Journey to the West: Guangdong's Maoming City

UNCLAS SECTION 01 OF 04 GUANGZHOU 005955

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E.O. 12958: N/A
TAGS: ENRG ECON ETRD EINV EAGR CH
SUBJECT: Journey to the West: Guangdong's Maoming City
Focuses Its Energy on Its Strengths

REF: Guangzhou 5870 and previous

(U) THIS DOCUMENT IS SENSITIVE BUT UNCLASSIFIED. PLEASE
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1. (U) Summary: In contrast to the "pie in the sky"
wishful thinking we heard throughout our tour of Guangxi's
top cities, officials in Guangdong's Maoming City
professionally presented credible plans for further
economic development based on heavy industry with some
agriculture thrown in. City officials have confidence that
they will be successful in building Maoming into China's
largest petrochemical industrial base with a developed
infrastructure, strong traditional industrial base, and
educated and skilled human resources. In addition to a
solid heavy industrial base, Maoming also is making strides
to lead Guangdong Province in its development of
agriculture. End Summary.

What a Difference a Border Makes
--------------

2. (U) There can be too much of a good thing.
Environmentally, Guangxi is very nice, but its
comparatively pristine qualities are part and parcel of its
economic backwardness. As the Consulate party headed home
to Guangzhou from its "journey to the west" trip to key
cities in Guangxi (reftel),we rest-stopped mid-way for a
meeting where we could once again take in the not so
pristine atmosphere of massive industrial development. In
a highly professional Powerpoint presentation, Maoming
Development and Reform Commission (DRC) officials clearly
laid out the city's record and prospects. Maoming is a
petrochemical-focused industrial city locating in Western
Guangdong. It has an area of 11,500 square kilometers and
a coastal line of 222 kilometers. It has three county-
level cities, one county (rural) and two urban districts.
Maoming has Guangdong's third largest population of 6.7
million people. Maoming's economic development levels put
it in the mid-ranks within the Province. In 2004, though
Maoming's GDP was RMB 75.034 billion, ranking the 6th
biggest in Guangdong, its GDP per capita ranking was only
12th at RMB 11,210, and its public revenues RMB 1.776
billion, ranking 11th. In 2005, Maoming's GDP was
estimated to be RMB 80 billion, about 2.8 times of that of

2000. For the 11th Five-Year Planning Period, Maoming has
set a goal to reach an average annual GDP growth of 12%,
and GDP per capita growth of 11%. Officials also want to
lower the energy consumption for each unit of GDP produced
by 15% compared with that of the 10th Five-Year Planning
Period, and keep the urban unemployment rate below 4%.


3. (U) The petrochemical industry is the main pillar of
the City's economy. Maoming also has very strong
agriculture and leads the Province in agriculture sales by
value. The Government has a very ambitious goal to become
China's largest petrochemical city, and it also plans to
use its harbor resources to develop a heavy industrial zone
featuring petrochemical and steel ore refining.

Well-Positioned in Terms of Transportation
--------------

4. (U) The DRC Officials said Maoming is positioned to be
a transportation hub in Western Guangdong. It currently
has a railway connecting the City to Guangzhou and the
Provincial Government is building an extra line along the
current route to expand its capacity. Another railway
project under construction will connect Maoming with
Guangxi's Cenxi City and extend all the way to Henan
Province's Luoyang City. The Central Government's long-
term planning includes a railway that starts from Shanghai
and goes along the coastal area to Shenzhen, and goes
southwest to Maoming and ends in Zhanjiang. In addition to
rail expansion, two expressways are now under construction
that will extend north to connect Maoming with Wuzhou City
in Guangxi, and northeast to connect with Guangdong's
Yangchun and Zhaoqing cities.

Economic Pillar: Petrochemical Industry
--------------

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5. (U) As noted above, the City's economy relies
predominantly on the petrochemical industry. Maoming has a
petroleum refinery that has China's second largest capacity
of more than 13.5 million tons annually. It is undergoing
an expansion that will increase the capacity to 16 million
tons. The refinery's ultimate goal is 30 million tons.
Its ethylene manufacturing capacity will also increase from
the current 380,000 tons to one million tons, while its
ultimate target is two million tons. In 2004, the refinery
refined 13.23 million tons of crude oil, produced 1.85
million tons of gasoline, and 365,000 tons of lubricant.
The refinery attracts over 600 downstream enterprises to
locate at the City. Out of these enterprises, 160 are
large scale enterprises, and one of them ranks among
China's Top 100 petrochemical enterprises. According to
local government officials, the refinery alone contributed
to about one-third of the salaries for local public
servants.


6. (U) The Central Government decided to build a refinery
in Maoming in the 1950s, when China discovered some limited
oil resources and Maoming happened to have rich oil rock
deposits totalling 5.1 billion tons. However, Maoming's
rock was too costly to refine oil. As crude oil prices
have been going up in international markets in recent
years, the refinery is thinking of using new machinery to
utilize the oil rock resources. Now the refinery's crude
oil is shipped in by tankers. The refinery is responsible
for supplying the Southwestern China area and the Pearl
River Delta. Maoming used to ship its refined gasoline to
those areas by road and railway. Now it is using pipelines
connecting Maoming to Kunming in Yunnan Province and
Guiyang in Guizhou Province. Maoming is also building
pipelines to Guangzhou and Shenzhen in the Pearl River
Delta (PRD).

