AMBASSADOR'S MEETING WITH ZHEJIANG PARTY SECRETARY ZHAO

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 SHANGHAI 00000459 001.2 OF 003 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. -------------- 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. -------------- 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. -------------- 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 SHANGHAI 00000459 003.2 OF 003 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." -------------- 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