CHONGQING LEADER WANG YANG SAYS "THE WORLD IS

C O N F I D E N T I A L SECTION 01 OF 04 BEIJING 002016

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/26/2032
TAGS: PGOV ECON SOCI CH
SUBJECT: CHONGQING LEADER WANG YANG SAYS "THE WORLD IS
FLAT," CHINA IS OPEN AND WILL IMPROVE ITS SYSTEM

Classified By: Ambassador Clark T. Randt, Jr. Reasons
1.4 (b/d).

Summary
--------------


1. (C) Chongqing Party Secretary Wang Yang, one of
China's youngest regional leaders, told the Ambassador
that continued good United States-China relations will
depend on continued growth in bilateral economic ties.
Wang frankly discussed the challenges he faces in
Chongqing, but insisted that China will continue to
open up and improve its political system, which he
acknowledged, "has problems." Chongqing suffers from
a lack of talent, but is moving to become a technology
and finance hub and looks to compete with India for a
share of North America's software design business.
Wang described the trouble he goes through in getting
central approval for local projects, cited resistance
to the Property and Enterprise Income Tax laws (passed
by the National People's Congress on March 16),and
described protests outside his offices as
"understandable" and "necessary." "Taking aggressive
measures like chanting slogans can remind the ruling
party that it should care about the people," he said.
In an aside, Wang mentioned that his son works for
Gallup Polling in Washington, DC. End Summary.


2. (C) Dynamic and candid young leader of Chongqing
Municipality, Wang Yang, frankly discussed challenges,
controversies and shortcomings in the Chinese system
with the Ambassador over dinner at the Residence on
March 15. Recalling that he had spent time with the
Ambassador during Premier Wen Jiabao's visit to the
United States in December 2003, Wang was relaxed and
confident, frequently turning to his colleagues for
responses on specific issues and sprinkling humorous
asides throughout his remarks.

Chongqing's Challenge: Three Gorges Dam and More
-------------- ---


3. (C) Asked about challenges he faces in Chongqing,
Wang quipped that he has "too many." Noting that he
had worked on the Three Gorges Dam Development
Committee while at the NDRC, Wang said he never
imagined that he would be the one who would have to
deal with the massive relocation wrought by the
filling of the Three Gorges Dam reservoir. Power
generation at the dam has come on line and the
government anticipates that all generators will be
running by 2008, one year earlier than planned.
Chongqing has already relocated 1.03 million people,
but this is "an issue of world-class difficulty," Wang
noted. No other city has ever relocated so many
people.


4. (C) There have been no unanticipated environmental
effects from the dam, Wang maintained, but he said
that the rising water level in the reservoir had
brought some surprises. For example, branches of the
Yangtze River are also rising and have formed islands
cutting off about 20,000 residents from their
communities. They must now be relocated, as well.
Less money was spent on dam construction than
originally planned, but the budget for resettlement
was inadequate and now must be further augmented.


5. (C) Other problems are those that are challenges
throughout China. Chongqing has considerable poverty
and the "contradictions are relatively sharp," he
said. Increasing incomes and improving education,
medical care and the environment are the top
priorities and the issues that people care about the
most.

Sustainable Growth Challenge
--------------


6. (C) Chongqing is one of six old industrial bases
in China, but after it was made a municipality in
1997, authorities encouraged the development of the
private sector, Wang stated. Private enterprise now
accounts for 53% of Chongqing's GDP and 55% of
revenues. Wang noted that Ford's investment in
Chang'an Automobiles is producing 150,000 cars a year
at considerable profit and expansion by another
200,000 cars per year is planned. Chongqing boasts
one-tenth of China's car production and one-fourth of
its motorcycle production.


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7. (C) Wang acknowledged that balanced development
remains a major challenge. Chongqing is determined to
close heavy polluting factories in poor areas, but
requires resources for education and retraining. A
consensus on the need for such steps has already been
achieved, however. Wang's assistant said that coal-
fired stoves and furnaces in Chongqing have switched
to natural gas and that all taxis in the city run on
natural gas. Chongqing suffered the worst drought
since 1891 last year, Wang noted, citing water
supplies as a source of concern. He welcomed the
recent USAID-funded project with Western Kentucky
University to research drinking water solutions for
karst areas with Southwest University's Karst Research
Institute.

