NONIMMIGRANT VISA DEMAND FALLS AS SOUTHERN CHINA ECONOMY

UNCLAS SECTION 01 OF 04 GUANGZHOU 000188 STATE FOR CA/VO, CA/EX,EAP/CM, EEB/CBA, EEB/ESC, ISN/CB, L, OES BEIJING FOR EXEC, CG, NIV, ECON, FCS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: CVIS CMGT ECON CH SUBJECT: NONIMMIGRANT VISA DEMAND FALLS AS SOUTHERN CHINA ECONOMY WORSENS REF: A) GUANGZHOU 42, B) GUANGZHOU 47, C) SHANGHAI 81, D) BEIJING 680, E) BEIJING 686 GUANGZHOU 00000188 001.2 OF 004 ¶1. (U) SUMMARY: Guangzhou has seen a 10.4 per cent decline in nonimmigrant (NIV) cases in the first half of FY2009; this contrasts with a 17.4 per cent increase in NIV cases during the same time frame in FY2008. While tourist and business visa (B1/B2) applications dropped by 14.9 per cent, student (F1) visa applications increased 22.1 per cent. As other Mission China posts have reported (reftels),the recent slowdown in visa demand is most likely due to the effects of the global economic crisis. China's leadership is determined to maintain economic growth and that means, especially if Beijing's stimulus package works here in the south, the slowdown in visa demand could well be temporary. End summary. ECONOMY AFFECTS TOURIST AND BUSINESS TRAVEL -------------- ¶2. (SBU) The Guangzhou consular district includes 220 million people and covers the provinces of Guangdong, Fujian, Hainan and Guangxi Zhuang Autonomous Region. Guangdong is China's richest province; its capital, Guangzhou, lies at the heart of the huge manufacturing area known as the Pearl River Delta (PRD). With the world's demand for Chinese goods declining, factories are closing in the region and unemployment is rising (Reftel A). The connection with visa demand seems obvious: fewer business people going to America and overall visa adjudications declining by 10.4 per cent in FY2009, compared to a 17.5 per cent increase during the first half of FY2008. Business and leisure travel to the U.S. has declined by almost 14.9 per cent thus far in FY2009 versus the same period in FY2008. This is in sharp contrast to previous years, when B1/B2 travel experienced sustained annual growth. CHINESE GOVERNMENT (WAIBAN) OFFICIAL TRAVEL CURBED -------------- -------------- ¶3. (SBU) Compared to the first half of FY2008, there has been a dramatic 46.3 per cent decrease in Chinese government official travel in FY2009, primarily due to a recent central government edict that government officials can travel in groups no larger than six and can visit one country for no longer than five days. According to contacts in the Guangdong Foreign Affairs Office (FAO),China is cracking down on wasteful spending and looking more carefully into official travel to determine whether overseas trips are warranted. The new travel policies require Chinese officials to spend at least 70 per cent of their trips on business and they must return their official passports to the FAO within seven days of returning home. AMERICAN CHAMBER OF COMMERCE TRAVEL ALSO SLOWING DOWN -------------- -------------- ¶4. (SBU) The American Chamber of Commerce South China (Amcham) consists of more than 1,650 business members, with 280 firms participating in our Business Visa Program. A recent Amcham report on the State of Business in South China notes that 72.5 per cent of the organization's members are focused on providing goods and services for the domestic Chinese market, rather than for export. In recent years, Amcham visa adjudications have grown steadily at about 15% per year. However, in the first half of FY2009, AmCham-related visa adjudications dropped by 4.8 per cent as compared to the same period in FY2008, including a 53 per cent year-on-year drop for the months of January and February. MANTIS SAO ADMINISTRATIVE PROCESSING TIME INCREASING -------------- -------------- ¶5. (SBU) From 2005 to 2008, approximately 7 per cent of the total annual Amcham visa applicants required special administrative processing (Mantis SAOs). The ratio of Mantis SAO cases at this GUANGZHOU 00000188 002.2 OF 004 post is relatively lower than other China Mission posts due to the unique composition of the export-oriented manufacturing and business community here. Nevertheless, Guangzhou's number of Mantis cases has continuously risen, from 2,100 in FY2005 to 3,504 requests in FY2008, representing a total increase of 66 per cent. The PRD region is home to a number of major domestic and foreign technology companies, and many employees of non-Amcham firms also face SAO processing; there are hundreds of annual Mantis SAO clearance requests for Huawei employees alone. Currently, Mantis SAO processing time is about sixteen weeks. While companies and employees have grudgingly accepted longer administrative processing times and generally applied earlier than in the past, many business travelers have been turned away because the necessary Mantis SAO cannot be processed in time. PETITION VISA CONTRADICTIONS, ECONOMY TO BLAME? -------------- -- ¶6. (SBU) Petition-based applications for skilled workers (H1) and intra-company transferees (L1) fluctuate depending on the individual