An Overview of the Pearl River Delta: Hong Kong's

UNCLAS SECTION 01 OF 05 GUANGZHOU 010088

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TAGS: ECON ETRD PGOV SOCI EINV ELAB CH
SUBJECT: An Overview of the Pearl River Delta: Hong Kong's
Consul General Visits South China


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1. (SBU) SUMMARY: During a recent visit to Guangdong, Hong
Kong Consul General Cunningham met with officials and
business leaders to discuss the rapid economic growth of
southern Guangdong and its consequences for Hong Kong
industry and the region's environment. The Consul General
visited Guangzhou's new Baiyun Airport and Shenzhen's
booming Yantian Port, both key links in the Pearl River
Delta's connection to global trade and business. Hong Kong
and Chinese officials lamented the environmental
consequences of the region's rapid economic growth, but
Shenzhen officials said they plan to follow the central
government's directives and develop a greener economic
growth model. Meanwhile, Hong Kong's top official in
Guangdong, the Guangdong Amcham president, and a Duracell
factory manager all cited serious energy shortages in the
area, and the Yantian port director said Shenzhen's
underdeveloped road and rail network is restricting the flow
of goods further inland. END SUMMARY.

A Grudging Approval by MFA
--------------


2. (SBU) The Guangzhou Consulate first requested government
appointments for the Hong Kong group via the Guangdong
Foreign Affairs Office (FAO) on March 2. The FAO replied on
March 6 that only the Ministry of Foreign Affairs (MFA)
could approve the visit because officers from Consulate Hong
Kong wished to perform duties outside of their consular
district, citing Article 23 of the Consular Conventions
between China and the United States. On March 9, Consulate
Hong Kong sent a diplomatic note to the Office of the MFA
Commissioner in Hong Kong. After more than a week with no
decision, Embassy Beijing on March 17 contacted the MFA in
Beijing to request a decision on the visit. MFA did not
approve the Monday, March 20 visit until approximately 7:30
pm on Friday, March 17. Despite the go-ahead, MFA denied
requests to visit Shenzhen's Shekou Port and to meet with
the Shenzhen Public Security Bureau's Economic Crimes
Investigative Division to discuss intellectual property
rights (IPR).

Guangdong DRC: Innovation Coming to a City Near You!
-------------- --------------


3. (SBU) Guangzhou Consul General (CG) Dong, accompanied by
CG Cunningham, met with Zhang Jun, Deputy Director General
of the Guangdong Development and Reform Commission.
CG Dong began by noting that the priority for Guangdong in
the 11th 5-Year Plan is to build an "innovation society" and
he asked how Guangdong will adjust its use of resources to
achieve this goal. Zhang acknowledged that in terms of R&D
Guangdong has always lagged behind Beijing and East China,
but he noted that Guangdong's patent applications last year
ranked first in the country. In 2002, Guangdong's R&D
spending accounted for 0.8% of GDP, but the percentage has
risen to 1.5% of GDP, showing, according to Zhang, the
government's dedication to supporting innovation.


4. (SBU) Zhang explained that because the energy supply is
inadequate, Guangdong put forward the innovation concept to
contend with this shortfall, but he admitted that the
transformation will be slow. Zhang explained that financial
support for innovation should be increased through added
funding for education at all levels and for science and
technology research. He also said the science system should
be improved and he suggested allowing university labs to
play bigger roles. Zhang pointed out that Guangdong
companies Huawei and ZTE are already innovators and he noted
that Guangzhou and Shenzhen are the province's innovation
centers; he conceded, however, that the east and west areas
of Guangdong are lacking in this area. He suggested that
the government coordinate with enterprises in those areas to
support them and guide them to combine R&D efforts with
market demand.


GUANGZHOU 00010088 002 OF 005



5. (SBU) In response to a question from CG Cunningham on the
future of the Pan-PRD, Zhang said that the development of
the Pan-PRD has been faster than expected and he predicted
it will have a bright future. (Note: The Pan-PRD, also
called "Nine Plus Two," is the nine provinces of Fujian,
Guangdong, Guangxi, Guizhou, Hainan, Hunan, Jiangxi,
Sichuan, and Yunnan, as well as the two special
administrative regions of Hong Kong and Macau. End Note.)
Zhang noted Hong Kong's close connection with Guangdong --
and there are now 87,000 Hong Kong companies in Guangdong
with investments of more than USD 100 billion -- but he
opined that Hong Kong should build more connections with
inland provinces. He pointed out that through Pan-PRD
cooperation, Hong Kong can contribute to the development of
inland provinces, and in doing so(create mozd opportufhdi%s
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