Agriculture and other industries
--------------

7. (U) Maoming has very significant agricultural output
that has ranked at the top in Guangdong for many years.
Officials are proud of several famous brand names of high
quality lychee, longgan, chicken eggs and duck eggs. These
products have won awards in domestic agricultural contests.
In recent years, Maoming's fruit tree growing area has been
expanded from 1.98 million mu (15 mu are equal to one
hectare) to over 4 million mu. Due to its sub-tropical
location, Maoming's fruit ripening season is about one
month earlier than many other cities in China. Its fruits
have also received provincial certificates as "A-level
Green Food" and "Originating Place" (thus providing a
geographical "brand" to the produce). In 2003, Maoming's
lychee and longgan passed sanitary and phyto-sanitary tests
for the U.S. and Australia markets, and producers began
exporting to those markets.


8. (U) In addition to petrochemical industries and
agriculture, Maoming also has other primary processing
industries making bamboo products, dried or canned fruits,
aquaculture products, fish, leather gloves, and furniture.
After the Pan Pearl River Delta program was initiated in
June 2004, Maoming has received more visitors from the
region interested in investing there, and there is greater
coordination in infrastructure development between
different cities in Pan-PRD area. Compared with the Pearl
River Delta, Maoming has more available land, and it is
located in western Guangdong connecting the Province with
Southwestern and Western China and ASEAN. Officials said
the City was a good choice for investments whose market is
Southwest China and ASEAN countries.

A Harbor-Based Heavy Industrial Zone
--------------

9. (U) The Maoming DRC is also planning to develop a heavy
industrial zone in the city's harbor area based on its
advantages of port potential, environment capacity, a large
supply of land, and a trained work force and managerial
abilities. Currently, Maoming has three ports, one is for
shipping crude oil and oil products and can accommodate
vessels of 30,000-tons; one is for fishing boats; and the
third is a new port. The new port is located in a harbor

GUANGZHOU 00005955 003.2 OF 004


with a water depth that has the potential for four berths
that can receive vessels of 300,000-tons, four to six
berths of 200,000-tons, and six to eight berths of 100,000-
tons. The harbors are not located on river deltas and
consequently have no silt concerns. Locating by a harbor
area can also have benefit environmentally through the fast
recycling of air and water, and is thus suitable for heavy
industry. Near the harbor area, there is also a land
reserve of 30 square kilometers that is suitable for large
industrial enterprises and logistics companies.


10. (U) Maoming City is now working on infrastructure
preparation for the industrial zone. Officials are
planning to build a highway, a railway line, and two water-
supply channels to the zone. The City will also build a
power plant with an ultimate capacity of eight million
kilowatt hours at the site. The Provincial Government has
already approved an initial project of two million kilowatt
hours. The Government is also learning from Shanghai how
to build a centralized treatment plant to process
wastewater from the industrial enterprises in the zone.
The processed wastewater will then be discharged to into a
deep ocean water area.

Lots of Human Resources
--------------

11. (U) The DRC officials said their 50 years of
petrochemical development also has provided the City with a
lot of experienced personnel for heavy industry. Maoming
now already has about 10,000 managerial personnel and
300,000 workers working in the petrochemical industry. The
City also has a technology college that grants bachelor
degrees and there are several occupational schools.
Officials say the Maoming's well-developed infrastructure
and talent condition makes it an ideal cost-effective place
to develop heavy industries. Officials have strong
confidence that Maoming will become China's largest
petrochemical city in the future. Maoming's oil refinery's
expansion project is almost sure to locate in the harbor
industrial zone. Officials said there was no problem for
the refinery's crude oil capacity to be further increased
to 20 million tons, and it is just a matter of time to
reach its ultimate goal of 30 millions. However, it will
take a while for the City to initiate a steel project since
Beijing increased the entry threshold for this industry due
to concerns with oversupply and economic overheating in the
sector. Officials put their hope of starting their steel
project on Beijing's eventual loosening of restrictions in
the future.


12. (U) With its convenient transportation network,
Maoming's new industrial zone would strongly support a
logistic industry that could "hijack" the cargo now flowing
to Zhanjiang, one of the biggest bulk cargo ports in South
China. Once Maoming's port is operational, use of its
facilities would save one hundred kilometers of travel for
cargo from central and Southwest China.

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

13. (SBU) Maoming has clearly chosen heavy industry for
its future. The City obviously has strong advantages and
potential in this sector. Full utilization of these
conditions will guarantee continuous economic growth for
the City. Despite its focus on heavy industry development,
Maoming has also impressively developed its agriculture
while maintaining its environment. This flexibility gives
Maoming an advantage that its officials do not feel has
been well exploited. If the Maoming Government can
attract more labor-intensive investment to provide more
jobs to local people, it will be in a strong position to
continue its economic development without disruption.


14. (SBU) Maoming provides a good perspective for us to
reflect on Guangxi as our "journey to the west" came to an
end. Despite being a mid-tiered and relatively obscure
city in Guangdong, Maoming is way ahead of its counterparts
in Guangxi in terms of economic achievement and clear
thinking about exploiting advantages. The "be everything
to everybody" approach that we found all too prevalent in

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Guangxi is not at all prevalent in Guangdong, where
municipalities know their capabilities and "industrial
identities." That may be an important reason why Guangdong
is the richest province in China and Guangxi languishes in
18th or 19th place.


15. (U) The date of transmission of this message is also
the first day in the Consulate's "short march" to the
eastern Guangdong cities of Shantou, Jieyang, and Chaozhou,
and reports on that trip should be forthcoming some time
after that trip is finished.

DONG