VZCZCXRO0006
RR RUEHCN RUEHGH
DE RUEHGH #0492/01 3520919
ZNR UUUUU ZZH
R 180919Z DEC 09
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 8438
INFO RUEHBJ/AMEMBASSY BEIJING 3211
RUEHCN/AMCONSUL CHENGDU 2314
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGZ/AMCONSUL GUANGZHOU 0771
RUEHHK/AMCONSUL HONG KONG 2483
RUEHML/AMEMBASSY MANILA 0138
RHEHAAA/NSC WASHINGTON DC
RUEHUL/AMEMBASSY SEOUL 0626
RUEHSH/AMCONSUL SHENYANG 2305
RUEHIN/AIT TAIPEI 2104
RUEHKO/AMEMBASSY TOKYO 0837
RUCPDOC/USDOC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 9102

UNCLAS SECTION 01 OF 03 SHANGHAI 000492 
 
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 SENV PHUM SOCI CH
SUBJECT: PARTY CHIEF TOUTS SHANGHAI'S ECONOMIC "TRANSFORMATION" 
DESPITE HOUSING, EMPLOYMENT WORRIES 
 
REF: A. (A) SHANGHAI 25 
     ¶B. (B) SHANGHAI 148 
     ¶C. (C) SHANGHAI 267 
 
(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) Shanghai Communist Party Secretary Yu Zhengsheng 
announced to a December 5-6 meeting of senior municipal 
officials  that Shanghai would "lead the transformation of 
China's economic development model" in the coming year.  Yu's 
statements appear to reassure local officials of Central 
Government support for Shanghai's development agenda in advance 
of the municipality's upcoming annual People's Congress and 
Political Consultative Conference sessions in January (Ref A), 
at which rapidly rising housing prices -- a strongly felt side 
effect of the city's growth -- and chronic concerns over 
employment for young people entering the workforce will likely 
feature prominently on the agenda.  End Summary. 
 
 
 
PARTY SECRETARY: SHANGHAI TO LEAD CHINA'S CHARGE 
 
--------------------------------------------- --- 
 
 
 
¶2. (SBU) During a two-day meeting held by the Communist Party of 
China Shanghai Standing Committee on December 5-6, Municipal 
Party Secretary Yu Zhengsheng said Shanghai would "lead the 
transformation of China's economic development model." 
According to Yu, changing Shanghai's development model is an 
"important historical task" assigned by the Central Government. 
Rapid economic development, however, should not sacrifice the 
city's environment and resources, he added.  Yu urged government 
officials to consider the development model change as a 
strategic task and to alter their mindsets and work styles 
accordingly to achieve the goal of sustainable development. 
 
 
 
¶3. (SBU) Yu said Shanghai can only achieve sustainable 
development through further reform and opening-up, improving 
people's livelihoods, and innovation.  Key areas for reform and 
innovation include: 1) building an evaluation system for 
economic development; 2) deepening SOE reform and promoting 
property rights reform; 3) deepening housing reform and 
establishing a comprehensive housing security system; 4) doing 
further research on and developing methods to support the 
development of private enterprises and small and medium size 
enterprises; 5) further promoting science and technology 
innovation and high-tech industrialization; 6) promoting new 
countryside building; 7) paying attention to the "floating 
population" of rural migrant working in Shanghai and improving 
public services; and 8) promoting reform of government 
administration. 
 
 
 
MESSAGE TO THE WEST 
 
------------------- 
 
SHANGHAI 00000492  002 OF 003 
 
 
 
 
 
¶4. (SBU) Party Secretary Yu reportedly told visiting Canadian 
Prime Minister Stephen Harper December 5 that Shanghai is making 
efforts to change its economic development model in the face of 
growing environmental and resource pressures.  According to an 
article in the Wenhui Bao, a local Communist Party-controlled 
newspaper, Yu told Harper that Shanghai should open up further 
and learn from countries like Canada through cooperation and 
communication in order to realize Shanghai's "sound and fast" 
(you hao you kuai) development.  Yu said he appreciated Canada's 
participation in the Shanghai 2010 World Expo, which he said 
would showcase sustainable development through its "Better City, 
Better Life" slogan (Refs B and C). 
 
