C O N F I D E N T I A L SECTION 01 OF 03 SHANGHAI 000459

SIPDIS

SIPDIS

DEPT FOR EAP/CM, INR/B AND INR/EAP
STATE PASS USTR FOR STRATFORD, WINTER, MCCARTIN, ALTBACH, READE
TREAS FOR OASIA - DOHNER/CUSHMAN, WRIGHT
USDOC FOR ITA/MAC - A/DAS MELCHER, MCQUEEN
NSC FOR WILDER AND TONG

E.O. 12958: DECL: 7/20/2032
TAGS: PGOV PINR EINV ECON KIRF CH
SUBJECT: AMBASSADOR'S MEETING WITH ZHEJIANG PARTY SECRETARY ZHAO
HONGZHU

REF: A) 06 SHANGHAI 3843 B) 05 SHANGHAI 3779

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CLASSIFIED BY: Clark Randt, Ambassador, U.S. Embassy, Beijing,
Department of State.
REASON: 1.4 (b), (d)




1. (C) Summary: Ambassador Randt met with Zhejiang's new Party
Secretary, Zhao Hongzhu, in Hangzhou on July 9 and was hosted by

SIPDIS
Zhao for dinner on July 13. Zhao noted that, while relatively
small in size and population, Zhejiang contributes more than its
fair share to national GDP growth and tax revenues. One of the
main reasons for Zhejiang's success is its vibrant private
economy. Zhao, in response to the Ambassador's interest in how
the Zhejiang Government knows whether its citizens are satisfied
or not, explained how the provincial Letters and Visits Office
(LAVO) system in Zhejiang helps in that regard. Zhao's most
pressing concern for the province is improving the overall
livelihood of all of the province's people. End summary.

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Party Secretary Zhao on Zhejiang's Success
--------------


2. (SBU) During the July 9 meeting, Party Secretary Zhao
Hongzhu explained that Zhejiang is relatively small in terms of
geographic and population size, comprising 100,000 square
kilometers or only 1.96 percent of China's total land mass, with
a population of 49 million people or only 3 percent of China's
total population. Despite its relatively small size, Zhao said,
the province accounts for 7.5 percent of China's GDP and 6.5
percent of the national fiscal revenues. Zhejiang ranks number
four behind Beijing, Shanghai and Tianjin in terms of
contributions to China's total economic value. Zhejiang also

ranks fourth behind the three cities in terms of population
distribution with 56-57 percent of the population living in
cities.


3. (SBU) Zhao attributed Zhejiang's economic success to a
number of factors, including its highly-developed private sector
and its advanced manufacturing industry (mostly light industry,
such as textiles). The province also welcomes foreign
investment and encourages its companies to invest abroad. Total
investment by Zhejiang companies abroad has already reached 1.2
billion USD and 2,800 Zhejiang enterprises have already begun
internationalizing operations, including 2,500 private
enterprises. In addition, there are more than 5 million
Zhejiang people living outside of Zhejiang, including one
million living abroad and 4.4 million living in other Chinese
provinces. Agriculture accounts for 5.9 percent of Zhejiang's
economy, with industry and manufacturing accounting for 51
percent. Zhejiang's service sector, including transportation,
finance, etc., accounts for 40 percent of the provinces economy,
although the government is committed to enlarging the service
sector share.


4. (SBU) Zhao emphasized the importance of exchanges with the
United States, noting that Zhejiang has sister relations with
both New Jersey and Indiana. Zhao's predecessor, former
Zhejiang Party Secretary Xi Jinping, personally paid many visits
to the United States, including one last year, he said.
Zhejiang wants to speed up economic exchanges with the United
States. Motorola already has a plant in the province with 5
billion RMB (USD 670 million) per year in output and FedEx has
also established a hub in Hangzhou. Zhao is also focused on
expanding cultural and educational exchanges with the United
States, noting that Zhejiang is working to establish exchange
programs with Valparaiso University in Indiana and with King
University in New Jersey.

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Importance of Feedback Mechanisms
--------------


5. (SBU) Explaining that he understood the Ambassador is
interested in how the government receives feedback on its work;
Zhao offered an introduction to Zhejiang's Letters and Visits
Office (LAVO) system. The system grew up out of the pent-up
frustrations of the Cultural Revolution (1966-76). During that
period, no one was willing to complain, but since then, there
has been a flood of letters and visits, which has forced the
government to come up with a systemized way of handling them.
He noted that over the past 30 years, the Party and State

SHANGHAI 00000459 002.2 OF 003


Council have really come to care about what the public thinks
and now relies on the letters and visits system as a mechanism
to solicit public feedback (Ref A).