categories, given that these petitions are employment-based. A majority of Post's H applicants are former students who received their college or graduate degrees in the United States. Comparing the first half of FY2009 to the same time frame in FY2008, H1B applications increased by 2.7 per cent while L1 applications decreased by 4.1 per cent. We believe fewer Chinese companies are opening offices in the U.S. at this time, probably as part of their broader response to the global economic downturn (Reftel A). This would help explain why L1 applications have seen a larger decline than H1B applications. INCREASE IN C1/D APPLICANTS -------------- ¶7. (SBU) As more Chinese airlines begin direct flight services from the mainland to the West Coast of the United States, Guangzhou has seen an increase in C1/D issuances. Some of China's fastest growing airlines are headquartered in Guangzhou's consular district. China Southern Airlines, which partners with Delta and is a member of the SkyTeam Alliance, has daily direct service from Guangzhou to Los Angeles; Hainan Airlines serves Seattle via Beijing; and China Southern has also acquired a daily Tokyo/Narita flight when its alliance partner, U.S.-based Northwest Airlines, gave up the route. With Chinese airlines expanding internationally, Guangzhou has experienced a corresponding doubling of crew and transit visa cases. Other recipients of the C1/D crew and transit visas are mainly comprised of freighter seamen from Fujian Province. Most of these applicants have prior travel to the U.S. and are generally considered to be bona fide visa applicants. STUDENTS STILL WANT TO ENTER THE U.S. -------------- ¶8. (SBU) Student visa applications continue to defy the downturn seen in other visa categories. The U.S. remains a highly attractive destination for study, especially now that the dollar's value has weakened against China's Renminbi. Student visa applications continue to increase each year. -- Comparing FY2008 to FY2007, student visa adjudications increased by 31.4 per cent. -- Comparing the first half of FY2009 to the same period in FY2008, the increase is 22.1 per cent over last year's adjudications. ¶9. (SBU) The J-1 exchange visa category covers a broad range of applicant types ranging from au pairs and college students working in a summer work/travel program to college professors doing research at U.S. universities. The J-1 visa category continues to enjoy modest yearly increases regardless of economic conditions. This may be attributed to the fact that people in academia, whether teaching or studying, are relatively immune from the economic downturn. Post GUANGZHOU 00000188 003.2 OF 004 issued 23.3 per cent more J-1 visas in FY2008 compared to FY2007, and the first half of FY2009 is showing a 39.5 per cent increase over prior year's levels. NIV APPOINTMENT DEMAND DROPS IN FY2009 -------------- ¶10. (SBU) Comparing the first six months of FY2008 with FY2009, 81 per cent of available appointment slots were filled while only 69 per cent of appointment slots have been filled thus far in FY2009. Since the beginning of FY2009, Post's capacity allows most applicants to schedule an appointment within a few days. Currently, most categories enjoy almost no waiting periods. New applicants are able to schedule an interview within 2 days and applicants who had been previously refused have a wait time of 9 days. NIV DEMAND IN FY2008 AND FY2009 (OCT TO MAR PERIOD) FY2008 FY2009 -------------- -------------- TTL APPT AVAILABLE 46,271 30,438 TTL APPT BOOKED 37,660 20,949 DEMAND 81.3% 68.8% TOTAL NIV ADJUDICATIONS IN GUANGZHOU -------------- FY2006 FY2007 FY2008 FY2008 FY2009 Oct/Mar Oct/Mar -------------- -- -------------- -------------- -------------- -------------- B1/B2 61,549 65,208 72,211 32,432 27,614 C1/D 252 325 386 524 920 L1 5,816 7,860 10,539 2,922 3,567 H1B 823 887 927 512 526 J1 1,159 1,532 1,889 560 781 L1 346 321 502 241 231 All Classes 72,871 79,087 92,937 38,473 34,462 AmCham 2,646 3,068 3,266 1,382 1,316 Waiban 11,054 11,788 9,296 5,511 2,959 INCREASE/DECREASE IN GUANGZHOU'S NIV ADJUDICATIONS -------------- -------------- FY2006 FY2007 FY2008 FY2009 Oct/Mar -------------- -------------- -------------- -------------- B1/B2 14.6% 5.9% 10.7% -14.9% C1/D -79.7% 29.0% 18.8% 75.6% F1 50.9% 35.1% 34.1% 22.1% H1B 45.1% 7.8% 4.5% 2.7% J1 1.0% 32.2% 23.3% 39.5% L1 32.6% -7.2% 56.4% -4.1% All Classes 15.5% 8.5% 17.5% -10.4% AmCham 15.7% 15.9% 6.5% -4.8% Waiban 37.1% 6.6% -21.1% -46.3% COMMENT: WHAT NEXT? -------------- ¶11. (SBU) We agree with Embassy Beijing's analysis (ref D) that, while we might see slower growth this year as the global economic crisis impacts visa demand, China's economy could well recover more quickly than other countries, thus triggering a recovery in visa demand. Furthermore, China's leadership has announced its intention to maintain an annual economic growth rate in the upper single digits to avoid the potential for social unrest. These factors suggest strongly that the drop in visa demand is a temporary one. GOLDBERG GUANGZHOU 00000188 004.2 OF 004 1