Attracting Talent
--------------


8. (C) Chongqing's biggest problem is not lack of
money, but lack of talent, Wang stated. Chongqing
lags behind China's developed coastal areas in this
respect, which is why the Central Government has a
policy to bring officials from developed coastal areas
to lead western provinces. He gave several examples
of such transfers, including new Sichuan Provincial
Party Secretary Du Qinglin (former Agriculture
Minister) and Sichuan's new Governor Jiang Jufeng
(from Zhejiang). Asked about his own roots in Anhui
Province, Wang acknowledged but rejected the notion
that there is now a large group of leading officials
from Anhui, claiming that the biggest group of
ministerial level officials is from Jiangsu Province
(more than 60). The coastal areas are still leading
the way, he said. While Wang was friendly and open,
his lexicon was more old school Party-speak than his
peers. He said he attended the Central Party School
when Hu Yaobang was its leader.

The World is Flat
--------------


9. (C) Executive Vice Mayor Huang Qifan, who Wang
noted had come to Chongqing from Shanghai, outlined
Chongqing's continuing efforts to attract investment.
Huang noted that Party Secretary Wang had had all of
Chongqing's cadres read Thomas Friedman's book, "The
World is Flat" and joked that the books had sold out
in record time. In keeping with the theme of the
book, Chongqing is not limiting itself to developing
heavy industry, but is looking to develop high tech,
financial services and information industries. The
city has signed a deal to produce software for the
North American market and will provide 10,000 software
technicians for the project at half the cost of
China's east coast, Huang stated, noting that
Chongqing hopes to capture a share of India's software
production business. Remarking that Huang takes care
of economics while he takes care of politics, Wang
said, "from this you can see that there has been
positive reform in China's political system."


10. (C) Wang commented that U.S.-China relations are
good and asserted that ties would remain on an upward
trend due to growing economic relations between the
two countries. "Our bilateral political relations
will be decided by our economic relations," Wang
stated. Just as Sino-Japan relations have been put on
a more positive track following a realization of the
importance of economic links, U.S.-China relations
will be improved by ever closer economic ties, he
asserted. Ford, Honeywell, Dell, HP and many other
American companies have business with Chongqing. Vice
Mayor Huang described Chongqing's active efforts to
court American financial institutions.


11. (C) Referring to Hu Jintao's formulation of a
"harmonious world," Wang quoted a popular text message
on the subject that he said is making the rounds of
Chinese cell phones. "To build a harmonious world, we
should keep in mind the following basic areas: never
try to struggle against the United States, never
struggle with the wife at home, never fight against
the leader of your work unit and never struggle
against nature and God." Wang said this shows that
the Chinese people do not want to take on the United
States.


12. (C) Wang raised the issue of diversity in
discussing his home province of Anhui and posited that
diverse cultures are more developed because "tolerance

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promotes new ideas and progress." He lamented that
China had isolated itself for much of its history, but
said Chinese society is much more open now. For
example, Valentine's Day and Christmas have become
more important holidays for young Chinese than some
traditional Chinese holidays. His first day of work
in Chongqing coincided with Christmas Eve when 200,000
people celebrated at the downtown square. China
should take care not to allow foreign culture to
replace traditional Chinese culture, an issue that
some intellectuals have raised. Nevertheless, Wang
said he personally is not worried about this, as China
has a long hstory and people will eventually find
ways toreturn to and enrich Chinese culture.

