CENTRAL CHINA EXPO 2007: IF YOU BUILD IT, THEY

C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 003085

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E.O. 12958: DECL: 05/09/2017
TAGS: ECON EINV ETRD ELAB PGOV ENRG CH HK
SUBJECT: CENTRAL CHINA EXPO 2007: IF YOU BUILD IT, THEY
WILL COME

REF: A. BEIJING 22299


B. 06 BEIJING 10969

Classified By: MINISTER COUNSELOR FOR ECONOMIC AFFAIRS ROBERT LUKE; REA
SON 1.4(B) AND (D)

SUMMARY
--------------


1. (C) Government officials and businessmen descended on
Zhengzhou April 26-28 for the second Central China Expo. The
Expo, a featured part of the Central Government's
six-province "Central China Rising" strategy, was well
attended despite the poor organization of volunteers who were
ill-prepared for the large-scale event. The Central China
Expo, with support from Vice Premier Wu Yi, Commerce Minister
Bo Xilai, and the six provincial governors, appears to be
maintaining its momentum seven months after the first Expo in
Changsha (Ref A). Zhengzhou's business sector demonstrated
its growing clout, as businessmen flocked to the city's
exhibition center (the largest in China outside Shanghai) on
the first two days of the event, in marked contrast to the
more politically staged Changsha event. For foreign
investors, views on Zhengzhou's investment potential, while
buoyant in public, remain guarded in private. END SUMMARY.

TRAVEL TO ZHENGZHOU
--------------


2. (C) Econoff and Econ Assistant traveled to Zhengzhou,
Henan Province April 24-27 to attend the Central China Expo.
They also met on the margins of the Expo with provincial
government officials and businessmen. Zhengzhou, the capital
of China's most populous province, is the Embassy's first
Virtual Presence Post (VPP) in China, and Press Officer and
Consular Officer joined Econoff in Zhengzhou to publicize the
launch of the VPP website (septel to follow).

HENAN'S ECONOMIC DEVELOPMENT: IF YOU BUILD IT...
-------------- --------------


3. (C) Wei Zhiyong, Director of the Foreign Economy
Department at the Henan Provincial Development and Reform
Commission, highlighted the province's recent economic
successes during a meeting with Econoffs on April 25. Wei
stated that Henan's GDP growth rate outpaced the country as a
whole, exceeding 14 percent for the third consecutive year in
2006, boosted by investment in the manufacturing, real estate
and transportation sectors. Infrastructure in the province
continues to improve, Wei said, and Henan now boasts more
highway mileage than any other province. The Central China
Expo gives Henan an opportunity to inform potential investors
about the province's benefits -- an opportunity the
provincial government would not have been able to seize at
any point during the previous twenty years due to lack of
development. Significant challenges remain for continued
development, Wei said, particularly increasing foreign direct
investment (FDI),which remains low. Henan relies on Hong
Kong, Taiwan, and coastal provinces for much of its incoming
investment, Wei added. (Comment: Henan does not lack
domestic investment in areas such as real estate. However,
FDI is still highly welcomed as a means to create higher
value, sustainable employment. End Comment.)


4. (C) Henan Governor Li Chengyu told a group of diplomats on
April 26 that Central China is growing increasingly
competitive. According to Li, with resources such as oil and
gas, sectors like petrochemical and aluminum, along with
textile manufacturing and rice production, Henan Province
plays an important economic role in the region. Li said he
is particularly proud of Henan Province's transition from a
predominantly state-owned economy to one that is more driven
by the private sector. From 2002 to 2006, the share of
non-state-owned enterprises increased from 30 percent to 55
percent, Li said. (Note: Provincial officials routinely
include firms in the non-state-owned category that are not
wholly state-owned, but in which government entities retain
shares. End Note.)

...THE BUSINESSMEN WILL COME
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BEIJING 00003085 002 OF 003



5. (C) Proof positive of Henan's growth was the robust
attendance at the Expo. In marked contrast to the low
turnout in Changsha (Ref A),government officials and
businessmen flocked to Zhengzhou's exhibition center (the
largest in China outside Shanghai) in the Zhengdong New
District. Even on the second day of the Expo, long after the
VIPs had departed, local businessmen continued to stream
through the exhibit, suggesting the event offered more than
ceremony and symbolism. Wang Chaobin, a local real estate
magnate and member of the Chinese People's Political
Consultative Congress (CPPCC),said that the Zhengzhou event
clearly was more commercially driven that its predecessor in
Changsha.