 
 
FEARS OVER HOUSING COSTS ACCOMPANYING "TRANSFORMATION" 
 
--------------------------------------------- --------- 
 
 
 
¶5. (SBU) District-level officials in Shanghai say their policies 
are in line with Party Secretary Yu's emphasis on sustainable 
development.  An official of the Jiading District Foreign 
Economic Commission told PolOff December 17 Jiading is focused 
on economic transformation and environmental protection and has 
stopped allowing high-pollution industries from establishing 
factories in the district, which is located in northwestern 
Shanghai on the border with Jiangsu Province.  Jiading will 
benefit from the opening of a new subway line which will connect 
the center of the district to downtown Shanghai.  The Jiading 
subway stop will be at the center of a "new city" where 800,000 
to one million people will live and work in an energy efficient 
environment, Liu said. 
 
 
 
¶6. (SBU) Shanghai, however, faces a significant challenge with 
rising housing prices, highlighting housing as a major issue to 
address in 2010.  In Jiading, the district official raised 
concerns that attractive new developments, more convenient mass 
transit, and additional investments will force housing prices 
upward in the coming year even when apartment costs "already are 
high."  Municipal Party Secretary Yu's pledge to address worries 
about housing foreshadowed subsequent moves from the Central 
Government to tamp down property speculation and increase the 
supply of affordable housing.  In the days following Yu's 
remarks, the Central Government announced an end to a 
preferential business tax on property sales and a building 
program for low- and middle-income housing.  Several local media 
outlets have highlighted Yu's "deepening housing reform" 
message, as well as a briefing by Premier Wen Jiabao on the 
national property market following the announcement of measures 
to deal with galloping real estate prices. 
 
 
 
¶7. (SBU) In some ways, the spotlight is on Shanghai as a prime 
example of real estate developers pricing housing out of the 
reach of ordinary families.  The setting of the popular, but now 
banned, TV series, "Snail House" (Wo Ju, which also has the 
English name "Dwelling Narrowness") is modeled on Shanghai -- 
the series depicts "house slaves" struggling to pay surging 
mortgage costs.  The Shanghai Audit Bureau reported in August 
that Shanghai had at that time fulfilled less than 25 percent of 
its affordable housing construction goals for the year.  In 
response, the Shanghai Municipal Government is starting to roll 
out measures, including a December 10 announcement of a trial 
 
SHANGHAI 00000492  003 OF 003 
 
 
project to construct "economic" or "subsidized" housing. 
 
 
 
EMPLOYMENT STILL A TOP CONCERN, TOO 
 
----------------------------------- 
 
 
 
¶8. (SBU) Housing will not be the only socioeconomic concern at 
the "Two Meetings" as the hot topic of the 2009 legislative 
session (Ref A) -- employment for graduates -- remains a serious 
problem.  A December 18 front page story in the Wenhui Bao 
reported on the employment problem, noting that Shanghai would 
graduate 10,000 more high school and university students in 2010 
than a year ago, adding pressure to the tight job market. 
 
 
 
COMMENT 
 
------- 
 
 
 
¶9. (SBU) As Shanghai prepares for the coming year and the 
Shanghai 2010 World Expo, municipal government leaders are 
emphasizing the importance of economic "transformation."  Yu's 
fairly assertive comments about Shanghai's leading role, which 
were covered widely in local Chinese media but not in the 
English language press -- seem designed to reassure local 
officials that the Central leadership -- to which Yu, a 
Politburo member, technically belongs -- will support the 
municipality's development plans.  The annual "Two Meetings" of 
the Shanghai Municipal People's Congress and Shanghai Committee 
of the Chinese People's Political Consultative Conference 
(CPPCC) in January will most likely endorse an ambitious 
development agenda that, while more oriented toward 
environmental sustainability, could exacerbate existing 
challenges such as rising housing prices and youth employment. 
CAMP