South China H1 Economic Report: Fujian, Guangxi,

UNCLAS SECTION 01 OF 04 GUANGZHOU 029114 SIPDIS SIPDIS STATE FOR EAP/CM USDOC FOR 4420/ITA/MAC/MCQUEEN STATE PASS USTR USPACOM FOR FPA TREASURY FOR OASIA/INA-CRANE USDA FOR FAS/ITP AND FAS/FAA E.O. 12958: N/A TAGS: ECON ETRD EINV EAGR ELAB CH SUBJECT: South China H1 Economic Report: Fujian, Guangxi, and Hainan REF: A) Guangzhou 18102 B) Guangzhou 26903 ¶1. (U) SUMMARY: In the first half of 2006, Guangxi Zhuang Autonomous Region, Fujian Province, and Hainan Province recorded rapid growth rates despite government control measures and natural disasters. Strong industrial and export sectors fueled rapidly rising gross domestic product (GDP) figures. Growth in fixed asset investment was particularly robust, although it focused primarily on manufacturing in urban areas. Urban-rural disparities in income remain roughly fixed at a 3:1 ratio. Despite damage from a series of typhoons that struck South China, economic growth is expected to stay strong in the second half of the year. End Summary. ¶2. (U) All currency conversions in this report are at the average exchange rate of USD 1 = RMB 8.0292. The majority of statistics are from Chinese government sources, of limited reliability, and best used in comparison to other time periods. Even then, their accuracy may be limited, since the methodologies used to calculate them often change without notice. In the past, authorities have been unwilling to explain irregularities or changes. Guangxi -------------- ¶3. (U) In the first half of the year, Guangxi's GDP amounted to RMB 201 billion (USD 25.1 billion),up 13.6% from the same period of last year, or 1.3 percentage points higher than the growth rate of the same period of last year. Guangxi's GDP growth has remained above 11% for the last 11 quarters, and above 13% for the last 3 quarters. ¶4. (U) The gross output of the farming, forestry, husbandry and fishery industries totaled RMB 42.3 billion (USD 5.27 billion),up 6.8% from the same period of last year. The industrial added value reached RMB 80.6 billion (USD 10.0 billion),up 18.9% from the same period of last year. Due to the increase in residents' income and surging demand, the tertiary industry showed significant growth in the first half of the year. ¶5. (U) Fixed asset investments in the first half of 2006 reached RMB 88.2 billion (USD 11.0 billion),up 37% from the same period of last year. Of the fixed asset investments, RMB 76.5 billion (USD 9.53 billion) were in urban regions, up 41.7%, the highest growth since 1995; RMB 11.639 billion (USD 1.45 billion) were in rural regions, up only 12.2%. The Provincial Governments recognize the need for additional investments in rural areas. However, it will take time for these investments to materialize. Fixed asset investments continue to go to the urban areas where there is a higher concentration of factories and businesses. ¶6. (U) Guangxi's trade volume with ASEAN reached USD 790 million in the first half year, up 49.8% from the same period of last year. -- Exports to ASEAN countries amounted to USD 440 million, up 22.9%. -- Imports reached USD 350 million, up 110%. -- Vietnam remained Guangxi's biggest trade partner among ASEAN countries. -- Trade volume between Guangxi and Vietnam reached USD 650 million, accounting for 82.3% of the total China-ASEAN trade volume. -- Guangxi's top exports to ASEAN countries were mechanical/electrical products, garments, and spinning yarn/thread. ¶7. (U) In the first half year, 3,271 enterprises in Guangxi were engaged in foreign trade, up 39% from the same period of last year; 56.2% of these companies were private enterprises. ¶8. (U) Residents' income rose steadily. In the first half GUANGZHOU 00029114 002 OF 004 of 2006, urban residents' per capita disposable income reached RMB 5,174 (USD 644),up 9.9% as compared to rural residents' per capita income at RMB 1,590 (USD 198),up 14.9%. The price index rose 0.7%. Fujian -------------- ¶9. (U) In the first half of this year, Fujian's GDP reached RMB 315.7 billion (USD 39.3 billion),up 12.8% from the same period of last year, or 1.7 percentage points higher than the growth during the same period. Fujian's GDP growth in the first half year was 1.9 percentage points higher than the national GDP growth. Fujian's GDP has maintained a growth rate of more than 11% in the last three years. From 2003 to 2005, Fujian's GDP growth was 11.6%, 12.1% and 11.3% respectively. ¶10. (U) In the first half of 2006, Fujian's GDP only accounted for 3.45% of the country's total. From 2003 to 2005, Fujian's share of the national GDP was 4.56%, 4.43% and 3.6% respectively. Fujian's share of the national GDP dropped due to greater growth in other Provinces, not from any economic slowdown in Fujian. ¶11. (U) Fixed asset investments reached RMB 123.4 billion (USD 15.4 billion),up 39.9% year on year, or 22.9 percentage points higher than the same period of last year. Urban regions accounted for RMB 109.2 billion (USD 13.6 billion) of the fixed asset investments, up 42.8%, or 24.9 percentage points higher than the same period of last year. ¶12. (U) Fujian's exports reached USD 18.9 billion in the first half year, up 18.4%, while