CHINA/ECONOMY: HU JINTAO RECONFIRMS ECONOMIC

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 000310 SIPDIS PACOM FOR FPA PICCUTA NSC FOR LOI E.O. 12958: DECL: 02/05/2025 TAGS: ECON PGOV PREL CH SUBJECT: CHINA/ECONOMY: HU JINTAO RECONFIRMS ECONOMIC RESTRUCTURING REF: OSC/CPP20100203004009 Classified By: Economic Minister Counselor William Weinstein. Reason 1. 4 (a and d) ¶1. (C) SUMMARY: In a major February 3 speech at the Central Party School, President Hu Jintao called for the ministers and top provincial leaders present to accelerate China's economic structural adjustment. While acknowledging the impact of the financial crisis, Hu emphasized that the crisis had not changed overall global development trends and China's need to accelerate reforms left moribund over the past year. Some observers assessed the speech was intended to underscore for the party membership the leadership's strong support for continued economic reform, restructuring and rebalancing of the economy toward stronger domestic demand. END SUMMARY. The Speech: Gathering at the Party School -------------- -------------- ¶2. (SBU) Chinese President Hu Jintao on February 3 delivered a major policy speech to top leaders, ministers and provincial authorities at the Central Party School (Reftel). Vice President Xi Jinping presided over the event. In his remarks--which were covered prominently in local Chinese-language media--Hu claimed that the financial crisis had borne heavily on China. But he asserted that the crisis had not altered fundamental global economic growth trends, which mandated that China remain open to the outside world. Further, China had to lay the groundwork for a sustainable future by boosting domestic demand and improving the welfare of the common people. ¶3. (SBU) Expanding on this last point, Hu urged those present to accelerate work towards fundamental economic restructuring, citing what the media has subsequently dubbed his "eight accelerations": --accelerate structural economic adjustment, including income redistribution and urbanization. (Note: These two goals were also key themes in the State Council and Chinese Communist Party's January 31 Number One Document. End Note.) --accelerate industrial structural adjustment and the development of new strategic industries. --accelerate innovation. --accelerate reform and modernization of the agriculture sector and the food security system. --accelerate creation of a "conservation culture," including enhanced energy savings and emissions reductions. --accelerate efforts to improve the social safety net and promote even economic growth. --accelerate the development of "cultural" industries (e.g. publishing, advertising, entertainment, etc.) --accelerate adjustment of the "externally-oriented economic development" (focused on exports and foreign-direct investment) and promotion of the "going out" strategy (including outward-bound investment). Message to the Troops -------------- ¶4. (SBU) Bank of America-Merrill Lynch analyst Lu Ting, writing from Hong Kong, commented that "now that they're more assured about the recovery, China's leaders want to redirect the economy back to structural reform, which was on track through 2007 but disrupted by the financial crisis." Likewise, a contact in a Chinese government think-tank said that Hu was clearly asserting his leadership over the economy, refocusing provincial and ministerial attention on national goals of rebalancing and reform. He noted that during the crisis many special interests had taken the opportunity to resist reforms detrimental to their benefit, but that the Central Leadership was now reassuming control. Comment: High-level Support -------------- BEIJING 00000310 002 OF 002 ¶5. (C) President Hu's speech repeated many themes from other recent high profile policy statements, which will likely appear again in the upcoming National People's Congress (NPC) and National Committee of the Chinese People's Political Consultative Conference (CPPCC) meetings in early March, as well as in the 12th Fifth-year Plan. The main purpose of the speech appears to have been establishing indisputable political support for the policy course, endorsing rebalancing at a level too high for local opponents or commentators to touch. ¶6. (C) Lower-level decision-makers and officials will now focus on various aspects of Hu's speech as it touches on their industries, pouring over it for signals of where Central Government work priorities lie, and where they might best position themselves to continue to protect their interests. As President Hu himself acknowledged in the speech, implementing these goals will be a long and difficult process. HUNTSMAN