6. (SBU) Zhao explained that of China's 31 provinces, Zhejiang
ranks number 28 in terms of overall volume of letters and
visits. Only Shanghai, Hainan, and Tibet have fewer complaints.
Zhao said that as a sign of the great importance Zhejiang
places on resolving these issues, the province has adopted seven
measures governing the letters and visits system. First,
Zhejiang has "further removed obstacles and expanded channels
for letters and visits to allow greater expression of public
opinion." Zhao noted that 11 cities and 100 districts or
counties in Zhejiang have adopted a "1-2-3-4-5" complaint
hotline that puts people in touch with the mayor or
county/district head.


7. (SBU) Second, beginning in 2003, Zhejiang adopted a
"reception date" mechanism, whereby government and party leaders
receive complaints in person from aggrieved parties on a certain
date. Zhao noted that he himself would be doing this later in
the month. Third, Zhejiang has established a feedback
mechanism. After a complaint has been received, the receiving
letters and visits office must provide written notification
within 15 days to the complainant to advise whether the case has
been accepted. If the case is accepted, the letters and visits
office then must provide notification within 60 days to advise
the complainant of the settlement ofQhe issue. Zhao noted that
this only works in the case of signed letters. Anonymous
petitioners obviously can not receive feedback. However, their
complaints are given equal importance.


8. (SBU) Fourth, a letters and visits information system has
been established, allowing petitioners to track their cases
online. The provincial website is also linked to the state
letters and visits system. Fifth, Zhao said that for more
complex cases raised through the letters and visits system,
Zhejiang has begun implementing public hearings. Sixth,
Zhejiang has implemented an upward feedback channel, where
information from the letters and visits on complaints is
collected, analyzed, and reported to senior provincial leaders.
Zhao said that the provincial leadership treats letters and
visits as a good way to check its work, evaluate its
decision-making and find areas it needs to rectify. Finally,
Zhejiang has improved the supervision of letters and visits
settlements. Settlements are conducted by interview and require
the consent of three parties: the complainant; the defendant;
and the accepting agency.


9. (SBU) The Ambassador expressed appreciation for Zhao's
briefing and the arrangements for his visit. He agreed with
Zhao's assessment that U.S.-China relations were developing in a
positive direction. He noted the growing American business
presence in Zhejiang Province and welcomed the support Zhejiang
has given to those companies. He emphasized that the United
States is open for investment and urged more Zhejiang companies
to consider investing in the United States. The Ambassador also
stressed the importance of expanding educational exchanges.

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Putting People First: Zhejiang's Greatest Concern
--------------


10. (C) During the July 13 dinner, Zhao, in response to the
Ambassador's question, told the Ambassador that improving the
livelihood of all of Zhejiang's residents was his greatest
challenge. This meant not just developing the economy but also
implementing Scientific Development principles. Zhao listed
employment, social security, healthcare, and low incomes in the
countryside among his primary foci. According to Zhao, in 2006,
Zhejiang collected more than 20 billion RMB in taxes and spent
more than 80 percent of it on improving people's livelihoods.


11. (C) One of the programs Zhejiang is focused on at present
is implementing a new health insurance system in the
countryside. The majority of the cost is borne by the
government, but participants are also required to pay a certain
amount for their insurance. The target is to have every person
see a doctor for a routine physical every two years as a
preventative measure. Zhao said he visited Yandong Village and
was told that there the program is going so well that residents
are having physicals annually. Zhao also noted that a similar
government/individual sharing insurance program is being set up

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for housing in the countryside to provide insurance against
floods, hurricanes and other disasters.


12. (C) Zhao noted that Zhejiang is doing better than average
in terms of narrowing its income gap. The provincial income
differential compared favorably to the national average. In
some locations, such as Jiaxing and Huzhou, the ratio was even
better. Zhao set a goal of improving the livelihood of
Zhejiang's most disadvantaged people. Although the late leader
Deng Xiaoping said it was acceptable for some to get rich first,
that goal had been met and it is time to help those who have
been temporarily left behind. One group that Zhao singled out
as needing specific attention in Zhejiang is the Shezu minority,
a small minority group in China with a population of 100,000 who
reside in Jingning autonomous county.


13. (C) Part of "putting people first" also means fighting
corruption. In the recent plenary session of the Zhejiang
Provincial Party Congress, Zhao announced five areas with 19
specific guidelines for behavior, noting that they must be
followed strictly. Zhao said he told those present that "if you
violate any one of these, I will show you no mercy."

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A Stable China Important to U.S.-China Relations
--------------


14. (C) The Ambassador observed that a stable China was good
for the United States, for the world economy and for world peace
and prosperity. He said that the United States has no interest
in containing China's economic growth or splitting China.
SCHUCHAT