Economic Change and Property Law
--------------


13. (C) Asked bout resistance to passing the
Property Law that is currently before the NPC, Wang
said the development of China's market economy
requires regulation of property or myriad problems
will arise. China's economy now includes state,
private, collective, joint and cooperative property
which need to be clearly defined and protected. The
law will pass, but it will need to be amended in the
future as China's economy continues to change, Wang
said. Eighty percent of Chinese now own their homes,
but questions have arisen over specific rights and
land rights of farmers. These questions will need
solutions in the future, but for now the important
thing is to pass the law and perfect it later. The
NPC has been conservative in giving the law seven
readings, as opposed to the normal three. While some
scholars oppose the law, they are not a significant
force. Besides, politicians have the advantage since
they can push to pass the law and see how it does in
implementation.


14. (C) Wang stated that there is opposition to
provisions of the Enterprise Tax Law, as well. Many
western provinces oppose the provision that requires a
company to pay taxes in the location of the companies'
legal representative and not in the production
location. While many companies have businesses in the
West, their head office is in China's coastal areas.
This could mean a huge loss of revenue for western
provinces. Wang said that his delegation protested to
the Minister of Finance, who subsequently gave
assurances that any imbalance would be taken care of
in adjustments after passage.


15. (C) Regarding rule of law development, Wang said
China has a long way to go. He noted that his NPC
delegation had many complaints in small group
discussions of the judicial reports presented during
the week. Wang said he felt obliged to come to the
courts' and procuracy's defense, telling his deputies
that China does not have a long legal tradition and
improvement will take time.

Woes of Local Leaders
--------------


16. (C) Executive Vice Mayor Huang Qifan excused
himself early from dinner, noting that he had to go
meet a "ministry official." Wang then lamented that
the NPC session was extremely busy for him and his
colleagues. Aside from the unprecedented number of
invitations he had gotten from foreign Embassies this
year (he only accepted the United States and German
invites, and sent his mayor to the British, French,
Japanese, Australian and Philippine Embassies),he
said he and his colleagues spent many hours in
meetings with ministry officials. It is helpful for
us to meet them during the two meetings, because their
attitude is more helpful when the legislature is in
session, Wang said. "These are hard nuts to crack,"
Wang joked.


17. (C) Elaborating on Chongqing's agenda with the
ministries, Wang said the Chongqing is mainly seeking
approvals for construction projects. Following the
imposition of the Center's macroeconomic controls,
localities now have to seek approval of new
construction projects from a series of central
ministries including the NDRC, State Environmental
Protection Agency and the Ministry of Land and Natural
Resources. As a former NDRC Vice Minister, Wang said
he understands the Center's need to prevent the
economy from overheating, but as a local leader, I

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know that some projects are necessary to provide jobs
and fiscal revenue. Some departments have their
preferred candidates for project approval, Wang said,
so this is a big headache. He wryly noted the irony
of his previous position as NDRC Vice Minister when he
frequently denied local officials project funding.

Protests Understandable, Political System Has Problems
-------------- --------------


18. (C) Asked by the Ambassador how he gets
information about people's dissatisfaction, Wang said
that, as opposed to U.S. political parties, the Party
has a system of direct administration and can easily
hear the complaints from the grass roots. For
example, Chongqing will hold its Party Congress in May
when Party Secretary Wang will have to make a report.
He is currently in the process of soliciting opinions
from all quarters, including people at the bottom of
society, about what the report should address. He
hears opinions and suggestions through the local
People's Congress and People's Political Consultative
Conference mechanisms, invites Democratic Party
representatives to dinner and relies on petitions,
which some of his staff pass to him.


19. (C) Another important channel is when some people
bring their grievances directly to his office and
chant slogans outside, Wang said. This kind of
aggressive approach is an option for common people and
the phenomenon will continue to exist for quite some
time, he assessed. This is probably a good thing to
remind the ruling Party that they should care about
the people. It is understandable for people to take
these measures, as the political system "has its
problems and needs improvement." China will need this
motivation to adjust its system, since it doesn't have
a U.S.-style Congress that will discuss everything.
In response to a question, Wang said his son works at
Gallup in Washington, DC. He said that he himself
doesn't use formal polling to collect opinions,
although he does seek out opportunities for frank
discussion with locals.




RANDT