imports amounted to USD 10.2 billion, up 8.2%, with a corresponding trade surplus of USD 8.71 billion. ¶13. (U) Foreign enterprises' foreign trade volume reached USD 18.89 billion, accounting for 64.87% of the Province's total foreign trade volume. -- Private enterprises' foreign trade grew 38.57% to reach USD 5.69 billion. -- State-owned enterprises' foreign trade only grew 2.89% to reach USD 4.54 billion. ¶14. (U) The city of Xiamen's foreign trade volume reached USD 15.12 billion, up 11.26%, accounting for 51.92% of the province's total foreign trade volume. ¶15. (U) The United States, the EU, Japan, Hong Kong and ASEAN were Fujian's top 5 export markets. -- The United States imported USD 4.76 billion in Fujianese goods and exported USD 1.01 billion to Fujian. -- The EU imported USD 3.58 billion. -- Japan imported USD 3.11 billion and exported USD 1.299 billion. -- Hong Kong imported USD 1.33 billion. -- ASEAN countries imported USD 1.15 billion. ¶16. (U) The top exported commodities from Fujian Province were machinery (USD 8.389 billion),footwear (USD 1.981 billion) and clothing (USD 1.889 billion). ¶17. (U) Retail sales rose to RMB 130.2 billion (USD 16.2 billion),up 14.6% year on year, only 0.7 percentage points higher than the same period of last year. The price index rose 0.2%. ¶18. (U) Urban residents' per capita income was RMB 7,247 (USD 903),while rural residents' was RMB 2,357 (USD 294), up 12% and 9.1% respectively. Hainan -------------- ¶19. (U) Hainan's GDP for the first six months of the year GUANGZHOU 00029114 003 OF 004 was RMB 49.155 billion (USD 6.12 billion),11.6% more than the same period of last year, a growth rate of 1.75 percentage points higher than the same period last year. -- Primary industry value-added was RMB 15.964 billion (USD 1.988 billion),up 9.1%. -- Secondary industry value-added was RMB 12.65 billion (USD 1.575 billion),up 15.7%. -- Tertiary industry value-added was RMB 20.541 billion (USD 2.558 billion),up 11.1%. -- Growth rates for primary, secondary, and tertiary industries were 9.1%, 15.7% and 11.1% respectively. -- The average price of agricultural products rose 5% compared to the same period last year. -- The finance and insurance industries grew by 12.6%, while the tourism sector was up 9.5% from the same period of last year, with output valued at RMB 7.166 billion (USD 892 million). ¶20. (U) Retail sales in the Province totaled RMB 14.828 billion (USD 1.847 billion),up 14.2%. Retail sales in urban areas reached RMB 10.612 billion (USD 1.322 billion), while retail sales in rural areas reached RMB 4.216 billion (USD 525 million),up 14.4% and 13.6% respectively. ¶21. (U) The Province's foreign trade volume amounted to USD 1.27 billion, up 16.45%. -- Exports were valued at USD 605.35 million, up 28.3%. -- Imports were valued at USD 666.27 million, up 7.43%. -- Hainan's trade volume with ASEAN countries reached USD 163 million, up 69%, far exceeding the growth of its trade volume with the EU, which increased only 38%. -- Hainan's major trade partners were Vietnam, Thailand and Indonesia. -- The Province's main exports were natural gas, meat and fish, fertilizer, steel, and wood products. Its main imports were aircraft, aircraft parts, and machinery. ¶22. (U) Hainan's utilized foreign direct investment in the first six months of 2006 reached USD 31.14 million, up 4.6% from the same period last year. U.S. investments are mainly in the hotel, aviation, retail sales, and agriculture sectors. ¶23. (U) Fixed asset investments in the first half year reached RMB 17.022 billion (USD 2.12 billion),up 16.6%. RMB 16.259 billion (USD 2.025 billion) of the fixed asset investments took place in urban areas, up 16.2%. Only RMB 763 million (USD 95.0 million) of the fixed asset investments took place in rural areas, up 25.4%. ¶24. (U) Urban citizens' average disposable income for this period was RMB 5,023 (USD 626),up 16.2%. Rural residents' per capita income was RMB 1,785 (USD 221),up 8.8% from the same period of last year. Comment -------------- ¶25. (U) The region continues to record rapid growth rates despite government control measures and natural disasters. The strong industrial and export sectors fueled GDP growth higher than the estimated national growth rate of 10.9%. Fixed asset investments recorded particularly robust growth. However, rural versus urban disparities in income and investment levels continue, especially in Hainan Province and Guangxi Zhuang Autonomous Region. The expectation of policy makers in the 11th Five-year plan is that continued development of infrastructure, particularly rural roads and connecting highways, will encourage increased investment in rural areas and gradually raise rural incomes. However, in the short term, these income disparities, coupled with land compensation issues, homelessness resulting from recent typhoons, and higher prices for agricultural inputs, could increase socio-economic tensions in the affected areas. Nonetheless, despite the typhoon damage to farms, businesses, communications networks, and water conservation GUANGZHOU 00029114 004 OF 004 projects, economic growth will likely continue at high levels in the second half of the year. GOLDBERG