JILIN GOVERNOR FOCUSES ON THE ECONOMY AND U.S.

C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 000614 SIPDIS E.O. 12958: DECL: 03/10/2034 TAGS: PGOV ECON SOCI CH SUBJECT: JILIN GOVERNOR FOCUSES ON THE ECONOMY AND U.S. INVESTMENT AT LUNCH WITH CHARGE REF: A. 08 SHENYANG 138 ¶B. 08 SHENYANG 123 Classified By: Charge d'Affaires Dan Piccuta. Reasons 1.4 (b) and (d). SUMMARY -------------- ¶1. (C) Jilin Governor Han Changfu focused on his province's plans for coping with the global financial crisis and attracting U.S. investment during a March 9 lunch hosted by the Charge d'Affaires on the margins of the National People's Congress (NPC). Jilin was experiencing an economic downturn because of the financial crisis, Han said, but the impact had been less severe because exports play a relatively minor role in Jilin's economy. Jilin's RMB 40 billion portion of the central government stimulus package would be used in eight sectors, including infrastructure and services. Increasing domestic consumer demand would be difficult because of the propensity of Chinese citizens to save and the still-inadequate social safety net. Jilin's migrant labor problem was manageable through new infrastructure projects and programs to retrain workers and find them jobs. The Governor said he would visit the United States later this month in an attempt to attract investment. Jilin's border with North Korea was "stable," Han said, appearing unconcerned about DPRK-related issues. End Summary. CORE THEMES: FINANCIAL CRISIS, STIMULUS PACKAGE -------------- --- ¶2. (C) The Charge d'Affaires hosted a lunch on March 9 for Jilin Governor Han Changfu, who was in Beijing as a leader of the Jilin provincial delegation to the ongoing National People's Congress (NPC). In response to the Charge's welcome to Governor Han as the first PRC official to be hosted for a meal in the new Embassy chancery, the Governor said he was honored and agreed with the hope that the meal would inaugurate a "new era of good relations" between the United States and Jilin Province. Han was accompanied by his Vice Governor, Chen Weigen, the head of Jilin's Economic and Technology Cooperation Bureau, Li Tie, and chief of the province's Foreign Affairs Office, Fan Fei. ¶3. (C) Jilin, like other areas in China, was experiencing an economic downturn because of the global financial crisis, but because exports play a relatively minor role in Jilin's economy, the impact had been less severe there than in many other parts of China. Jilin had set a target of 12 percent �A;GDP growth for 2009, and although the province had encountered economic "problems" in the first two months of this year, Han echoed the rhetoric of central leaders in stating that he was "full of confidence" that Jilin could effectively manage the downturn and meet its production goals. Jilin's plan for using its 40 billion RMB share of the central government's fiscal stimulus package will focus on eight sectors, including service industries and infrastructure, Han said. CONSUMPTION VS. SAFETY NET -------------- ¶4. (C) In response to a question about how Jilin is implementing the central government's policy of increasing domestic demand, particularly consumer spending, Governor Han stated that this was an "imposing challenge" for China, given the high priority Chinese people put on savings. Jilin's consumption growth rate is up 18.5 percent over the last year, Han claimed, but it would take years to generate a "consumption mentality" among China's population because of continuing concerns over the lack of an adequate social safety net. (To underscore this point, Han noted that bank lending in the province had grown a healthy 20 percent, year-on-year, in the first two months of 2009 but that savings had increased by the same amount.) The provincial government's challenge was to raise the level of social welfare enough to convince people that they should consume more, but this was very difficult. The province was increasing unemployment and medical insurance and was making progress in the central government-sponsored pilot project for pension reform in state-owned enterprises. Han said seven in 100 Jilin citizens receive the minimum welfare allotment (dibao) but that the amount was small, and that 60 percent of rural dwellers still lacked adequate social insurance of various kinds. MIGRANT LABOR PROBLEM MANAGEABLE -------------- ¶5. (C) Like other provinces, Jilin's unemployed migrant BEIJING 00000614 002.2 OF 003 laborers are returning home because of the economic downturn, and the province is implementing a plan to manage the problem, Han stated. To date, some 175,000 laborers have returned from other provinces, and many more have returned to the countryside from Jilin cities. Investment, according to Han, was the key to solving the unemployment problem, and therefore was also the most effective means of reducing instability caused by "labor problems." ¶6. (C) The province is taking the following four measures to assist migrant workers to find jobs: A) many will be hired to work on infrastructure projects that will be funded by the central government's fiscal stimulus package; B) Jilin has established a retraining program for migrant workers, which includes the allocation of RMB 50 million to fund vouchers that workers can spend on training programs; C) migrant workers are being encouraged to "be creative" in opening their own businesses; and D) the provincial government is helping workers find jobs in other provinces. JILIN ECONOMY -------------- ¶7. (C) Jilin's per capita income was above the national average, Governor Han said, with auto production, at ONE million units per year, accounting for 25 percent of industrial production. Oil, petro-chemicals, pharmaceuticals and agriculture