Short March: Shantou Back in the Black

UNCLAS SECTION 01 OF 02 GUANGZHOU 010542

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB, R, EAP/CM, EAP/PD, DRL
STATE PASS USTR
USDOC FOR 4420/ITA/MAC/MCQUEEN, CELICO, DAS LEVINE
USPACOM FOR FPA

E.O. 12958: N/A
TAGS: ECON KIPR EINV PHUM KPAO PINR CH
SUBJECT: Short March: Shantou Back in the Black

REF: A) Guangzhou 10337, B) Guangzhou 10336

(U) This document is sensitive but unclassified. Please
protect accordingly. Not for release outside U.S.
Government Channels. Not for internet publication.


1. (SBU) Summary: Shantou officials say that the city's
economy is back on track in a big way after negative growth
in 2001 and slow growth in 2002. Long known as a center of
smuggling and piracy, city officials state that Shantou
plans to realize its role as the key city of Eastern
Guangdong with a modern port and transportation system to
further accelerate economic growth. The city's Development
Reform Commission (DRC) has detailed plans for three
economic belts to supplement Shantou's already well-
developed porcelain, toys, knitwear, and underwear
industries while improving public safety, instituting the
"New Socialist Village," and improving the environment.
End Summary.

"Welcome to Beautiful Shantou"
--------------

2. (SBU) In the first stop of Consulate Guangzhou's "short
march" to Eastern Guangdong in the early part of March
(reftels),Shantou Mayor Huang Zhiguang and Vice Mayor
Ouyang Zhihong proclaimed the recent turnaround success of
the prefectural city. They noted that this port city of
4.58 million people was one of the original special
economic zones introduced by Deng Xiaoping's 1981 reforms
and constitutes the ocean gateway for Eastern Guangdong,
Southwestern Fujian and Southeast Jiangxi as well as being
a commercial, financial, transportation and information hub
for the region. They acknowledged the negative economic
growth in 2001 and the slow growth in 2002, alluding to but
not quite acknowledging that the city is notorious as a
center for the production of counterfeit goods and went
through a massive upheaval in 2001, because of the central
government's crackdown on corruption and mismanagement by
their predecessors. In a province where most cities easily
record over 10% economic growth every year, the mayor and
vice mayor were happy to point out that in 2004 Shantou was
back on pace with economic growth of 11.1% with figures for
2005 economic growth probably at 11.3%.

"Setting the Bar High"
--------------

3. (SBU) Separately, Shantou Development and Reform
Commission (DRC) Deputy Director Liao Xiaoping said his
office spent over two years planning the city's 11th five-
year plan, basing its plans on guidelines set by the
national and provincial governments. The central
government wants Shantou to become an important coastal
city in Southeastern China and plans for it to become a
regional level city, and, in that vein, city leaders want
Shantou to become a modern port city, which is wealthy,
stable, and environmentally friendly. Its 2005 GDP was RMB
65.08 billion (US$ 8.135 billion),and its goal is RMB 78
billion (US$ 9.75 billion) by 2010 and with a per capita
GDP at that time of RMB 15,800 (US$ 1975).


4. (SBU) Different sectors of the Shantou economy have
different goals. Some have concrete goals, which they are
required to meet, while others have only predictions of
what they might accomplish. One concrete goal is for the
city to sustain an average annual economic growth of over
10% for the next five years. GDP per capita is also
planned to double in the next five years. Another binding
target is that energy consumption per GDP unit must
decrease by 5% in the same time period.


5. (SBU) The public sector also has binding goals. The
officials say that Shantou citizens are already well off,
but that they can still be better off. The DRC wants to
develop a safer environment for its citizens with one
binding target for the public sector being a decrease in
traffic fatalities in the city. City officials want more
rural citizens to have access to the same level of health,
safety, livelihood, and educational benefits that can be
found in urban areas, per the central government's concept
of the "New Socialist Village." Environmental issues will

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also be stressed.

"How Is This Going to Work?"
--------------

6. (SBU) Shantou intends to further develop three economic
belts in and around the city. Each belt will specialize in
different industries and sectors. The first belt will run
along the eastern coast and will be used for residential
development. The city plans to reclaim 19 square
kilometers from the ocean and to build residential housing
units there. The second belt will center on the two ports
and a tax bonded zone. This belt will be 30 kilometers
long and will be reserved for petrochemical plants. The
final belt will also be 30 kilometers long and will be
inland. The belt will be used for the development of high-
tech agriculture and other related industries.


7. (SBU) The DRC is placing much emphasis on heavy
machinery manufacturing in addition to Shantou's ports.
City officials plan to promote manufacturing of machines to
be used for medical equipment, food processing, and
machines for light industry manufacturing. On the high-
tech side, the government will be focusing on electronic
equipment and pharmaceuticals.


8. (SBU) In typical centrally planned economy fashion, the
DRC has a list of over 190 projects available for
investment. These projects include infrastructure,
industrial, and social development. Traditionally, the
biggest investors in the Shantou region have come from
overseas Chinese with family ties to the area. The city
officials admit that as these family ties become more
distant, it is becoming increasingly difficult to attract
investment, but did not offer an alternative.

Comment
--------------

9. (SBU) Despite its past history and identification as an
IPR pirate, Shantou does seem to be poised for a
resurgence, but many questions remain unanswered. Despite
having "binding" goals and predictions, the city's plan
also takes the same smorgasbord, shotgun approach favored
by many of its counterparts, seemingly seeking to develop
every sort of industry instead of specializing in those
that would complement the city's competitive advantages.
Shantou also faces stiff competition from neighboring
cities in Guangdong and Fujian provinces. Xiamen in Fujian
province already has well-developed port, electronics, and
petrochemical industries, which far outshine those in
Shantou. Rather than seeking to develop a regional
strength by cooperating with nearby Jieyang and Chaozhou,
each city in the Chao-Shan area seems to be following a
separate path to development. Still, Shantou has clear
strengths in porcelain, toys, knitwear, and underwear and
is also working to upgrade its high tech sector. It may be
that in Guangdong's superheated economy, most cities can
still come out smelling like a rose, and Shantou is likely
to be one of them.


10. (SBU) The next messages in the "short march" series
deal with two sides of Shantou -- one literally of
transparency and light as we visited a pair of enterprises
making specialty glass and ultrasound equipment using
optical fiber, respectively, and literally of darkness as
we talk with Shantou's rather weak IPR bureaucracy and a
university student audience that seemingly would want an
IPR free ride in order for China to get to global
innovation levels.

Dong