LONG MARCH: QUANZHOU - IT'S HARD TO BEAT XIAMEN

UNCLAS SECTION 01 OF 03 GUANGZHOU 014936

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E.O. 12958: N/A
TAGS: ECON PGOV ETRD EINV CH
SUBJECT: LONG MARCH: QUANZHOU - IT'S HARD TO BEAT XIAMEN

REF: A) Guangzhou 13562 B) Guangzhou 13384 C) Guangzhou

13385 F) Guangzhou 14707 G) Guangzhou 14818 H) Guangzhou
14848


1. (SBU) Summary: Quanzhou, the wealthiest city in Fujian
and itself a coastal city in the southern part of the
province, strikes a contrast to Xiamen as the city neglects
its vast potential as a tourist and economic hub through
poor intellectual property rights protection and
conservative planning. As the last major stop on the
Consulate Guangzhou's long march trip, Vice-Mayor Zeng
discussed the city's transformation from agrarian society to
a shoe-producing center with help from Taiwanese investment.
Well taken care of local religious and historic sites offer
hope for the city to expand revenues through tourism.
Sadly, unenthusiastic efforts by local officials to secure
intellectual property rights (IPR) in a city known to have
IPR problems will possibly affect the levels of foreign
direct investment in the city. End Summary.

WHAT A DIFFERENCE AN HOUR CAN MAKE
--------------


2. (U) Approximately 100 kilometers north of Xiamen along
the coast of Fujian province lies Quanzhou. Although the
drive was a little more than an hour, the contrast between
the two cities was striking. Where Xiamen's outskirts
appeared planned with an abundance of parklands and whose
major arteries lead one along its well-preserved coastline,
Quanzhou is a hodgepodge of decaying and restored housing
and factories that belie the city's status as wealthiest in
Fujian. Roadways gave no hint that you were still along the
coast or that this once proud city was formerly a major port
of the Cong and Yuan Dynasties.


3. (U) Quanzhou Vice-Mayor Zeng Huabin stressed that
Quanzhou is a progressive city leaving agriculture behind,
claiming only 5% of the population remained agrarian. He
emphasized that tourism and goods manufacturing were the
economic engine of today's Quanzhou and would be the base on
which to build the city's future. As an example of
Quanzhou's ability, the Vice-Mayor stated factories in the
city had manufactured 950 million pairs of shoes in last
year alone. He cited heavy investment from Taiwan as being
a major factor in driving this change in the city. Vice-
Mayor Zeng also proudly announced Quanzhou's sister-city
agreement with San Diego and stressed Quanzhou would soon
send a delegation to visit its younger sister across the
Pacific.

TOURIST POTENTIAL EXISTS
--------------


4. (U) Getting past first impressions, a tour of Quanzhou's
tourist highlights revealed that the city does have much to
market. In addition to a well-preserved city center that
has worked with UNESCO to maintain its original appearance,
Quanzhou has a treasure of archaeological sites and
religious relics in excellent condition. Quanzhou was once
the terminus of the Maritime Silk Road and, as such, was
home to merchants and sailors from many diverse nations of
the Middle East, Europe, and Asia. The long and largely
peaceful co-existence of these diverse peoples for almost
five centuries left Quanzhou with a varying array of
mosques, churches, temples, monuments, and cemeteries.
Unfortunately, earthquakes and time have devastated many of
these sites, but many pieces connecting to this storied past
can still be found.


5. (U) The Quanzhou Museum of Maritime History houses a
surprisingly large array of these artifacts covering Islam,
Christianity, Hinduism, and the Manichean faith.
Gravestones from both Muslim and Christian graves have been
salvaged showing scripts in Arabic, Spanish, or English on
one side and carved Chinese characters on the other. The
amount of Islamic artifacts unearthed is so large that a new
Islamic History wing of the museum is about to be opened.
The setting and quality of the museum and its displays are
on par with any found in China. The city also boasts
religious sites such as Lao Jun Rock, an enormous carved
statue of the deified founder of Daoism, the Sacred Tombs of

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Islam at Lingshan Hill, still in pristine condition,
Qingjing Mosque built in 1009, and the Buddhist Kaiyuan
Temple Complex with two giant granite pagodas looking out
over the city. It is this depth and variety of religious
and cultural history that the city is attempting to exploit
as a lure for tourists.

DEVELOPMENT - A PLAN WITHOUT DETAIL
--------------


6. (SBU) Quanzhou city officials Mr. Hong Liangquan, Deputy
Director of the Economic & Trade Bureau and Director of
Quanzhou Office of Rectification and Standardization of
Market and Economic Order (MORO),Mr. Xu Qinghai, Deputy
Director of the Quanzhou Administration of Industries and
Commerce, Ms. Huang Danping, Director of the Quanzhou
Intellectual Property Office, and Mr. Zhang Fan, Deputy
Director of the Press and Copyright Bureau discussed
Quanzhou's 11th five-year development plan and IPR education
and enforcement efforts. While development plans in Xiamen
were about creating opportunities for the city, Quanzhou's
development seems to be driven less by creating
opportunities and more by seizing whatever opportunities
come the city's way. Quanzhou currently is the richest city
in Fujian province by GDP and is primarily a center of
textile, shoe, and handicraft manufacturing, due in great
part, to Taiwan investors.


