Identifier
Created
Classification
Origin
09BEIJING1083
2009-04-23 04:15:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Beijing
Cable title:  

INNER MONGOLIA GROWTH GOAL "ONLY" 13 PERCENT,

Tags:  ECON EAGR EPET PGOV CH 
pdf how-to read a cable
VZCZCXRO6735
RR RUEHCN RUEHGH RUEHVC
DE RUEHBJ #1083/01 1130415
ZNR UUUUU ZZH
R 230415Z APR 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 3607
INFO RUEHOO/CHINA POSTS COLLECTIVE
UNCLAS SECTION 01 OF 02 BEIJING 001083 

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EAGR EPET PGOV CH
SUBJECT: INNER MONGOLIA GROWTH GOAL "ONLY" 13 PERCENT,
SLEEPY AG EXPO REFLECTS TOUGH TIMES FOR CHINA'S DAIRYLAND

Sensitive but Unclassified, please protect
accordingly. Not for Internet publication, not for
distribution outside USG.

Summary
-------

UNCLAS SECTION 01 OF 02 BEIJING 001083

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EAGR EPET PGOV CH
SUBJECT: INNER MONGOLIA GROWTH GOAL "ONLY" 13 PERCENT,
SLEEPY AG EXPO REFLECTS TOUGH TIMES FOR CHINA'S DAIRYLAND

Sensitive but Unclassified, please protect
accordingly. Not for Internet publication, not for
distribution outside USG.

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


1. (SBU) Inner Mongolia Autonomous Region (IMAR)
officials claimed March 30 that, while the IMAR's
resource-based economy was faring better than that
of China's export-oriented regions, the province was
still feeling the ill effects of the global
financial crisis. Some VIPs present at the opening
of the 2009 Inner Mongolia Agricultural Expo
expressed doubt that the IMAR would achieve its GDP
growth target of 13 percent given dropping demand
for coal and electricity. Expo organizers told
PolOff the slow economy had made it difficult to
attract companies to this year's event and foot
traffic was sharply down. Interlocutors claimed the
IMAR's dairy industry had almost fully recovered
from last fall's tainted milk scandal, with one
official claiming that demand was back to 90 percent
of pre-scandal levels. Local contacts said the
economic slowdown offered an opportunity for the
IMAR to boost investment in clean energy, such as
wind and converting coal into less-polluting liquid
fuels. One official said China's stimulus package
had already created more orders for the IMAR's heavy
truck manufacturers. End Summary.

Background
--------------


2. (U) PolOff traveled to Hohhot, Inner Mongolia
Autonomous Region (IMAR) March 29-30 as part of
Embassy Beijing's Virtual Presence Post (VPP) Hohhot
program. In Hohhot, PolOff attended the opening
ceremony of the 4th Inner Mongolia International
Agricultural Expo.


3. (SBU) Expo organizers said the slowing economy
had made organizing this year's fair particularly
difficult. Expo officials told PolOff they managed
to maintain the same number of participating
companies as 2008 only by discounting the cost of
exhibit space. Nevertheless, they lamented that
foreign agricultural companies stayed away this year
because overseas firms have cut back sharply on
travel budgets. Of the 140 exhibitors, most were
based in Northeast China and roughly half were
headquartered in the IMAR. A single Japanese

veterinary pharmaceutical firm was the only non-
mainland Chinese or Hong Kong company present.
Exhibitors were mainly firms selling processed food,
alcoholic beverages, seeds and livestock feed and
equipment. After a surge of visitors immediately
after the morning opening ceremony March 30, foot
traffic dropped sharply by early afternoon and expo
officials told PolOff crowds were noticeably smaller
than last year.

Dairy Industry Recovering from Tainted Milk Scandal
-------------- --------------


4. (SBU) IMAR officials were eager to portray the
IMAR's dairy industry as mostly recovered from the
melamine tainting scandal of fall 2008. At the
expo, IMAR's two largest dairy companies, Yili and
Mengniu, occupied prime exhibit space right beside
one another. The scandal (which resulted in a life
sentence for Tian Wenhua, the former chairman of the
Sanlu Group, a now defunct dairy firm in
Shijiazhuang, Hebei Province) had hit IMAR's dairy
farmers hard, according to Lu Manshan, the head
organizer of the expo. Lu said for several weeks,
IMAR farmers were simply dumping milk down the drain
because consumer demand for dairy products had
collapsed. The IMAR government, Lu added, had
provided income subsidies to dairy farmers to help
them weather the scandal. The farmers, Lu said,
were innocent victims as it was milk wholesalers who
were guilty of watering down milk and then adding
melamine to show higher protein levels. Chen
Ruiqing, the former deputy chairman of the IMAR
People's Congress and current head of the IMAR
Socialism Institute (neimenggu shehui zhuyi
xueyuan),told PolOff that demand for milk had
returned to 90 percent of pre-scandal levels.

IMAR 2009 Growth Target "Only" 13 Percent

BEIJING 00001083 002 OF 002


--------------


5. (SBU) Chen and other officials with whom PolOff
spoke on the margins of the expo described the
IMAR's economy, based largely on resource extraction
and agriculture, as fairing much better than that of
export-oriented coastal provinces. For the past
decade, IMAR's economic growth rates have been among
the highest in China. Inner Mongolia enjoyed 17.2
percent GDP growth in 2008. IMAR leaders have set a
target of 13 percent for 2009. Yin Zhengye, retired
Party Secretary of the IMAR Finance and Economics
College (caijing xueyuan),told PolOff he thought
achieving the 13 percent target would be
"difficult." Yin noted that on March 18 the World
Bank reduced its overall 2009 GDP growth prediction
for China to just 6.5 percent, meaning China's
economy is slowing considerably. While the IMAR has
few exports, Yin said, the reduction in energy
demand in the rest of China would impact Inner
Mongolia's growth rate (note: the IMAR is a major
provider of coal and electricity to other
provinces). Chen Ruiqing, however, said the 13
percent target was achievable despite the global
financial crisis. Chen said the IMAR should use the
slowdown as an opportunity to encourage development
of clean energies industries such as wind. Chen
also viewed the global financial crisis as a chance
for IMAR to put more resources into developing
organic food, tourism, and other "green industries"
that would encourage better environmental
protection.

Stimulus Already Helping IMAR
--------------


6. (SBU) In Hohhot, PolOff met separately with Sun
Baoshan, Deputy Director of the IMAR Foreign Affairs
Office. Sun said IMAR was already benefiting from
the central government's RMB four-trillion stimulus,
mainly because the anticipated increase in
infrastructure projects had led to a surge in orders
for earth moving equipment and heavy trucks produced
by IMAR companies, especially Baotou North-Benz
Heavy-Duty Truck Ltd. Sun added that the IMAR
government also anticipated that construction would
begin on a new high-speed rail link between Hohhot
and Beijing, which would also give a boost to the
economy. Sun stressed IMAR's desire to develop
"clean energy" and noted the IMAR was investing
heavily in new technology to convert coal (IMAR has
the largest coal reserves of all of China's
provinces) directly to diesel and other liquid
fuels. Sun noted, however, that this technology
would only become cost effective if crude oil prices
were to rise sharply from present levels.
PICCUTA