PRC-DPRK BORDER: BIG PLANS FOR 2ND BRIDGE AND

C O N F I D E N T I A L SECTION 01 OF 02 SHENYANG 000216

SIPDIS

DEPARTMENT FOR EAP/K, EAP/CM, INR

E.O. 12958: DECL: TEN YEARS AFTER KOREAN UNIFICATION
TAGS: CH EAID ECON EIND ETRD EWWT KN KS PBTS PREL
SUBJECT: PRC-DPRK BORDER: BIG PLANS FOR 2ND BRIDGE AND
DEVELOPMENT ZONE, SOBER REALITIES FOR TRADERS AND NGOS

Classified By: Acting Consul General Dannielle R. Andrews.
Reasons: 1.4 (b) and (d).


1. (C) SUMMARY: Premier Wen Jiabao's October 4-6 meetings in
Pyongyang produced a joint PRC-DPRK agreement to build a second
bridge across the Yalu River. During ConGenOffs' recent trips
to Dandong, officials openly discussed their development plan
to include the to-be-built bridge, estimating a May or June
2010 start date. However, they later toned down their assessment.
Traders and aid groups expressed skepticism about the bridge and
its collateral benefits. END SUMMARY.


2. (U) ConGenOffs traveled to Dandong City and Donggang Port
in late November to observe the Dandong New Town Development
Zone, Donggang International Port, and meet with consulate
contacts. Dandong City and Dandong New Zone officials feel
that with the elevation of Vice Premier Li Keqiang's "Five
Points One Line" project to national-level status, the time
is now right for Dandong to take its place as a premier
gateway to the Pacific Ocean for Liaoning, Jilin, and
Heilongjiang Provinces. High-speed railways are planned from
Dandong to Shenyang and Dalian. Officials were confident about
their ability to attract foreign investors and they foresee
Dandong thriving within in the next 3-5 years. One official
said that, in ten years time, Dandong will become a top-tier
commercial city.

PRECISION INSTRUMENTS AND PRECISE TIMING
--------------


3. (SBU) Dandong City and New Zone officials discussed plans
for the region to become a global center for the production
of precision measurement instruments, with a goal of reaching
RMB 100 billion worth of annual production. When asked how
it would compete with Dalian, the Northeast's economic
powerhouse, officials were careful to say that their
production of precision measurement instruments will not
compete. "We will concentrate on this production, Dalian-based
companies do not produce the same things, so no problem,"
an official added. Precision instrument companies, minimum
investment is RMB 30 million and a ten year commitment. Their
attraction strategy includes the customary China-wide special
economic zone policies tax rebates on initial capital invested,
free and discounted rent for a specified length of time, deeply
discounted warehouse pricing, and tax-free status for the
first five years of profitability. Companies could also
enjoy another five years of rent at a 50 percent discount.
Companies seeking to invest in other industries within the
zone face no such minimums and could qualify for preferential
treatment based on provincial or national laws, but would
receive no special treatment from the zone. Upon further
questioning, officials would not detail their zone's special
treatment of projects, which types of projects warrant their
special attention, nor why.


4. (SBU) As evidenced by the Hong Kong-invested hospital and
residential buildings, the Japanese-invested hotel, and the
French watch manufacturer, all under construction in the
zone, foreign investors seem to see Dandong's potential as
well. According to officials, more than 100 companies have
already invested in the zone, with about 20 percent of total
investment coming from Western companies, such as Canada,
the U.S., Germany, and France. The Canadian and American
investments have come from overseas Chinese. Other foreign
investments have come from South Korean and Singaporean
sources. They noted that they would soon meet with other
potential investors. To support the zone, officials said
Dandong City and Provincial government buildings and housings
will be moved into the zone. Construction is underway. To
further bolster support in the zone, construction of a
technical middle and high school, and a measurement and
instrument college is nearly complete. Graduates from the
college and other northern China universities will soon
enjoy the planned Entrepreneurial High Tech Zone, in which
they will be provided low-cost space to pursue "fast
development of high-tech ideas."

EBULLIENCE ABOUT THE NEW BRIDGE HARD TO CONTAIN
-------------- --


5. (C) From the outset of our meetings, one New Zone official
spoke excitedly about the new bridge from China into North
Korea to be built in this zone. During his 3-D model

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presentation of the area, he showed ConGenOffs how the
bridge will link to a main road leading towards the
Shenyang-Dandong and Dalian-Dandong highways. He even
ventured a guess as to how the road would link to a major
DPRK highway. According to him, construction by the
Ministry of Communications is planned to begin in May or
June 2010. Upon further questioning by ConGenOffs (and stern
looks from the accompanying foreign affairs officer (FAO),
the zone official toned down his assessment saying that
important details such as the exact location and questions
of which side will be responsible for what part of
construction and what part of payment have yet to be settled.
The FAO further clarified during a later meeting that what
the zone official meant to tell us was that, "if everything
goes as planned, as it was announced, bridge construction
could start in May or June of 2010." Given the speed with
which construction in the zone has already been undertaken,
further development does not depend on the new bridge.

SECOND FRIENDSHIP BRIDGE? LOCALS SAY WAIT AND SEE
-------------- --------------


6. (C) A more measured assessment of the bridge came from
AmCit NGO contact Dr. Byung Ho Ahn of the Spiritual
Awakening Mission - Christian Medical Welfare Mission (SAM-
CMWM). Dr Ahn said he heard that Chinese authorities were
making progress with plans for the long-awaited new bridge,
but acknowledged that, based on his experience in this
sensitive region, the DPRK central government would be less
enthusiastic about moving forward. Dr. Ahn, the SAM-CMWM
manager of a hospital serving rural impoverished villages
in Liaoning Province, said his local DPRK contacts across
the border in Sinuiju were excited about the bridge as it
was something that the DPRK provincial commerce departments
had always supported. More importantly, as it appeared that
the Chinese would bear all associated costs with construction,
they stood to benefit from Chinese infrastructure development
on their side of the border. Ahn reserved judgment as to whether
the bridge and all that is hoped it will bring, will really
come to fruition.


7. (C) Finally, Dandong native An Shengyi (please protect),
a Sino-Korean trader whose cross-border trade business
relies heavily on current land bridge traffic, told
ConGenOffs he had not heard details about the new bridge.
He said he suspected there were "still too many unknowns."
When we pointed out public Chinese optimism about the
project, An said the construction of the bridge is "still
all up to the North Koreans" and given his prior experiences
dealing with the DPRK, neither he nor his trading
colleagues had confidence that the bridge would be built as
announced, if at all. Further, An detailed how years ago,
Liaoning Province asked the North Koreans to split the costs of
bridge construction and was flatly rejected. On the second
try, Beijing offered to pay for the bridge itself, but asked
the North Koreans to foot the bill for related buildings and
other structures, which North Korea again rejected. An said
that he heard from other (and well-connected) Chinese
traders that the DPRK only agreed to the deal when Wen
Jiabao offered to not only pay for the bridge, related
warehousing facilities, and new customs complexes, but also
to foot the bill for 20 kilometers worth of new North Korean
roads, from the bridge approaches inland. (NOTE: On the North
Korean side of the border, the bridge terminates in an
undeveloped, rural part of Sinuiju City, roughly 20 km away
from the existing Sino-Korean Friendship Bridge but close
to the Pyongyang-Sinuiju highway. END NOTE.)

ANDREWS