VZCZCXRO4587
RR RUEHCN RUEHGH
DE RUEHBJ #0042/01 0110954
ZNR UUUUU ZZH
R 110954Z JAN 10
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 7554
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 000042 
 
SIPDIS 
 
SENSITIVE 
 
TREASURY FOR OIA CWINSHIP AND TTYANG 
STATE PASS USTR FOR STRATFORD AND KEMP 
 
E.O. 12958: N/A 
TAGS: ECON EIND EFIN ETRD SENV CH
SUBJECT: CHINA: MIIT SAYS INDUSTRIAL POLICY TO REMAIN UNCHANGED; 
STATE-OWNED FIRMS ESSENTIAL TO ECONOMY 
 
Ref:  A) 09 BEIJING   000151 
  B) 09 BEIJING   001339 
  C) 09 BEIJING   003115 
 
¶1. (SBU) SUMMARY: In a January 7 meeting, Ministry of Industry and 
Information Technology (MIIT), Department of Industrial Policy 
Deputy Director General Hou Shiguo told Economic Minister Counselor 
China treated State Owned Enterprises (SOEs) and private companies 
equally, but indicated that, due to their size, SOEs were essential 
to the economy.  There would likely be no major changes in 
industrial or privatization policies in 2010 or in the next 
five-year plan, and MIIT would continue to focus on reducing 
pollution and overcapacity in industries like cement, steel, and 
aluminum.  Hou also predicted continued positive auto industry 
growth in 2010.  Department of Industrial Policy Division Chief Miao 
Changxing, who is responsible for provincial coordination, 
acknowledged difficulties in coordinating national industrial 
policies with provincial and local governments, but claimed "in the 
end, our interests are one and the same."  END SUMMARY. 
 
MIIT 2010 priorities: energy savings, emissions reduction 
--------------------------------------------- ----- 
 
¶2. (SBU) Department of Industrial Policy Vice Director Hou Shiguo 
told Econ MinCouns January 7, MIIT's industrial policy priorities in 
2010 would remain unchanged from the year before: increased R&D, 
energy savings, and factory pollution reduction.  Hou also explained 
that MIIT was founded in March 2008 and takes its authorities from 
four ministries and bureaus, most prominently the Ministry of 
Information Industry and the State Council's Informatization Office. 
 MIIT was responsible for the formulation of industrial and 
information technology policy, including communicating with the 
public about these issues.  He noted that MIIT was increasingly 
concerned about developing a better environment for the development 
of Small and Medium Size Enterprises (SMEs), as they make up a large 
portion of the Chinese economy.  Worker safety would also remain a 
priority, said Hou, but did not comment in detail about the 
implementation of energy savings, emissions reduction, or increased 
efficiency. 
 
No Special Treatment for SOE National Champions 
--------------------------------------------- -- 
 
¶3. (SBU) Promoting an equal playing field, with no special treatment 
for SOEs, was one of the most important philosophies underpinning 
China's industrial policy, Hou claimed.  When pressed about stimulus 
money going overwhelmingly to SOEs and perceptions of preferential 
treatment in stock listings, Hou emphasized that SOEs and private 
competitors were on equal terms: "Major SOEs, like Sinopec, CNOOC, 
they have already won.  They have survived in a competitive market 
and come out stronger.  When the criteria for support or qualifying 
for stimulus benefits are named, SOEs are often better able to meet 
the criteria."  When Econ MinCouns asked about further privatization 
of SOEs, Hou responded that, although privatization remained the 
purview of the State-owned Assets Supervision and Administration 
Commission (SASAC), it was unlikely the 12th five-year plan would 
include any new initiatives for further SOE privatization.  Sectors 
that would definitely not see more privatization included the 
telecommunications, television broadcasting and military hardware 
sectors, Hou claimed.  There might, however, be some reduction in 
SOE numbers through mergers and acquisitions, but SOEs would 
continue to play a large role in contributing to national GDP in key 
sectors. 
 
Balancing Provincial Interests 
----------------------------- 
 
¶4. (SBU) Hou noted that MIIT would continue to use policy tools to 
address systemic challenges of industrial restructuring, 
overcapacity and polluting industries.  Balancing the interests of 
the central government, provincial and local governments and private 
industry was a continual challenge, Miao admitted.  To address these 
competing interests, MIIT would continue to work together with local 
government counterparts to implement overarching national goals, 
Miao said.  Further, to address the regional imbalance in wealth 
distribution, the government would have to provide financial support 
to encourage the closure of high-polluting factories. 
 
Rising Vehicle Production/Demand: But for How Long? 
--------------------------------------------- ------ 
 
¶5. (SBU) On automobile policy, Hou was optimistic about current 
trends, forecasting a similar trajectory of demand and supply coming 
off 2009's milestone of more than 13 million vehicles produced and 
sold.   Although China's auto market was strong, Hou acknowledged 
 
BEIJING 00000042  002 OF 002 
 
 
three fundamental challenges:  the rising price of gasoline, carbon 
emissions and environmental pollution, and increasing traffic 
congestion.  In the near-term,  Hou predicted robust, continued 
growth, based in part on government policies to stimulate 
consumption, however, there would be a slow down at some point. 
"When that slowdown is, I don't know.  Maybe when drivers are only 
allowed to drive three days per week due to congestion rules," he 
ventured. 
 
HUNTSMAN