.  At the same time, Hefei is constructing a new 
international airport on the western side of the city, which is 
due to be completed in 2012.  The province continues to expand 
its highway network, Wu said. 
 
 
 
CONTRIBUTIONS BY MIGRANT WORKERS 
 
-------------------------------- 
 
 
 
¶8. (SBU) Previous concerns about Anhui's migrant workers finding 
new jobs in coastal areas during the economic downturn appear to 
have lessened in recent months.  With close to one-sixth of 
Anhui's population of 66 million working outside the province 
(many in the Yangtze River Delta region), the provincial 
government was relieved to discover most workers had found jobs 
since the late January Lunar New Year holiday, Wu said, 
reporting 98 percent of Anhui migrant workers successfully found 
employment in YRD cities.  Zhang Deyuan, a professor 
specializing in rural issues at Anhui University Economic 
Institute, acknowledged that Anhui's migrant worker situation is 
"better than expected," as nearly all of Anhui's workers below 
 
SHANGHAI 00000436  003 OF 003 
 
 
the age of 40 had found new jobs while some older than 40 had 
chosen to remain in the countryside.  Zhang noted that the older 
migrants who had stayed behind had had experience as farmers 
while young, while the younger migrants often had not worked the 
fields as children and had no tolerance for that possibility now. 
 
 
 
¶9. (SBU) Wu and Zhang both also claimed an increasing number of 
migrant workers are returning to Anhui to use technical 
knowledge gained in the YRD to establish new businesses in their 
home province.  Wu said 150 new industrial parks have been set 
up in the province to assist migrant workers who want to set up 
new businesses.  (Note: See Ref B for information on one 
development zone outside Fuyang in northwestern Anhui.  End 
Note.)  An October 22 People's Daily (Renmin Ribao) featured 
Hefei's industrial innovation efforts on the front page, 
crediting municipal government investments in new businesses for 
fueling Hefei's 16 percent GDP growth through the first half of 
the year. 
 
 
 
COMMENT: AROUND THE NEXT BEND? 
 
------------------------------ 
 
 
 
¶10. (SBU) CongenOffs have traveled frequently to Anhui in the 
past year and heard a different story each time about the 
economic situation.  From outright optimism about weathering the 
storm in October 2008 to serious concerns in February 2009 to 
cautious optimism in April 2009 to a current sense of 
confidence, Anhui's economy has experienced a roller coaster 
ride of ups and downs.  Despite the recovery, Anhui still faces 
a significant challenge in moving towards a more 
consumption-driven economy.  With an emphasis on fixed asset 
investment and a weak social safety net, the province may be 
able to produce eye-popping GDP growth statistics but may not be 
adequately addressing long-term concerns.  Nevertheless, Anhui's 
ability to maintain economic growth (and social stability) 
through a difficult period likely is a positive sign for the 
Central Government, which implemented the economic stimulus 
package to pave the way in Anhui. 
CAMP