Cablegate: Wen Jiabao On Developing China's Western Provinces: 10 Years

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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

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