7. (SBU) Director Hong read most of the city's 11th Five
Year Development Plan, a plan that was long on goals, but
short on details about how to get there. One stated goal
was to double government revenues by 2010 but this
projection relies solely on maintaining the city's current
GDP growth rate for the remainder of the decade. Lowering
energy consumption per unit of GDP by 10%, modernizing
agriculture, developing 100 new enterprises, increasing
medical benefits for farmers, restoring the port to its
former glory, and better utilizing Quanzhou's local history
and cultural resources for tourism were other stated goals
(mostly in accord with national directives for the 11/5
plan),but no roadmap was presented. When questioned about
what tourist promotion could be done, local officials could
only respond with excuses that the city had poor funding,
was in a bad location, and could not compete with the
wonders of Beijing, Shanghai, and Xian.

INTELLECTUAL PROPERTY RIGHTS -
UNENTHUSIASTICLY MEETING MINIMUM REQUIREMENTS
--------------


8. (SBU) Nearly all current investment in Quanzhou comes
from Taiwan and overseas Chinese who have roots in the area.
It is unclear how much more can be drawn from this well,
though many of the Taiwan-invested shoe and apparel
companies are also pirating and counterfeiting legitimate
goods on the side. Quanzhou is viewed by many U.S.
businesses as a major center for counterfeit production.
While a few major American companies such as Wal-Mart, Nike,
and ADM are invested in enterprises in the city, plans for
an ExxonMobil refinery are currently on indefinite hold
despite local officials' enthusiasm for the project.
Quanzhou's past IPR problems make further investment from
American and other foreign firms a shaky assumption at best.


9. (SBU) Quanzhou has three agencies, focused separately on
Trademarks, Copyrights, and Patents, under the broad
supervision of the Office of Rectification and
Standardization of Market Economic Order (MORO) which are
assigned to combat IPR violations within the city. The
city's IPR plan meets the Chinese State Council and
provincial government assignment to implement IPR protection
but the emphasis is on promotion of IPR for local companies
and on Quanzhou's interagency cooperation. This type of
development has become a common focus of many the IPR
development efforts of many cities. Much less emphasis
appears to be placed on the actual discovery, combating, and
prosecuting of IPR violations, especially those involving
foreign companies. To illustrate this imbalance, most facts
presented by officials were about the numbers of locally-
registered trademarks and copyrights and local promotion
events. It was only after questioning about criminal

GUANGZHOU 00014936 003.2 OF 003


transfers that officials commented, almost casually, that a
case in Quanzhou regarding a local person manufacturing
counterfeit products ended with a fine of RMB one million
(USD 120,000) and was cited as a national Top 10 case for
IPR enforcement by Beijing for the year 2005. What should
be a source of pride for the agency was strangely brought up
only as an afterthought.


10. (SBU) Overall, the presentations implied, and in many
cases outright stated, that Quanzhou lacks interest in IPR
enforcement. Key areas of health and safety, such as food
and drug patents and complaints of counterfeiting, are under-
investigated. Thresholds for criminal transfer and
prosecution use the counterfeit product cost rather than the
genuine product price for computation of total value, making
most cases fall well below the threshold for criminal
investigation. Staffing is inadequate in most agencies for
investigation of cases, and in some areas such as patent
violations; most violations are not acted upon unless a
complaint is made by a local association of businesses.
Even among local government offices, IPR violations are
still found. The county and district governments have still
not finished implementing a mandated "No Piracy Program" for
software use on government computers, largely due to a lack
of funding for new software. While local trademark and
copyright registration is high and cases of local company
versus local company seem to get government attention, the
current environment is still not as welcoming as it should
be for foreign enterprises seeking to produce goods in a
manufacturing center such as Quanzhou.

Comment:
With Such Poor Planning,
How Did Quanzhou Get to Be So Wealthy?
--------------


11. (SBU) Despite its wealth, Quanzhou contrasts poorly
with Xiamen in terms of both detailed planning and
implementation of its next five-year plan. The basic
building blocks for a prosperous and important city are
still there but Quanzhou, despite its wealth, has yet to put
together a coherent program for its improvement. Not unique
among cities visited during the long march, Quanzhou seems
content to be dependent on foreign direct investment,
especially from Taiwan, as its primary means of development,
without a backup plan. End Comment.


12. (U) Officials visited include:
Zeng Huabin Vice Mayor
Zhuang Zhimin Deputy Secretary General
Hong Liangquan, Deputy Director of Economic & Trade
Bureau and Director of Quanzhou Market
Order Rectification Office (MORO)
Xu Qinghai, Deputy Director of Quanzhou
Administration of Industries and
Commerce
Huang Danping Director of Quanzhou Intellectual
Property Office
Zhang Fan Deputy Director of Press and Copyright
Bureau
Wang Jinding Director, FAO
Ding Feng Deputy Director, FAO
Huang Decong Deputy Section Chief, FAO
Wu Jihuai Vice President, Quanzhou Overseas
Chinese University
Liu Bin Director, Executive Office, Quanzhou
Overseas Chinese University
Xiang Shimin Director, FAO, Quanzhou Overseas Chinese
University

DONG