were other major industries. Han said he was emphasizing the expansion of grain-processing and commercial agriculture. He claimed that the central government's 2003 "Revitalize the Northeast" plan to further reform and privatize state-owned enterprises had shown steady progress in Jilin, with GDP growth increasing each year since 2003 and reaching 15 percent last year ) also above the national norm. Han noted that government revenues continued to grow by high double digits this year, indicating few financial worries for the infrastructure program. ¶8. (C) While corn figures prominently in the province's commodity grain production, the vast majority is processed for food. Han said the demands of the domestic market for processed corn were great and there was little left for export or bio-fuels. (Note: Ref A provides further discussion of corn issues). In response to a question on whether Jilin was considering expanding its bio-fuel production from corn, the Governor responded that this would be difficult given the demands of the domestic market and limits imposed by Jilin's agricultural conditions on expanding corn production. (Note: Han did not mention that the central government prohibits the use of corn for production of bio-fuels such as ethanol.) BID FOR U.S. INVESTMENT -------------- ¶9. (C) The Governor noted that with urbanization proceeding apace in Jilin and extensive plans for new infrastructure projects, investment opportunities in the province were expanding. Han said he would lead a delegation to the United States this month in an effort to attract investment for Jilin, and, in response to the Charge's encouragement for U.S.-China collaborative efforts in tackling Jilin's economic downturn, asked for suggestions, especially for "large" U.S. companies that might be willing to invest. ¶10. (C) Foreign Commercial Service Minister Counselor William Brekke encouraged Han to focus on U.S. industries that were a good match for Jilin's current needs. In particular, he suggested that Han consider the many small U.S. auto parts manufacturers who provide the parts to major U.S. automakers, noting that these companies were often not well known. Brekke also recommended that Jilin consider large U.S. companies that process corn as well as those in industries often found in conjunction with corn producing regions and in which the United States has considerable expertise, such as large-scale dairies and associated spin-offs, to include ice cream, corn sugar and biogas production; wind farms; renewable fuels; and tourism, to include development of Jilin's summer resorts. NORTHEAST ASIA ECONOMIC EXPOSITION -------------- ¶11. (U) In September 2009, Governor Han announced, Jilin will hold its fifth Northeast Asia Export Exposition whose purpose is not only to attract outside investment and promote greater trade and economic exchange in Northeast Asia but also to foster broader regional cooperation. Han extended an invitation for the Charge to attend, encouraged strong U.S. participation and asked for recommendations on whom to invite. Han said that 56 countries and some international BEIJING 00000614 003.2 OF 003 organizations would take part. The annual Exposition is a cooperative venture between the State Council and the Jilin Government and is co-sponsored by the National Development and Reform Commission and the Ministry of Commerce. (Note: Ref B provides further details on last year's meeting.) DPRK BORDER -------------- ¶12. (C) In response to the Charge's question about Jilin's border with North Korea, Governor Han merely replied that China had "long borders with both the DPRK and Russia," claiming that the borders were "stable." Han maintained that local governments in border areas had "cooperative" relations with their respective foreign counterparts. The central government was always attentive to such issues but there were "no major problems." The border policies, Han said, were based on long-term goals and the principle of "peace, development and cooperation." BIOGRAPHICAL INFORMATION -------------- ¶13. (C) Confirming educational data in his official biography, Han said he studied law during his post-graduate years, commenting that Chinese law is mostly economic management, with his legal training consisting of 70 percent economics and 30 percent law. Han said he visited the United States for 10 days in the 1990s in a "youth leader exchange" at the invitation of the U.S. Government, as he was doing "youth work" at the time. (Note: Han spent 15 years in the Communist Youth League (CYL) and was a member of the CYL Standing Committee.) ¶14. (C) Han noted that during his 20-year tenure in PRC "central ministries," he visited more than half of China's counties in all parts of the country. (Note: In addition to his CYL work, Han held positions in the Central Committee's Leading Group on Financial and Economic Affairs and as Vice Minister of Agriculture) This experience impressed on him the fact that large cities on the coast and in the south were the main beneficiaries of the economic development of the past 30 years. "Many" parts of China, he said, were "very backward," especially in the west, and this was a problem China needed to tackle, Han observed. ¶15. (C) Han appeared to be in good health, was on top of his brief and was articulate. He was generally responsive to the Charge's questions but did not venture beyond the specifics that were raised. Han did not invite his Vice Governor or Economic and Technology Cooperation Bureau head to participate in the discussion, turning only once to the Economic and Technology adviser to confirm a statistic. Han drank very little of the wine in his glass, joining only in the several toasts. Han appeared to understand very little English. PICCUTA