6. (C) Continuing its focus on Central China, Hong Kong sent
a large trade mission to Zhengzhou, led by Chief Executive
Donald Tsang. The Expo trade floor, like the Henan
International Trade and Investment Fair one year earlier, was
dominated by companies from Hong Kong as well as investors
from coastal provinces (Ref B). In an effort to broaden the
scope of trade and investment opportunities, Expo organizers
also held a special symposium on China-Africa trade and
investment (septel to follow),and invited Trade and
Commercial Officers from Beijing-based Embassies.
Representatives of the UK, Canadian, German and Belgian
Embassies all attended.

CENTRAL CHINA: GO THE DISTANCE!
--------------


7. (C) The Central China Rising strategy -- supported by the
Central Government and the provinces of Henan, Hubei, Hunan,
Anhui, Shanxi, and Jiangxi -- aims to advance an artificial
construct, i.e., integrating the development of six provinces
that are otherwise not a natural economicunit. The Expo,
however, appeared to furthercement the ties between the
Central Government and the six provinces in their effort to
market Central China as a single entity. At a meeting with
multinational companies on April 25, Governor Li promoted
Central China as an investment destination, stating that 310
of the Fortune 500 companies and 300 of China's top 500
companies already have invested in the region.


8. (C) Other provincial leaders focused on Central China's
contributions in the sectors in which their respective
provinces hold comparative advantages. Anhui Governor Wang
Jinshan spoke of the importance of Central China as a
manufacturing hub. Zhou Qiang, Governor of Hunan Province,
emphasized the important role of tourism. Shanxi Vice
Governor Song Beishan focused on Central China as an energy
base. More than 40 multinational companies attended the
April 25 meeting, and Richard Hansmann, Vice President of
Siemens China and Chairman of the Executive Committee of
Foreign Invested Companies (CAEFI),represented the
multinationals, giving a positive assessment of the region's
natural and human resources.


9. (C) To further emphasize the purported synergies in the
Central China region, Zhengzhou Stadium hosted an Olympic
Opening Ceremony-like spectacle on April 26. The three-hour
presentation boasted star singers from all over China and
hundreds of performers from Central China's six provinces,
and highlighted the attractions of each of the six provinces
in televised promotional videos. The six provincial
governors all attended the extravaganza.

THE VIEW FROM INVESTORS: EASE THEIR PAIN
--------------


10. (C) Despite the Expo's public success, there was much
grumbling in private. Businessmen and diplomats complained
that logistically speaking, Zhengzhou was not adequately
prepared for the Expo. The Henan Provincial Government's
staff and volunteers were poorly organized and ill-prepared
for the large-scale event. Business representatives' views
on Central China's potential were, although positive in
public forums, more guarded in private discussions.


11. (C) Michael Barbalas, President of the American Chamber
of Commerce in China, told Econoff that 23 companies
participated in the Expo, and while they were favorably
impressed with Zhengzhou's infrastructure, they remain

BEIJING 00003085 003 OF 003


concerned about transparency. Goh Hung Song, Chief
Representative of APL Logistics China, attended the Expo as
part of the United States-China Business Council (USCBC)
delegation, and lamented that only 13 members of USCBC had
elected to participate. Wang Zhaohua, Vice President of
Michelin China, said that Michelin has little interest in
Central China but was encouraged to attend the Expo by the
Ministry of Commerce. Christopher Hassall, based in
Guangzhou as Vice President of Procter and Gamble's Greater
China External Relations Office, told Econoff that his
company might not have been represented at the Expo were it
not for a new village distribution agreement in Henan
Province that Procter and Gamble is about to finalize.

COMMENT: CENTRAL CHINA A MIXED BAG, ZHENGZHOU BOOMING
-------------- --------------


12. (C) We see a mixed result in the second Central China
Expo. On one hand, it underlined that the region still has
its difficulties, including, despite provincial officials'
claims, an over-reliance on the state-owned sector, lack of
transparency, and inexperience with wooing investors, not to
mention that the six-province Central China construct remains
largely an artificial political creation. However, the
marketing of Central China as a unit does appear to be
gaining at least some traction with the private sector. The
city of Zhengzhou itself appeared to be far more successful
than Changsha in demonstrating an ability to attract
commercial interest. Logistical difficulties
notwithstanding, the city appeared to use the Expo to
showcase that it is on the way to becoming the number two
economic hub in Central China after Wuhan. Zhengzhou will
need to address some of its shortcomings in the near-term,
however, to ensure that it is able to lure investors from
Hong Kong, Taiwan, coastal China, and elsewhere if it is to
prove that it is more than just a field of dreams. End
Comment.
RANDT