UNCLAS SECTION 01 OF 02 SHANGHAI 000298

SENSITIVE
SIPDIS

STATE FOR EAP/CM AND EB
STATE PASS USTR FOR STRATFORD/WINTER/ALTBACH/KATZ
DOC FO ITA - DAS KASOFF, CMCQUEEN, ESZYMANSKI
TREASURY FOR OASIA - DOHNER/HAARSAGER/CUSHMAN
NSC FOR KURT TONG, JONATHAN SHRIER
TREASURY FOR OASIA - CUSHMAN, WINSHIP

E.O. 12958: N/A
TAGS: PGOV EINV KIPR ELAB ETRD ENRG EWWT CH
SUBJECT: NANJING LEADERSHIP SEEKS CLOSER U.S. TIES

SHANGHAI 00000298 001.2 OF 002


(U) Sensitive but unclassified. Not for dissemination
outside USG channels; not for Internet distribution.


1. (SBU) Summary. During the Consul General's July 30 visit to
Nanjing, Mayor Jiang Hongkun and Vice Mayor Jin Daoqiang pushed
for an increased U.S. commercial and diplomatic presence in
Nanjing. A U.S. Consulate in Nanjing would be useful in
deepening cultural and economic ties said Mayor Jiang.
According to Vice Mayor Jin, although the weak U.S. economy has
affected Nanjing's economy, the overall economy remains stable.
Vice Mayor Jin emphasized that the Nanjing Government
understands the importance of IPR protection, rule of law and
good governance to maintaining a good business environment and
is committed to making improvements in these areas. Jin said
the government is increasingly focused on three criteria when it
evaluates local leaders: the state of the environment, people's
livelihood, and grassroots assessments of performance. End
Summary.

U.S. Companies Welcomed
--------------


2. (U) The Consul General paid a farewell call on Nanjing Mayor
Jiang Hongkun on July 30. Jiang thanked the Consul General for
his efforts to bolster Nanjing's economic and cultural
connections to the United States. Commenting on his May trip to
the United States, Jiang said he visited Seattle, Dallas, and
sister city St. Louis. He expressed a keen interest in
establishing direct passenger and cargo flights from the United
States to Nanjing, but realized that civair links are a matter
handled by Beijing.

U.S. Consulate in Nanjing Welcomed
--------------


3. (U) Mayor Jiang urged that the USG establish a Consulate in

Nanjing as soon as possible. Nanjing has strong cultural and
economic ties to the United States and a Consulate would help
strengthen these ties. The Consul General noted that the United
States also wanted to strengthen ties with Nanjing, and toward
that end, in March had established a Virtual Presence Post (VPP)
in Nanjing. During the subsequent lunch with Vice Mayor Jin,
the CG provided examples of material on the VPP.

Nanjing Feels U.S. Economic Pain
--------------


4. (SBU) Following the meeting with Mayor Jiang, Vice Mayor Jin
Daoqing hosted a lunch. According to Jin, Nanjing's economy is
suffering from the economic downturn in the United States.
Exports to the United States were down 15 percent during the
first half of 2008. Before the downturn, Nanjing's exports to
the United States had been increasing by 30 to 40 percent. Jin
complained that the RMB has appreciated too quickly and
expressed relief over recent indications that the RMB's rise
might slow down in the months to come.


5. (SBU) Vice Mayor Jin added, however, that Nanjing's economy
remains stable and continues to grow, albeit at a slower pace.
There has been no big increase in bankruptcies and unemployment,
as officially defined, remains at four percent. Businesses have
been forced to be very flexible in order to cope with current
economic conditions. For example, companies have negotiated
contracts that allow them some room for maneuver. Some will fix
prices to a certain exchange rate or renegotiate contracts.
There has also been a shift to the euro for denominating
contracts.

Energy Shortages & Wen Jiabao Visit
--------------


6. (SBU) Vice Mayor Jin said that Nanjing has recently suffered
from energy shortages. According to Jin, this is not due to a
shortage of capacity. The problem is an incoherent pricing
mechanism. For example, Jin noted the rising cost of coal but
the relative low price for electricity. Thus, some producers
preferred to produce less energy since they could only produce
at a loss. Asked about the recent Jiangsu visit by Premier Wen
Jiabao, Vice Mayor Jin offered few specifics. In terms of
Beijing's expectations, he said the Central Government's chief
economic goals are to avoid overheating and inflation. Given

SHANGHAI 00000298 002.2 OF 002


the global economic weakness, there was a push to increase
domestic consumption.

A Good Business Environment
--------------


7. (U) Vice Mayor Jin talked positively about U.S. companies,
noting that many big U.S. firms such as AIG, Emerson, and
McDonalds operated successfully in Nanjing. The Nanjing
Government understands the importance of developing a good
business environment and has made efforts to strengthen IPR
protection, improve rule of law and develop good governance. He
noted that Nanjing has its own IPR White Paper. When asked
about food and product safety, Vice Mayor Jin acknowledged
recent problems in these areas, but said this was an inevitable
part of a country's development. The United States went through
a similar stage thirty years ago, he said. Nanjing would like
to learn more about the U.S. experience as it works to fix
problems in this area. The city is committed to developing a
good business environment and welcomes further cooperation from
the United States in these areas.

Assessing Nanjing's Leaders
--------------


8. (SBU) According to Vice Mayor Jin, Jiangsu province uses a
battery of 28 criteria to assess local leaders. In terms of
general areas of emphasis, the three most critical overall areas
are the state of the environment, people's livelihood, and
grassroots assessments of local leaders. Jin said the municipal
government hires outside specialists to conduct polls, and
indeed, a look at the Nanjing Municipal Government website had
the results of a 2007 poll in which local citizens were asked to
evaluate 30 government agencies. (See
www.nj.gov.cn/other/test/dcwj/dcwj.htm.) Vice Mayor Jin added
that staff also provide input about the performance of their
supervisors.
JARRETT